Lecture 2
The Structure of the Advertising
and Promotion Industry:
Advertisers, Agencies, Media,
and Support Organizations
Close Scheinbaum, Advertising and Brand Promotion, 9th Edition. ©2023 Cengage. All Rights Reserved. May not be scanned, copied or
Close Scheinbaum, Advertising and Integrated Brand Promotion, 9th Edition. © 2023 Cengage. All Rights Reserved. May not be scanned,
duplicated, or posted to a publicly accessible website, in whole or in part.
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Learning Objectives
After reading and thinking about this lecture, you will be able to do the following:
2-1 Describe the advertising and promotion industry’s size, structure, and
participants.
2-2 Discuss the role played by advertising and promotion agencies/consolidated
agency networks, the services provided by these agencies, and how the agencies
are compensated.
2-3 Identify key external facilitators who assist in planning and executing advertising
and integrated brand promotion campaigns.
2-4 Discuss the role played by media organizations in executing effective advertising
and integrated brand promotion campaigns.
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The Structure of the
Advertising and Promotion Industry
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The structure of the
advertising and
promotion industry
and participants in
the process.
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The Scope and Structure of the
Advertising and Promotion Industry (2 of 4)
• Advertisers use promotional techniques to reach target audiences.
− Known as clients by their advertising and promotion agency partners.
• Manufacturers and Service Firms
− The largest users of advertising and promotion.
− Advertising (particularly mass media advertising) is essential in creating awareness and
preference for brands.
• Trade Resellers
− Trade resellers buy products and resell to customers.
− Wholesalers and distributors work mostly with business customers and rely very little on
advertising.
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The Scope and Structure of the
Advertising and Promotion Industry (3 of 4)
• Federal, State, and Local Governments
− One of the 100 largest spenders on
advertising in the U.S.
− Indian Government spending on
advertisement
• Social and Not-for-Profit Organizations
− Raise awareness for organizations
− Seek donations
− Shape behavior
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Integrated
Brand Promotion in Action: India.
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The Scope and Structure of the
Advertising and Promotion Industry (4 of 4)
• There is an important role played by the advertiser before the services of an
agency are enlisted:
− Understand and describe the value that the firm’s brand(s) provides to users.
− Understand and describe the brand’s position in the market.
− Describe the firm’s objectives for the brand in the near term and long term (e.g., brand
extensions, international market launches).
− Identify the target market(s) most likely to respond favorably to the brand.
− Identify and manage the supply chain/distribution system.
− Be committed to integrating advertising, event sponsorship, and other promotional tools as
part of the organization’s overall marketing strategy.
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Advertising and Promotion Agencies
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Advertising and Promotion Agencies (1 of 7)
Advertising Agencies- An organization of professionals who provide creative
and business services to clients related to planning, preparing, and placing
advertisements.
• Most advertisers use an advertising agency.
− Many American agencies are also international agencies.
− Many top agencies are headquartered in Europe.
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Advertising and Promotion Agencies (2 of 7)
• Types of agencies include:
− Full-service: Includes an array of advertising professionals to meet all the promotional
needs of clients
− Creative boutique: Emphasizes creative concept development, copywriting, and artistic
services to clients
− Digital/interactive agencies: Focus on using online, mobile, and social media for direct
marketing and target market communications for clients
− In-house agency: The advertising department within a firm
− Media specialists: Buy media time and space and offer media strategy consulting to
advertising agencies and advertisers
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Advertising and Promotion Agencies (3 of 7)
Promotion Agencies
• Promotion agencies are specialized.
• Handle everything from sampling to event promotions to retail promotional
tie-ins.
• Types:
− Direct marketing and database agencies maintain and manage large databases of
mailing lists as one of their services.
• Fulfillment centers ensure customers receive product via direct mail or ecommerce.
• Infomercials promote a brand directly to viewers.
