Download STANDARD 3: Marketing Segmentation & Marketing Mix

Advertising Agencies and
the Marketing Mix
Advertising Agency
• An advertising agency is a company made
up of professionals who specialize in
providing creative and business services
involved in planning, preparing, and placing
advertisements.
Ad Agency (cont’d.)
Because the main business of an advertiser is not
advertising, most companies hire an advertising
agency. Advantages:
• Most businesses are not familiar with the field of
advertising.
• Agencies can maintain more specialists than an
advertiser would employ.
• It is more cost effective
Market Saturation
As a consumer, you see advertisements everywhere
you look. Even when you are buying one product,
you are exposed to advertising for other products.
Ex. Ticket to movie theatre, watch previews of
movies soon to be released.
• During prime-time television programming, you
watch almost 17 minutes of commercials. During
Daytime T.V. there are almost 21 minutes of
commercials every hour during the day.
Its Own Worst Enemy
Advertising is becoming its own worst enemy.
It is a challenge to create an advertisement
that will stand out and remain with the
consumer.
5 Types of Ad. Agencies
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In-house
Full-service
Creative boutique
Media-buying services
Interactive agency
In-House agency
• An advertising department in a company
whose main business is not advertising.
– Advantages: Familiar with company’s products,
doesn’t have to pay Ad. Agency for its services.
– Disadvantages: Lacks objectivity, experience.
Won’t try to improve advertising by looking at
better options.
Full-Service Agency
• Provides a wide range of services designed
to meet a client’s advertising needs.
– Services include:
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Account management
Marketing planning and management
Creative design
Production
Media planning
Media-buying services
Creative Boutique
• Specializes in developing creative concepts,
writing creative text, and providing artistic
services.
– Usually hired by another agency to add greater
creativity or excitement to the advertisement.
Media-Buying Service
• Specializes in buying media time and space,
particularly on radio and television.
– Buys large quantities of time, thus buying it at a
lower cost.
– Resells time to advertising agencies.
Interactive Agencies
• Specialize in helping clients prepare
advertising for new interactive media (ex.
Internet, Interactive T.V.)
– Maintain Internet sites and build databases.
– Services often purchased by other advertising
agencies.
The Marketing Mix
• The Marketing Mix uses strategic options to enhance the product/service concept
– Product (advertising)
• Most important element of the marketing mix
• Includes the way the product is designed and classified, positioned, branded, and packaged
– Price (sales promotions)
• Amount charged for the good or service, including deals, discounts, terms, warranties, etc.
• Affected by market demand, cost of production and distribution, competition, and corporate
objectives
– Place (event sponsorships)
• Includes direct and indirect distribution
• Method of distribution must be consistent with brand’s image
– Promotion (public relations)
• Product, price, and place must be determined before planning marketing communications
• Includes all marketing-related communications between a seller and a buyer
The Product Element:
Product Life Cycle
• Products pass through a Product Life Cycle
– Development Phase
• Company develops or alters products to meet current and future market demands
– Introduction (Pioneering) Phase
• Company incurs costs for educating customers, building widespread dealer distribution, and
encouraging demand
– Growth Stage
• Characterized by rapid market expansion as
more customers, stimulated by advertising and
word-of-mouth, make purchases
– Maturity Stage
• Marketplace becomes saturated with competing
products and the number of new customers
decreases, causing sales to reach a plateau
– Decline Stage
• Products become obsolete due to new
technology or changing customer tastes
• Companies may cease all promotion and phase
products out quickly
Regulations and Ethics
• Federal Trade Commission (FTC):
Created in 1914 to enforce laws prohibiting
unfair methods of competition.
Regulations and Ethics
Federal Communications Commission (FCC):
Enforces laws prohibiting fraud, obscenity,
lotteries on radio and T.V. stations
– Able to revoke a station’s broadcast license if a
station is in violation of the laws.
Regulations & Ethics
• Food & Drug Administration (FDA):
– Regulates the advertising of food, drugs,
cosmetics, and medical products.
– Regulates labeling and packaging.
– Prosecutes false labeling.
Regulations & Ethics
• Securities & Exchange Commission (SEC):
– Enforces laws for the advertising of securities.
– Regulates the disclosure of company
information on the annual report.
Regulations & Ethics
• U.S. Postal Service
– Enforces laws for direct mail advertising.
– Prosecutes lotteries, fraud, and
misrepresentation.
Regulations & Ethics
• Bureau of Alcohol, Tobacco, and Firearms
(ATF):
– Requires warning labels on advertisements for
alcoholic beverages and banned active athletes
from appearing in these commercials.
Ethics
• Competition between companies should be
fair
• Puffery – the use of superlatives (best,
greatest, etc.)
– Puffery is legal because courts believe that
consumers understand that superlatives are not
necessarily true
– Part of the language of advertising
• Emotional Appeal is also legal
Advertising to Children
• Subject to ethical debates
• Children are consumers
• Children might not be educated consumers
– No concept of the value of money
– No concept of the price of a toy
– No concept of the quality of an advertised
product