Kleppner's Advertising Procedure Ch. 5

This is my personal summary of Kleppner's Advertising Procedure.

Chapters
Chapters 1 & 2: Basics of Advertising Chapter 3: History and Brands Chapter 4: Target Marketing Chapter 5: Agencies and Services Chapter 7: Media Strategy Chapter 13: Internet Marketing Chapter 24: Economic, Social and Legal Aspects of Advertising Addendum: Corporate terrorism

Chapters 5: Agencies and Services

There are 10,000 agencies of various sorts related to advertising in the USA.

About 8,000 are listed in the Agency Red Book.

Most agencies have between 1 and 10 people.

It was in the 1870s that agencies began doing the creative part of writing ads, pioneered by Charles Austin Bates.

In 1875 Ayer devise the ageny-client exclusive relationship idea.

In 1917 the standard agency commission of 15% was set.

Media mergers led agencies to merge as well, in order to get bigger clients.

Integrated services combines advertising with promotions, PR, direct marketing, package design, etc.

Full service agencies

They offer everything to do with ads.

Planning
Creation
Production
Placement
Evaluation

For a new product it generally proceeds as follows

1. Diagnose the market existing brands

2. Objectives and strategy

3. Create the ads

4. Notify dealers & retailers, if appropriate

5. Billing (for space plus services) and payment to media

Traditional agency organization

Creative dept : Headed up by 1 or more creative director, who are sort of like low-level managers e.g. babysitters.

Account services : Responsible for agency-client relationship.

Marketing services : Responsible for philosophy and strategy. Also for paying residuals to performers.

Management and finance

Continuing Evolution of the Agency

They're always changing.

Agencies come in all sizes.

Larger ones offer "star" talent, but are expensive & inflexible.

Competing accounts

The bigger the agency, and more the mergers that have been happening, the great the chance that 1 agency will have (or come to have) 2 competing clients.

Client-agency relationship length

Average is shortening. Now at 5.3 years.

BBDO has several long-term clients: GE, DaimlerChrysler, Campbell Soup, Hormel.

Agency of Record

This is an exclusive agreement.

Some advertisers use >1 agencies.

Agency multiple offices

Many agencies have several offices in major cities in the US and abroad.

Globalization

This has created global agencies.

Example is J Walter Thompson (JWT), which is owned by WWP.

They have several sets of people to their company who manage global business:

Global teams
Directors-in-charge (DIC)
Regional directors
Global directors.

Global ad centers = Major cities where ad agencies exist.

Global efficiencies

Single world execution, not really so efficient in practice. Frequent translation problems!

Global marketing

“Think local, act local” (Coke exec)
Cultures vary, but emotions are the same.
Consistent brand between countries

Agency networks

Smaller agencies have formed networks so as to share data gathering tasks.

Typically one member per region.

They also help each other gain skills, e.g. financial.

Mega-agency holding companies

As agencies grow, client conflicts hinder growth.

These holding companies own agencies that have client conflicts.

Largest companies are: WWP (London) ... Omnicon (NYC) ... Dentsu (Tokyo) ... Publicis (Paris)

Mega-agencies offer a very large pool of talent and expertise.

Mega-agencies make it easy to shift accounts between agencies.

Other services

Talent & production agencies : Teaming up with ad agencies for product placement & star appearances in ads.

Independent creative services : Creative talent also do independent work.

A la carte : Some agencies have spun off media divisions.

In house agency : Some advertisers have brought in mini agencies. These usually consist of administration & creative people; all else is bought a la carte.

Rolodex agency : Mini agency consisting of account executive and creative, totaling 2 or even just 1 person, with all else hired out.

Media-buying service : Service that buys media for advertisers. Coke uses Starcom for this.

In-house media services : Some large advertisers have brought media buying in house.

Forms of agency compensation

Media commission: Agencies get a commission from the media entity of 15%.
Production commission: All work for production is billed to the advertiser plus a markup of 17.65%.
Fee arrangements: The 15% may not be enough for the agency to make a profit, especially with smaller advertisers, so a fee may be added.
Performance fees: An agency can win another 15 or 20% if unit sales or some other metric is high.

Nowadays, performance fees may be based on metrics like

increased brand awareness
growth in sales

Other services

Barter

Some advertisers may offer barter items in exchange for airtime. For instance, a tourist bureau may offer hotel rooms & tickets to events. Unclear how media companies subsequently sell such barter items.