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SOLUTION MANUAL FOR ADVERTISING AND PROMOTION AN INTEGRATED MARKETING COMMUNICATIONS PERSPECTIVE 12TH EDITION BY GEORGE BELCH, MICHAEL BELCH Chapter 1-22

CHAPTER 1 AN INTRODUCTION TO INTEGRATED MARKETING COMMUNICATIONS Learning Objectives 1. Describe the role of advertising and other promotional elements in marketing. 2. Discuss the evolution of the integrated marketing communications (IMC) concept. 3. Explain the increasing value of the IMC perspective in advertising and promotional programs. 4. Identify the elements of the promotional mix. 5. Identify the contact points between marketers and their target audiences. 6. Describe the steps in the IMC planning process.

Chapter and Lecture Outline I.

INTRODUCTION TO ADVERTISING AND PROMOTION

The chapter begins with a brief discussion of the changing roles of advertising and promotional strategy in modern marketing. Specifically, it offers a case study from Nike about their willingness to take a risk and utilize Colin Kaepernick in their anniversary campaign. The case shows that Nike was willing to change their marketing strategy in order to adapt to the new ways in which companies and brands communicate with consumers. Instructors should discuss how increases in audience fragmentation and a shift to digital media have spearheaded this change in brand/consumer communication. Consumers no longer just passively receive messages, but serve as content creators as well. Brands must be willing to adapt their strategies, moving away from solely an advertising focus to a holistic approach that attempts to engage consumers in a conversation: an IMC approach. Instructors should also stress the difference between IMC, advertising, and public relations.

II.

THE GROWTH OF ADVERTISING AND PROMOTION

Advertising and promotion are integral parts of our social and economic systems. Advertising has evolved into a vital communication system for both consumers and businesses. In market-based economies, consumers rely on advertising and other forms of promotion to provide them with information they can use in making purchase decisions. Corporations rely on advertising and promotion to help them market their products and services. Evidence of the increasing importance of advertising and promotion in the marketing process comes from the growth in expenditures in these areas over the past decade. In 1980, advertising expenditures in the U.S. were $53 billion and $49 billion was spent on sale promotion. In 2019, $240 billion was spent on 1-1 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Difficulty: 1 Easy Bloom‘s: Understand AACSB: Analytical Thinking

III.

THE TARGET MARKETING PROCESS

Almost no products satisfy the needs of all consumers. Thus, companies must develop marketing strategies to reach and satisfy different consumers. In this section, the concept of target marketing is introduced, noting that there are four distinct steps involved in this process—identifying target markets with unfulfilled needs, market segmentation, selecting a target market, and positioning through marketing strategies. From this point, the chapter will go on to discuss in detail the processes required in each step. A.

Identifying Markets—Target marketing involves the identification of the needs and wants of specific groups of people (or segments), selection of one or more of these groups as targets, and the development of marketing strategies aimed at each. This approach has found increased applicability for a number of reasons. 

The diversity of consumers‘ needs.



Increasing use of segmentation by competitors.



More managers are trained in segmentation and realize its advantages.

The instructor should note that this process leads to a more homogeneous grouping of potential customers, which allows the marketer to develop more precise strategies designed to reach them. B.

Market Segmentation—Once the marketer has identified who it is that is to be targeted, these potential customers are grouped based on similar needs and/or behaviors that are likely to cause them to respond similarly to marketing actions. This division of the market into distinct groups is referred to as the market segmentation process. 1. Bases for segmentation—A number of bases for segmentation are available to the marketer including the following: (Figure 2-4 will be helpful here.) 

Geographic segmentation—The market is divided into geographic units (i.e. nations, states, counties, or even neighborhoods) with alternative marketing strategies targeted to each.

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Demographic segmentation—Division involves demographic variables such as age, sex, family size, income, education, and social class, among others.

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Psychographic segmentation—Markets are divided based on the personalities and/or lifestyles of consumers. (The instructor should note that lifestyles have become a commonly employed segmentation strategy.) Programs such as VALS and PRIZM are commonly employed by marketers for this purpose.



Behavioristic segmentation—This form of segmentation divides consumers into groups according to their usage, loyalty, or buying behaviors. These characteristics are then usually combined with demographic and/or psychographic criteria to develop profiles of market segments. When considering consumer usage and loyalty, marketers consider the

80-20 rule, which proposes that 20 percent of buyers account for 80 percent of their sales volume. Therefore, it is beneficial for marketers to attempt to reach that loyal 20 percent. 

Benefit segmentation—Specific benefits offered by a product or service may also constitute a basis for segmentation. In many instances a variety of benefits may be derived for the same product among different groups. (For example, the instructor might ask students to suggest benefits to be derived from the purchase of a watch, noting that at certain times of the year these benefits will change based on the recipient of the watch!)

2. The Process of Segmenting a Market—This section concludes by reminding the student that market segmentation is indeed a process that develops over time and is a critical part of the situation analysis. C.