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Advertising and Promotion Agencies (4 of 7)
Promotion Agencies (continued)
• Sales promotion agencies design and then operate contests, sweepstakes,
special displays, or coupon campaigns for advertisers.
− Consumer sales promotions and trade-market sales promotions
• Event-planning agencies find locations, secure dates, and put together a
“team” of people to pull off a promotional event.
− Crucial to measure events as a form of IBP.
• Designers help create create the visual impression of a firm’s advertising
materials (including logo design).
• Public Relations firms manage relationships with different stakeholders like
media, community, etc.
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Advertising and Promotion Agencies (5 of 7)
• Advertising and promotion agencies offer a wide range of services.
− Most important issue is for advertiser and agency to negotiate and reach an agreement on
services being provided before any agency is hired.
− Account services entails:
Identifying the benefits a brand offers and the best competitive positioning
Developing a complete plan
− Marketing research services involves:
Locating studies that have bearing on a client’s market or advertising and IBP objectives
Account planner: Assigned to clients to ensure that research input is included at each stage of
development of campaign materials.
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Advertising and Promotion Agencies (6 of 7)
• Creative and production services:
− Creative services develops the concept.
− Production services turn the concept into the final product.
• Media planning and buying services: Contracted for media buying and
planning
• Administrative services
− Agencies have personnel departments, accounting and billing teams, and sales staffs that
go out and sell the agency to clients.
− Most important to clients is the traffic department, which has the responsibility of monitoring
projects to be sure that deadlines are met.
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Advertising and Promotion Agencies (7 of 7)
• The way agencies get paid is somewhat different from the way other
professional organizations are compensated.
− Commissions: Around 15% total amount billed
− Markup charge (also called cost-plus): Production cost + Fixed %
− Fee system: Hourly rates, or by project
− Pay-for-results: Fee based on the achievement of agreed-on results
Tightly specified objectives (e.g., awareness, brand identification, brand feature knowledge among
target audiences)
Becoming more prevalent
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External Facilitators
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External Facilitators (1 of 2)
• External facilitators provide specialized services to advertisers and agencies.
• Marketing and advertising research firms:
− Perform research for advertisers to understand potential market and consumer perceptions
of a product or services
• Consultants are individuals who specialize in areas related to the promotional
process.
− Three new types: database consultant, website development and management, and
integration of information
Web developers help with managing user interface technical aspects.
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External Facilitators (2 of 2)
• Production facilitators offer essential services both during and after the
production process.
− Provide physical facilities
− Directors, production managers, songwriters, camera operators, audio and lighting
technicians, graphic artists, photographers, models, producers, video producers, animators,
etc.
• Software firms help advertisers and agencies make the best use of evolving
media and technology.
− Gather and analyze data related to Web surfing behavior, broadband streaming audio and
video, and managing relationships with trade partners
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Knowledge Check 1
Which new type of consultant is particularly useful to an advertiser when planning
a direct email campaign?
A. Information integration
B. Database
C. UI
D. Website development
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Media Organizations
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Media Organizations (1 of 2)
• Broadcast: TV, radio, satellite
• Print: Magazines, direct mail, newspapers, specialty, banners
• Interactive Media: Internet, interactive broadcast, social media and mobile
media, etc.
• Media conglomerates: AT&T, Comcast, Walt Disney Co., etc.
• Support media: Billboards, directories, premiums, point-of-purchase displays,
brand placement, event sponsorship
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Media Organizations (2 of 2)
• Target audiences and content marketing:
− No audience, no communication.
− The audiences for promotional communications, with the exception of household
consumers, are also the advertisers who use advertising and IBP communications.
− Business and government audiences are key to the success of a large number of firms that
sell only to business and government buyers.
− Business advertisers are investing heavily in content marketing.
Focus on making and sharing value-added content of interest to the target audience of decision
makers.
Content presented to target audiences in multiple media through integration of promotional efforts.
Modern advertising effectiveness now transcends so much more than sales.
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Summary
Click the link below to review the objectives for the presentation.
Link to Objectives
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