Advertising

and Integrated
Brand Promotion 8th Edition
O’Guinn • Allen • Close Scheinbaum • Semenik

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accessible website, in whole or in part.
 Chapter 2
The Structure of the Advertising & Promotion
Industry:
Advertisers, Agencies, Media, & Support
Organizations
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Chapter 2 Framework

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 Learning Objectives (Ch 2.)
1. Discuss important trends transforming the advertising and
promotion industry.
2. Describe the advertising and promotion industry’s size,
structure, and participants.
3. Discuss the role played by advertising and promotion
agencies, the services provided by these agencies, and how
the agencies are compensated.
4. Identify key external facilitators who assist in planning and
executing advertising and integrated brand promotion
campaigns.
5. Discuss the role played by media organizations in executing
effective advertising and integrated brand promotion
campaigns.

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 IBP In Action: Colorado
How can a state best use IBP to promote tourism?

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The Advertising Industry in Constant Transition

• Power struggles.
• How can the industry adapt to tech change?
• Consumers seek to avoid ads at times.
• Consumers seek control (e.g., Netflix you pick your
own content).
• Social media as a game changer with digital.
• Facebook’s “careful targeting” of 70-80 million
Facebook users.
• The role of the brand as central has not changed.

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 Trends Affecting the Advertising and
Promotion Industry (1 of 3)
1. Consumer control (content shift with Netflix,
Hulu, Amazon “on demand” models.”
• Social media: Web-based media that allow the
sharing of information between individuals and
between individuals and groups.
• Blogs: Websites frequented by individuals with
common interests where they can post facts,
opinions, and personal experiences.
• DVRs: Digital video recorders.

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 Trends Affecting the Advertising and
Promotion Industry (2 of 3)
2. Media proliferation, consolidation, and
multiplatform media organizations
(at the industry level).

3. Media clutter and fragmentation (at the

consumer level, more media options).
• Greater emphasis on IBP tools.

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 Trends Affecting the Advertising and
Promotion Industry (3 of 3)
4. Crowdsourcing: Online distribution of certain
tasks to groups of experts, enthusiasts, or
consumers.
5. Mobile marketing/mobile media:
Exceeds $20 billion a year.
22% of mobile users installed ad blockers.
May feel intrusive.
Includes branded games and entertainment
that can be accessed by mobile.
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 Scope and Structure of the Advertising &
Promotion Industry
• Spending on all forms of IBP exceeds $1 TRILLION a
year.
• Combined ad spend of the top 10 U.S. advertisers
exceeds $29 billion annually.
• The largest ad spenders in the us spend billions of $
or hundreds of millions of $ on advertising (e.g., GM
$3.5 billion on advertising budget; Ford 2.7$ billion
ad budget).
• This is just a fraction of overall sales revenues.
• Worldwide advertising spending.
• >$600 billion.

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Structure of the Advertising and Promotion
Industry

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The structure of the advertising and promotion
industry

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 Advertisers (1 of 2)
• Business, not-for-profit, and government
organizations that use advertising and other
promotional techniques to:
• Communicate with target markets.
• Stimulate awareness and demand for their brands.
• Known as clients.

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Advertisers (2 of 2)

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Role of the Advertiser in IBP: Before the Agencies
Get Involved (1 of 2)
• Understand and describe the value that the
firm’s brand provides.
• 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.
• Identify the target markets that are most likely
to respond favorable to the brand.

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Role of the Advertiser in IBP: Before the Agencies
Get Involved (2 of 2)
• 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.
• Clients: who advertisers do the work for.

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 Advertising Agencies (1 of 2)
• Organization of professionals who provide creative
and business services to clients.
• Services include planning, preparing, and placing
advertisements.
• Types:
• 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.

