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 everywhereyou 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

• 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:

» 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

– 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

• 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

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