Selecting a Target Market—Having conducted the segmentation analysis, the marketer will be faced with two subsequent decisions: 1. Determining how many segments to enter—Three market coverage alternatives are available in this step: 

Undifferentiated marketing would involve the decision to ignore the segment differences and develop one product for the entire market. It should be noted that few firms pursue this strategy today.



Differentiated marketing involves the decision to compete in a number of segments, developing different marketing strategies for each.



Concentrated marketing takes place when a firm decides to concentrate its efforts on one specific segment in an attempt to capture a large share of that market. (The examples of Volkswagen and Rolls Royce provided in the book will illustrate this point well.)

2. Determining which segments offer the most potential—This involves determining which of the markets is most attractive by examining the sales potential of the segment, the opportunities for growth, the competition, and a brand‘s own ability to compete. D.

Market Positioning 1. Approaches to Positioning—This section discusses the approaches to positioning as well as a number of strategies for developing a position. Positioning has been defined as ―the art and science of fitting the product or service to one or more segments of the broad market in such a way as to set it meaningfully apart from the competition.‖

IV.

DEVELOPING A POSITIONING STRATEGY

This section outlines a number of positioning strategies that can be employed in developing a promotional program, including: A.

Positioning by Product Attributes and Benefits—Setting a product apart by stressing a specific characteristic or benefit offered. Marketers attempt to identify salient attributes that are important to consumers and are the basis for making a purchase decision.

Positioning by Price/Quality—In this strategy, price/quality characteristics are stressed. For example, some products set themselves apart by assuming a very high price/quality association, while others become affordable products. While the price element is important, the quality 1-31 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

element of price/quality positioning is just as important as the product quality must be comparable to, or even better than, competing brands in order for the positioning strategy to be effective. C.

Positioning by Use or Application—How a product is to be used may in itself lead to a positioning strategy. The Arm & Hammer and Black & Decker examples offered in the text have capitalized on this strategy.

Positioning by Product Class—The Amtrak example provided in the text reflects this strategy in which the product is positioned against others that, while not exactly the same, provide the same class of benefits. The California Avocado Commission is another example that might be cited, as well as the Dole campaign cited in the text.

Positioning by Product User—In this strategy the product is positioned at a particular group of users. The Globe Shoes example in Exhibit 2-19 demonstrates this strategy in practice.

Positioning by Competitor—in many cases the competition may be used to define the positioning strategy. Companies can position their products to set themselves apart from the competition, show superiority, etc. The Samsung ad shown in Exhibit 2-5 is an example in the text that provides an example of positioning a brand against the competition.

Positioning by Cultural Symbols—The Jolly Green Giant, the Pillsbury Doughboy, the Keebler Elves, and Chicken of the Sea‘s mermaid are all examples of cultural icons, as are the Wells Fargo stagecoach and Ronald McDonald.

Repositioning—Declining sales or changes in market conditions may lead a firm to engage in repositioning. Companies such as Sears and J.C. Penney are a few of the examples of companies that have attempted (both successfully and unsuccessfully) to assume a new position in the market. Repositioning occurs because of declining or stagnant sales or because of other recognized opportunities in the marketplace. La-Z-Boy and MTV examples provide more current examples.

Professor Notes:

McGraw-Hill Connect ®: Selecting Target Markets Type of Activity: Click and Drag Activity Summary: In this activity, students will match the various segmentation strategies with the examples of brands using those strategies. Activity Learning Objectives: 02-02 Define target marketing. 02-03 Discuss the role of market segmentation in an IMC program. 02-04 Describe positioning and repositioning strategies.

Concept Review: It is not possible to develop marketing strategies for every consumer. Rather, the marketer attempts to identify broad classes of buyers who have the same needs and will respond similarly to marketing actions. Market segmentation is dividing up a market into distinct groups that (1) have common needs and (2) will respond similarly to a marketing action. The more marketers segment the market, the more precise is their understanding of it. But the more the market becomes divided, the fewer consumers there are in each segment. Thus, a key decision is: How far should one go in the segmentation process? Difficulty: 2 Medium Bloom‘s: Understand AACSB: Analytical Thinking

DEVELOPING THE MARKETING PLANNING PROGRAM

The next stage of the marketing process involves combining the various elements of the marketing mix into a cohesive and effective marketing program. This requires that all elements of the marketing mix be combined effectively and that they be consistent with one another. It is important to stress that each element of the marketing mix is multidimensional in nature and includes a number of decision areas. In discussing the various elements of the marketing mix attention should be given to how each influences and interacts with promotion. A.