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 Advertising Agencies (2 of 2)
• Digital/interactive agencies/social media agencies:
Focus on online, social, mobile marketing and
interactive.
• In-house: Advertising department in a firm and takes
responsibility for the planning and preparation of
advertising materials (a brand can have social media
in house or have it handled by an agency).
• Media specialists: Organizations that specialize in
buying media time and space and offer media
strategy consulting to advertising agencies and
advertisers.

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 Promotion Agencies (1 of 3)
• 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.
• Often called direct-response agencies.
• Fulfillment centers ensure customers receive the
product ordered via direct mail or ecommerce.

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 Promotion Agencies (2 of 3)
• Sales promotion: Design and then operate
contests, sweepstakes, special displays, or coupon
campaigns for advertisers.
• Consumer sales promotions.
• Trade-market sales promotions.
• Event planning agencies: Experts in finding
locations, securing dates, and putting together a
team of people to pull off a promotional event.
• Crucial to measure events as a form of IBP.

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 Promotion Agencies (3 of 3)
• Design firms: Designers create graphics and logos.
• Graphic mark that identifies a company.
• Public relations firms: Manage an organization’s
relationships with:
• Media.
• Local community.
• Competitors.
• Industry associations.
• Government organizations.

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Traditional Structure for a Full-Service
Advertising Agency

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Agencies Putting Focus on Digital

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 Agency Services (1 of 2)
• Account services entails:
• Identifying the benefits a brand offers and the best
competitive positioning.
• Developing a complete plan.
• Marketing research services.
• Locate 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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 Agency Services (2 of 2)
• Creative and production services: Responsible
for coming up with the concepts that express
the value of a company’s brand in interesting
and memorable ways.
• Production services: Include producers who take
creative ideas and turn them into advertisements,
direct mail pieces, and other IBP materials.

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 Agency Services/Agency Partners
• Media planning and buying services:
Contracted for media buying and planning.
• Media planning and buying now is trending
towards becoming automated, or scheduled in
advance based on key word bidding or other
ways of “programmatic media buying.”
• Consultants are crucial at times (e.g., in crisis
communications, event sponsorship
measurement, big data analysis).
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Traditional Agency Compensation
This is
changing;
Movement
towards Pay
for Results
Type
models or a
different
negotiated
rate besides
15%

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 Agency Compensation Options
Commissions:
• Around 15% total amount billed.
• 16% for outdoor media.
Markup charges (also called cost-plus):
• Production cost + Fixed %.
Fee systems:
• Hourly rates, or by project.
Pay-for-results:
• Fee based on the achievement of agreed-on results.
• Tightly-specified objectives.
• Becoming more prevalent.

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 External Facilitators (1 of 2)
• Organizations or individuals that provide
specialized services to advertisers and
agencies.
• Marketing and advertising research firms.
• Perform research for advertisers to understand:
• Potential market.
• Consumer perceptions of a product or services.

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 External Facilitators (2 of 2)
• Consultants: Specialize in areas related to the
promotional process.
• Production facilitators: Offer essential services
both during and after the production process.
• Software firms help gather and analyze data
related to:
• Web surfing behavior.
• Broadband streaming audio and video.
• Managing relationships with trade partners.

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 Media Organizations (1 of 2)
• Broadcast:
• TV, radio, satellite.
• Print:
• Magazines, direct mail, newspapers, specialty.
• Digital/Interactive Media/Social Media:
• Internet, interactive broadcast.
• iPad, Smartphone.
• Google, Facebook as a leading “advertising
company.”

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 Media Organizations (2 of 2)
• Support media:
• Outdoor, directories, event sponsorship,
premiums, point-of-purchase, branded
entertainment.
• Media conglomerates (change in process):
• Time Warner, Disney, Liberty Media.

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 Target Audiences
• Big change to behavioral targeting, such as
done on social media when you see an ad for
a product you have already searched for.
• Business and government audiences are key
to the success.
• Majority of the firms rely on personal selling.
• Some use variety of advertising and IBP tools.

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IBP Example: P&G

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IBP Example: Starbucks

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