This document provides an overview of the structure of the advertising industry, including the key players and their roles. It discusses advertisers, advertising and promotion agencies, external facilitators, media organizations, and target audiences. It also provides examples of large advertisers and agencies, the services agencies provide, and how different types of media organizations are compensated.

1. Chapter 2
The Structure of the
Advertising Industry:
Advertisers, Agencies, Media
Companies, and Support
Organizations
© 2009 South-Western, a part of Cengage Learning
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2. Trends Affecting the Advertising
and Promotion Industry
 The “Undoing” of Agency Consolidation
and Globalization—or not
 Media Proliferation, Consolidation, and
“Multiplatform” Media Organizations
 Media Clutter and Fragmentation
 Consumer Control: Blogs and TiVos
 Web 2.0
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3. Scope of the Advertising
Industry
U.S. Advertising Spending >$300 B
Worldwide Advertising
Spending >$600B
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4. Structure of the Advertising
Industry (text Ex. 2.5)
Advertisers
Advertising and Promotion Agencies
External Facilitators
Media Organizations
Target Audience
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5. Advertisers
Manufacturers and
Service Firms
Procter & Gamble, Verizon
Trade Resellers
Sears, McDonald’s
Government
Federal, State, Local
Social/Not-for-profit Organizations
United Way, Nature Conservancy
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6. Ad in Context Example
In addition to
companies, the
government makes
extensive use of
advertising.
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7. The Role of the Advertiser in IBP
 Describe the value that the firm’s brand provides
 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 market(s) that are most likely to
respond favorable to the brand
 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
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8. Agencies
Advertising Agencies: Promotion Agencies:
Full-Service Direct Marketing/
Creative Boutique Database
Interactive E-commerce
In-House Sales Promotion
Media Specialists Event Planning
Design Firms
Public Relations Firms
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9. Ad in Context Example
Advertising agencies
make extensive use of
advertising to acquire
new clients.
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10. Full Service Agency Services
 Account Services
 Marketing Research Services
 Creative and Production Services
 Media Planning and Buying Services
 Administrative Services
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11. Agency Compensation
 Commissions:
– around 15% of airtime fees—in flux
– 16 2/3 percent for outdoor media
– web media is all negotiated
 Markup Charges:
– production cost + fixed %
 Fee Systems:
– hourly rates, or by project
 Pay-for-Results:
– tightly-specified objectives
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12. External Facilitators
 Consultants
– Creative, Media, Database
 Production Facilitators
 Software Firms
– Web tracking, fulfillment
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13. Media Organizations
 Broadcast
– TV, radio
 Print
– Magazines, direct mail,
– Newspapers, specialty
 Interactive Media
– Internet, interactive broadcast,
– iPod, Cell Phone
 Support Media
– Outdoor, directories, sponsorship,
– Point-of-purchase, branded entertainment
 Media Conglomerates
– Time Warner, Disney, Turner
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14. Target Audiences
 Household Consumers
 Businesses
 Professionals
 Government Organizations
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