Chat with AIExam 2: The Promotion Industry
Briefly explain the three major methods of agency compensation. Outline any advantages or disadvantages associated with each system.
(90) 
VerifiedThe commission system is based on the amount of money the advertiser spends on media. Under this method, 15 percent of the total amount billed by the media organization is retained by the advertising agency as compensation for all costs in creating advertising for the client. This system can create pressure on agencies to recommend the most expensive media options.
With a fee system, compensation is based on an agreed-upon hourly rate for services provided. A variation on the fee system, the fixed-fee system, is based on a single fee charged for a project. Unless the agency and client agree precisely as to what services are covered by the fee, serious rifts can result.
Recently many advertisers and agencies alike have been working on compensation programs called pay-for-results that base the agency's fee on the achievement of agreed-upon results.
There are several key aspects of change that are affecting the structure of the advertising industry. Please discuss the four trends discussed in the book.
(68) Verified(1) The "undoing" of consolidation and globalization. The advertising industry has just come out of a period of extreme consolidation, which was occurring in two ways. Full-service agencies were acquiring and merging with other full-service agencies and interactive shops. Globalization occurred through mergers, partnerships and acquisitions. However, these mega agencies have not satisfied all the needs for all clients. It is unlikely that the giant agencies will dismantle all they have created. Some advertising clients are pleased to be able to consolidate all their integrated marketing communication (IMC) needs with one shop. But there is enough burden on the agencies from debt and conflict of interest that some unconsolidation will most certainly take place.
(2) The proliferation of cable television, direct marketing technology, Web options, and alternative new media has caused a proliferation of media options, while agency consolidation may just be starting. Control of media has always been a driving force behind many media companies. But there has always been a legal barrier to just how much control any one media company could acquire. In turn, the evolution of media options has spawned new specialized agencies to sell and manage these new media opportunities
(3) While the media industry may be consolidating into fewer and fewer large firms with more control, that does not mean that there are fewer media options. Quite the contrary is True. There are more ways to try to reach consumers than ever before. Advertisers are looking to the full complement of promotional opportunities in sales promotions (like the Miller chairs), event sponsorships, new media options, and public relations as means to support and enhance the primary advertising effort for brands.
(4) Historically, advertisers controlled information and the flow of information as a one-way communication through mass media. But, as the introductory scenario highlights, consumers are now in greater control of the information they receive about product categories and the brands within those categories. The simplest and most obvious example is when consumers log on to the Internet and visit sites they choose to visit for either information or shopping. But it gets a lot more complicated from there. The emergence of blogs, websites frequented by individuals with common interest where they can post facts, opinions, and personal experiences, are emerging as a new and sophisticated sources of product and brand information. Another new and dramatic example of consumer control is the growth of digital video recorders (DVRs), like TiVo, which allow TV viewers to essentially skip broadcast advertising.
One method of agency compensation has been accused of encouraging advertising agencies to recommend the most costly media vehicles available. This method is
(78) VerifiedD
While many facets of advertising have undergone a great deal of change since the early days of advertising, the goal of the industry has remained constant.
(76) One of the trends in the advertising industry today is the fragmentation of marketing budgets. Advertising agencies can continue to get a healthy share of their clients' business by redesigning their role and structure. List three departments that a full-service agency can add to accomplish this. Explain what each of these departments is responsible for.
(87) While playing golf, Tom sees a billboard on the adjoining highway for McDonald's. This is an example of interactive advertising because Tom responds by having lunch at the Golden Arches.
(92) Scenario 2-2
Brush Strokes is an art supply store located in a town with a population of about 100,000 people. The town is also home to a major state university. Brush Strokes gets a majority of its business from the student population. It has used the services of a local full-service advertising agency in the past. A great majority of its marketing budget has gone toward running small advertisements in the local and school newspapers at the beginning of each term. The advertising agency is now recommending that Brush Strokes devote a majority of its budget to running television spots during broadcasts of the university's football and basketball games. While the owners of Brush Strokes agree that they could be doing a better job of reaching the student population, they have not come to any conclusions about the best way to accomplish this.
-(Scenario 2-2) In all likelihood, with which one of the following would Brush Strokes's full service agency be least qualified to handle?
(60) Interactive agencies help advertisers prepare communications for new media on the world wide web.
