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Chapter 16
Organizing for Integrated Marketing
Communication
Chapter Objectives
• To understand how companies organize for
advertising and other aspects of integrated
marketing communications
• To examine methods of selecting, compensating,
and evaluating advertising agencies
Chapter 16 : Organizing for IMC
Chapter Objectives
• To explain the role and functions of specialized
marketing communications organizations
• To examine various perspectives on the use of
integrated services and responsibilities of
advertising versus agencies
Chapter 16 : Organizing for IMC
Participants in the IMC Process
• Figure 16-1
Chapter 16 : Organizing for IMC
Participants in the IMC Process
• Advertiser (Client)
– Key participants in the process
– Have the products, services, or causes to be marketed
– Provide funds to pay for advertising/promotions
• Advertising Agency
– An outside firm that that specializes in the creation,
production, and/or placement of the communications
message
Chapter 16 : Organizing for IMC
Participants in the IMC Process
• Media Organizations
– Provide an environment for the firm’s marketing
communications message
• Specialized Marketing Communications Services
– Include direct marketing agencies, sales promotion
agencies, interactive agencies, and public relations
firms
– These organizations provides services in their areas of
expertise
Chapter 16 : Organizing for IMC
The Centralized System
• Figure 16-2
Chapter 16 : Organizing for IMC
The Centralized System
• Planning and budgeting
• Administration and execution
• Coordination with other departments
• Coordination with outside agencies and services
Chapter 16 : Organizing for IMC
The Decentralized System
• Figure 16-3
Chapter 16 : Organizing for IMC
The Decentralized System
• Generally occur in large corporations with multiple
divisions and many different products
• Separate manufacturing, research and
development, sales, and marketing departments
for various divisions, product lines or businesses
Chapter 16 : Organizing for IMC
The Decentralized System
• Responsibilities and functions associated with
advertising and promotions are transferred to the
brand manger, who works closely with the outside
advertising agency and other marketing
communications specialists as they develop the
promotional program
Chapter 16 : Organizing for IMC
Management Issues of Advertising
Agencies
• Advertising Agency Decision
– In-House Agency Option
– Advertising Agency Option
Chapter 16 : Organizing for IMC
In-House Agency Option
• Reduces advertising and promotion costs
• Can provide related work (such as sales
presentations and public relations) at a lower cost
than outside agencies
• Increases time savings and eliminates potential
problems with outside agencies
Chapter 16 : Organizing for IMC
In-House Agency Option
• Increases knowledge and understanding of the
market that come from working on advertising and
promotion
• Companies have tighter control over the
processes and can coordinate promotions with
the firm’s overall marketing program
Chapter 16 : Organizing for IMC
Advertising Agency Option
• Provide clients with service of highly skilled
individuals who are specialists in their chosen
fields
• Provide objective viewpoint of the market and its
business that is not subject to internal biases or
limitations
• Provide insight into the industry, and often the
competition
Chapter 16 : Organizing for IMC
Canada’s Top 20 Marketing
Communications Companies
• Figure 16-5
Chapter 16 : Organizing for IMC
Full Service Advertising Agencies
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Account Services
Marketing Services
Creative Services
Management and Finance
Structure
Chapter 16 : Organizing for IMC
Full Service Agency
• Figure 16-13
Chapter 16 : Organizing for IMC
Account Services
• Account services is the link between the ad
agency and the client
• The account executive is responsible for
interpreting the advertiser’s needs to the agency
Chapter 16 : Organizing for IMC
Marketing Services
• Research Department
– Gather, analyze, and interpret information important in
developing advertisements
• Media Department
– Analyzes, selects, and contracts for space or time in
the media selected for the client
Chapter 16 : Organizing for IMC
Account Services
• Coordinates agency efforts in planning, creating,
and producing ads
• Presents agency recommendations and obtains
client approval
Chapter 16 : Organizing for IMC
Creative Services
• Copywriters are responsible for the creation and
execution of advertisements
• May be involved in determining the basic appeal
or theme of the campaign
• The art department is responsible for how the ad
looks
Chapter 16 : Organizing for IMC
Creative Services
• Coordinating the creative and production
processes can often be a major problem
• A traffic department coordinates all phases of
production to ensure all deadlines are met
Chapter 16 : Organizing for IMC
Management and Finance
• Advertising agencies must be managed and
perform operating functions such as accounting,
human resources, etc.
