© 2009 South-Western, a part of Cengage Learning

Chapter 2The Structure of the Advertising

Industry: Advertisers, Agencies, Media

Companies, and Support Organizations

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Trends Affecting the Advertising and Promotion Industry

The “Undoing” of Agency Consolidation and Globalization—or not

Media Proliferation, Consolidation, and “Multiplatform” Media Organizations

Media Clutter and Fragmentation Consumer Control: Blogs and TiVos Web 2.0

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Scope of the Advertising Industry

U.S. Advertising Spending >$300 B

Worldwide Advertising Spending >$600B

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Structure of the Advertising Industry (text Ex. 2.5)

Advertisers

External Facilitators

Advertising and Promotion Agencies

Media Organizations

Target Audience

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Advertisers

Trade Resellers Sears, McDonald’s

Manufacturers and Service FirmsProcter & Gamble, Verizon

Social/Not-for-profit OrganizationsUnited Way, Nature Conservancy

GovernmentFederal, State, Local

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In addition to companies, the government makes extensive use of advertising.

In addition to companies, the government makes extensive use of advertising.

Ad in Context Example

The Role of the Advertiser in IBP

Describe the value that the firm’s brand provides Describe the brand’s position in the market

Describe the firm’s objectives for the brand in the near-term and long-term

Identify the target market(s) that are most likely to respond favorable to the brand

Identify and manage the supply chain/distribution system that will most effectively reach the targets

Be committed to using advertising and other promotional tools to grow the brand

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Agencies

Advertising Agencies:Full-ServiceCreative BoutiqueInteractiveIn-House Media Specialists

Promotion Agencies:Direct Marketing/

DatabaseE-commerce Sales Promotion Event PlanningDesign FirmsPublic Relations Firms

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Full Service Agency Services

Account Services

Marketing Research Services

Creative and Production Services

Media Planning and Buying Services

Administrative ServicesPPT 2-10

Agency Compensation

Commissions:– around 15% of airtime fees—in flux– 16 2/3 percent for outdoor media– web media is all negotiated

Markup Charges:– production cost + fixed %

Fee Systems:– hourly rates, or by project

Pay-for-Results:– tightly-specified objectives

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External Facilitators

Consultants– Creative, Media, Database

Production Facilitators

Software Firms– Web tracking, fulfillment

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Media Organizations

Broadcast– TV, radio

Print– Magazines, direct mail, – Newspapers, specialty

Interactive Media– Internet, interactive broadcast, – iPod, Cell Phone

Support Media– Outdoor, directories, sponsorship, – Point-of-purchase, branded entertainment

Media Conglomerates– Time Warner, Disney, Turner

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Target Audiences

Household Consumers Businesses Professionals Government Organizations

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