(76) Scenario 2-3
ABC television network notified the Miss America Organization that it would not pick up the show for broadcast in 2005, leaving the pageant without a major broadcast outlet for the first time in 50 years. The news cannot have come as a shock to the Miss America Organization. A little more than a decade ago, the competition that started as an Atlantic City publicity stunt had grown to about 27 million viewers; in 2004, it drew a record-low 9.8 million, with the median age of the Miss America audience at 51. ABC paid $5.6 million for broadcast rights to the pageant in 2003. ABC, which took over the pageant after 30-year sponsor NBC bowed out, was not doing Miss America any favors airing it on Saturdays -- a low-viewership night. ("No More Miss America Pageantry for ABC," Washington Post.com, Lisa de Moraes,
October 21, 2004)
-(Scenario 2-3) The Miss America Pageant has had a struggle over the last few years in gaining the viewers and resulting ratings and advertising revenues from airing the program on network television. The board of directors of the pageant has considered simulcasting the event live on the Internet. What kind of organization might be helpful in planning the webcast?
(96) Which of the following is a promotion agency available to advertisers?
(89) DeeAnne Watson ensures that research is part of each creative development decision; she is a media planner.
(85) In-house advertising agencies have the advantage of maintaining objectivity about the brand while essentially keeping commissions that might have gone to an external agency.
(72) A company that you work for has asked you to write a brief report that evaluates the advantages and disadvantages of creating an in-house agency. What points would you consider in your report?
(62) While the amount spent on advertising across the world has increased, it has actually decreased in the United States.
(81) The definition of an advertising agency is "an independent organization of professionals who provide creative and business services to clients related to planning, preparing, and placing advertisements." List the major agency departments involved in each one of these phases (planning, preparing, and placing). In general terms, describe the role each department plays.
(85) Scenario 2-6
SC Johnson & Son produces a wide variety of very popular consumer products such as Shout , Windex , Mr. Muscle , Ziploc , Edge , Glade , Vanish , Raid , OFF! , Pledge , Scrubbing Bubbles Bathroom Cleaner. These products are in highly competitive markets and require substantial investments in consumer promotion to maintain market share.
-(Scenario 2-6) SC Johnson has recently hired an advertising agency to help promote their products. Several of the senior managers have indicated that they are uncertain as to the specific benefits of advertising their consumer products. Which of the following departments of their agency should be involved in giving this information to this client?
(91) When one considers the largest manufacturing organizations in the United States, it is clear that they all have one thing in common. They all
(60) Scenario 2-4
Advertising is a $300-billion-per-year business in the United States. Understandably, competition for clients is fierce among advertising agencies. There are many different reasons why a client may choose to move its business to a new agency, but there is one constant. The agency that wins the business is celebrated by the press; the agency that loses the business, however, is typically forgotten fairly soon.
-(Scenario 2-4) During a new business presentation, an agency says that one reason it should get the business is that all of its different department teams are so well coordinated. The department that brings all the different efforts together on a day-to-day basis is
(74) Scenario 2-3
ABC television network notified the Miss America Organization that it would not pick up the show for broadcast in 2005, leaving the pageant without a major broadcast outlet for the first time in 50 years. The news cannot have come as a shock to the Miss America Organization. A little more than a decade ago, the competition that started as an Atlantic City publicity stunt had grown to about 27 million viewers; in 2004, it drew a record-low 9.8 million, with the median age of the Miss America audience at 51. ABC paid $5.6 million for broadcast rights to the pageant in 2003. ABC, which took over the pageant after 30-year sponsor NBC bowed out, was not doing Miss America any favors airing it on Saturdays -- a low-viewership night. ("No More Miss America Pageantry for ABC," Washington Post.com, Lisa de Moraes,
October 21, 2004)
-(Scenario 2-3) One of the problems the Miss America Pageant has encountered has been an indifference or sometimes negative response to beauty pageants in general. Many viewers are critical of the swimsuit contest, which awards points for physical characteristics. The pageant feels the competition is integral to the overall program and wants to educate the public about why the swimsuit competition is included and how it contributes to a well-rounded program. To achieve its goals in this area, the pageant might employ the services of:
(93) A(n) ____ agency is often referred to as the advertising department within a firm.
(75) 
Filters
- Essay(0)
- Multiple Choice(0)
- Short Answer(0)
- True False(0)
- Matching(0)