Monash University

Organisation for advertising

The Advertising Agency

History ‘then’ Constraints ‘now Developments ‘future’

Monash University

History ‘then’ USA 1841 Volney B Palmer

space saleman (Print) Media commission system -

initially variable between media Creative advice for free Foundation for stable, familiar &

enduring structures

Monash University

Media Commission systems Evolved differently with country size and

media pattern US & UK – commission only for large

clients (10% for main media, minor media to 15 %)

Australia and small countries – commission (10%) plus service fee (1 to 7%)

Monash University

Traditional agency income sources – letter of terms Media commission Service fee, if agreed Commission and/or fee on production

charges, research bought through agency, others as agreed

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Constraints ‘now’ In Australia, media commission

dismantled since 3 February 1997, after a 2 year debate division between industry players

Pressure for accountability from clients Profitability of agencies no longer

underwritten by Accreditation system Now subject to negotiating skills!

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Common agency remuneration pattern now Small base fee, to cover “set-up” People-based hourly/daily fees, based

on costs of creatives, planners, account management, etc

Incidentals – travel, communication, etc Provision for audit

Monash University

Common media shop remuneration Mainly a small percent of media spend

Covers planning and buying and management

Incidentals Co-ordination fees if representing client in

discussions with creatives

Some expect media shops may take over aspects of agency role

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Developments ‘future’ Integration - marketing communication

elements integrated via communication solutions agencies clients managing the integration of

unbundled services Clients vary in their desires and their skills

Structures emerging to accommodate absence of commission and IMC

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Different patterns of agency/client relationships Limited to advertising

the agency plays a minimal role in other communication & marketing functions

A single agency may play different roles with different clients

Advertising plus selected services apart from advertising (creative & media) the

agency is invited to provide additional integrated communication services such as producing POS material or direct marketing, but not for marketing planning

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Different patterns of agency/client relationships Marketing counsel

the agency’s advice in marketing functions other than communication is sought and considered

Marketing partnership advertiser takes the lead in developing the

marketing strategy and plans, but in a close relationship with the agency who shares responsibility

Monash University

Different patterns of agency/client relationships Marketing leadership

the agency develops the marketing plans and provides a full spectrum of marketing support services

research distribution supplementation etc

Monash University

Agency structure (full service)Traditional

New businessdevelopment

Production

Creative

MediaAccounthandling

Research& Planning

Finance

Agency Board

Monash University

Departments comprise of: Production and supervision of production

Print, TV facilitation, Multimedia, Traffic Creative

Creative teams, usually Copywriter & Art director working together

Media Planners, Buyers

Account Management Account Directors, Managers

Research & Planning Strategy planners

Monash University

Organising the Advertising (client): Structures and Functions

Western culture - atomistic & specialised

Specific activities = functions Silos or chimneys Accounting function = control

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Functional structures worked well for single product, limited channel organisationsbut now: expanding product lines retail and direct options complex media options

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Solution: Revised brand management structures

coordination of sales & marketing Focus is markets, not products

Changes in marketing communication mix

Growth of sales promotion, direct marketing and PR

Transfer of information technology

Monash University

Marketing Communication Structures (Schultz)

Communication Manager or “Czar” Structure

Market Team Design Structure

but PRODUCT not CUSTOMER focussed therefore need some ‘outside-in’ thinking

Monash University

Agency Issues New Business

Selection of good potential clients Pitch (credentials, speculative, strategic,

creative) Costs (money, time, benefits, client

contribution) Organisation (people, budget)

Mergers Profitability

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Credentials Pitch Alternative 1

Introduction to team Establish rapport Case studies - strategic/media Testimonials Show reel - creative Way of doing business (esp remuneration) Why you want business Questions

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Credentials Pitch Alternative 2

Pre-pitch background (rapport + knowledge) 3 or 4 key points re agency views relevant

to client Dialogue on points Expand on questions from client with

smorgasbord of pre-prepared material

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Likely success in future?? Alternative 2 YES because

30% agency, 70% client Alternative 1, NO because

95% agency, 5% client