• Must generate new business
• Bulk of an agency’s income goes to salary and
benefits for employees
Chapter 16 : Organizing for IMC
Structure
• Advertising agencies develop an organization
structure to meet their clients needs
• Most medium-size and large agencies are
structured under either a departmental system or
a group system
Chapter 16 : Organizing for IMC
Department System
• Each agency function is set up as a separate
department
• Each department is called on as needed to
perform its specialty
• Some agencies prefer this system because it
gives employees the opportunity to develop
expertise in servicing a variety of accounts
Chapter 16 : Organizing for IMC
Group System
• Individuals from each department work in groups
to service particular accounts
• Each group is headed by an account executive or
supervisor
• Many agencies prefer this system because
employees become knowledgeable about the
clients business
• Provides continuity in servicing the account
Chapter 16 : Organizing for IMC
Other Types Of Agencies and
Services
• Creative Boutiques
• Media Buying Services
Chapter 16 : Organizing for IMC
Creative Boutiques
• Creative boutiques have developed in response to
desires to utilize outside creative talent only
• Clients may believe extra creative effort is
required or its employees do not have sufficient
skills
• Boutiques usually perform creative functions on a
fee basis
Chapter 16 : Organizing for IMC
Media Buying Services
• Independent companies that specialize in the
buying of media, particularly radio and television
• Agencies and clients usually develop their own
media strategies and hire a buying service to
execute them
• Media buying services have grown in recent years
as clients seek alternatives to full-service agency
relationships
• Paid a fee or commission for their work
Chapter 16 : Organizing for IMC
Agency Compensation
• Commissions from Media
• Other Compensation Systems
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Fee Arrangement
Cost-Plus Agreement
Incentive-Based Compensation
Percentage Charges
Chapter 16 : Organizing for IMC
Commissions from Media
• Traditional method is a commission system,
where the agency receives a specified
commission from the media on any advertising
time or space it purchases for its clients
• Many advertisers have gone to a negotiated
commission system: can be reduced percentage
rates, variable commission rates, and
commissions with minimum and maximum profit
rates
Chapter 16 : Organizing for IMC
Example of Commission System
Payment
• Figure 16-14
Chapter 16 : Organizing for IMC
Fee Arrangement
• Fixed-Fee Method
– Agency charges a monthly fee for services and credits
to the client any media commissions earned
• Fee-Commission Combination
– Media commissions received by the agency are
credited against the fee
Chapter 16 : Organizing for IMC
Cost-Plus Agreement
• The client agrees to pay the agency a fee based
on the costs of its work plus some agreed-on
profit margin, often a percentage of total costs
• Direct costs plus an allocation for overhead and a
markup for profits determine the amount the
agency bills the client
Chapter 16 : Organizing for IMC
Incentive-Based Compensation
• The agency’s ultimate compensation level will
depend on how well it meets predetermined
performance goals
• These goals often include objective measures
such as sales, and market share
• Compensation includes media commissions, fees,
bonuses, or some combination
Chapter 16 : Organizing for IMC
Percentage Charges
• Adding a mark up of percentage charges to
various services the agency purchases from
outside providers
• These charges may include market research,
artwork, printing, and other services
• Markups range from 17.65 to 20 percent and are
added to the clients overall bill
Chapter 16 : Organizing for IMC
Evaluation of Agencies
• Financial Audit
– Focuses on how the agency conducts its business
– Designed to verify costs and expenses, personnel
hours charged to an account, etc.
• Qualitative Audit
– Focuses on the agency’s efforts in planning,
developing, and implementing the client’s advertising
programs and considers the results achieved
Chapter 16 : Organizing for IMC
Gaining and Losing Clients
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Poor performance or service
Poor communication
Unrealistic demands by the client
Personality conflicts
Personnel changes
Chapter 16 : Organizing for IMC
Gaining and Losing Clients
• Changes in the size of the client or agency
• Conflicts of interest
• Changes in the client’s corporate and/or marketing
strategy
• Declining sales
• Conflicting compensation philosophies
• Changes in policies
Chapter 16 : Organizing for IMC
Sales Promotion Agencies
• Independent companies that specialize in
providing services needed to plan, develop, and
execute a variety of sales promotion programs
• Services provided by large sales promotion
agencies include promotional planning, creative,
research, tie-in coordination, etc.
Chapter 16 : Organizing for IMC
Public Relations Firms
• Develop and implement programs to manage the
organization’s publicity, image, and affairs with
consumers and other relevant publics
• Activities include planning the PR strategy and
program, generating publicity, preparing news
releases, managing crises, etc
Chapter 16 : Organizing for IMC
Direct-Response Agencies
• Provide a variety of services
– Database management
– Direct Mail
• Divided into three main departments
– Account Management, Creative and Media
• Direct-response agencies must solicit new
business and be reviewed by existing clients
Chapter 16 : Organizing for IMC
Interactive Agencies
• Specialize in the development and strategic use of
various interactive marketing tools such as
websites, banner ads, etc.
• Range from smaller companies that specialize in
website design to full-service interactive agencies
that provide all necessary elements for a
successful internet marketing program
Chapter 16 : Organizing for IMC
Pros of Integrated Service
• Advocates of the “one-stop shop” contend that
various individuals in the agencies and
subsidiaries are learning to work together
• More convenient for the client to coordinate all its
marketing efforts through one agency
• An agency with integrated marketing abilities can
create a single image for the product or service
and address everyone with one voice
Chapter 16 : Organizing for IMC
Cons of Integrated Service
• Providers become involved in political wrangling
over budgets and do not communicate with each
other as they should
• Agencies efforts to control all aspects of the
promotional program are nothing more than an
attempt to hold onto business
• Synergy and economies of scale have been
difficult to achieve
Chapter 16 : Organizing for IMC
Agency versus Client
• Marketers and agency executives have different
opinions regarding who should be in charge of the
IMC process
• Marketing executives say the biggest obstacle to
implementing IMC is the lack of people with the
perspective and skills to make it work
Chapter 16 : Organizing for IMC
Agency versus Client
• Many ad agencies are adding more resources to
offer their clients a full line of services
• As companies shift their promotional dollars away
from media advertising to other IMC tools,
agencies will explore ways to keep these monies
under their roofs
Chapter 16 : Organizing for IMC