Product Decisions—An organization exists because it has some product, service, idea or cause to offer customers. Discussion can focus on benefits or values offered by the product and the fact that products and services satisfy not only functional but social and psychological needs as well. Product decision areas of branding and packaging are particularly important from a promotional perspective because of the role the brand name and package play in communicating attributes, information, and meaning to the consumer. Product symbolism is the term for what a product or brand means to a consumer and what they experience in purchasing and using it. 1. Branding—Choosing a brand name for a product is important from a promotional perspective because brand names communicate attributes and meaning. The goals of branding are threefold: 1) to build and maintain brand awareness and interest; 2) develop and enhance attitudes toward the company, product, or service; and 3) build and foster relationships between the consumer and the brand. The combination of a brand‘s name, logo, symbols, design, packaging, and overall image comprise the brand identity. One important role of advertising in respect to branding strategies is creating and maintaining brand equity. Brand equity can be thought of as an intangible asset of added value or goodwill that results from the favorable image, impressions of differentiation, and/or the strength of consumer attachment to a company name, brand name, or trademark. 2. Packaging—The role and function of packaging has changed because of the self-service emphasis of many stores and the fact that as many as two-thirds of all purchases made in the supermarket are unplanned. The WD-40 advertisement in Exhibit 2-22 is an excellent example of how packaging can create new opportunities—sometimes for existing products.

Price Decisions—The price variable of the marketing mix refers to what the consumer must give up in exchange for a product or service, Marketing managers must be concerned with establishing a price level, developing pricing policies and monitoring consumers‘ and competitors‘ reactions to price in the marketplace. Factors a firm must consider in determining price levels include: 1-33 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Costs.



Demand.



Competition.



Perceived value.

1. Relating price to advertising and promotion—Factors such as product quality, competition, and advertising all interact in determining what price a firm can and should charge. Studies have shown that pricing and advertising strategies go together. C.

Distribution Channel Decisions—Marketing channels or the place element of the marketing mix refers to the set of interdependent organizations involved in the process of making a product or service available to customers. Differences in direct versus indirect channel arrangements should be discussed. In discussing the latter, the importance of resellers in marketing and promotional strategy should be introduced. The Internet has become a new channel for most companies, and has had a demonstrable impact on the distribution system. Attention should be given to the need to develop promotional programs for the trade or resellers to encourage them to stock and promote a product.

Developing Promotional Strategies: Push or Pull?—When a promotional push strategy is used, the goal is to push the product through the channels of distribution by aggressively selling and promoting the item to the resellers, or trade. This can be done by having the company‘s sales representatives call on resellers and offering special programs such as promotional allowances and cooperative advertising. Trade advertising in publications that serve the industry such as Progressive Grocer or Drug Store News may also be used as part of a push strategy. When a promotional pull strategy is used, the goal is to create demand among end users which will in turn encourage retailers to carry a brand. Heavy spending on consumer advertising and sales promotion is an important part of a pull strategy.

Professor Notes:

McGraw-Hill Connect ®: Positioning Strategies for Multiple Brands Type of Activity: Click and Drag Activity Summary: In this activity, students will match the various positioning strategies with the examples of brands using those positioning strategies. Activity Learning Objective: 02-05 Identify the marketing-mix decisions that influence advertising and promotional strategy.

Concept Review: Positioning has been defined as "the art and science of fitting the product or service to one or more segments of the broad market in such a way as to set it meaningfully apart from competition." The position of the product or service is the image that comes to mind and the attributes consumers perceive as related to it. Difficulty: 2 Medium Bloom‘s: Understand AACSB: Analytical Thinking

Teaching Suggestions This chapter is designed to provide the student with an overview of the overall marketing process and the role advertising and promotion play in the marketing program. The chapter may be a review for some students, particularly those who have had a basic marketing course. However, we feel that this chapter is more than just a review of marketing principles or fundamentals. We have written the chapter to show the role advertising and promotion play in the marketing process as well as how promotional strategy is influenced by and interacts with marketing strategy and the various elements of the marketing program. Students will benefit from the discussion of the marketing mix from a promotional strategy perspective even if they have had an introductory marketing course. We have found that the model of the marketing and promotion process is a very good framework for analyzing how promotion fits into an organization‘s marketing program. The components of the model cover the basic areas of marketing and the model shows that promotional programs must be developed for the trade as well as for the ultimate customer in the target market. It is important to stress to students the important role resellers play and the need to develop promotional programs to motivate the trade to get them to stock, merchandise and promote a company‘s products. You might point out to students that the recent trends in the allocation of promotional budgets have seen a shift in monies away from media advertising and toward trade promotions. Another shift in budgets has been affected by the advent of the Internet. Students will see that the Internet has both benefited and negatively impacted traditional media. These issues are discussed is considerable detail in the sales promotion and Internet chapters.

Answers to Discussion Questions 1. The lead-in to this chapter discusses segmentation in the online dating market. Pick any three online sites and discuss the target market these sites are trying to appeal to. Provide examples to support your position. (LO 2-4) The coffee industry has seen significant growth in the past decade, particularly in the U.S. Three major brands tend to vie for the spot of consumer‘s morning coffee stop: Starbucks, Dunkin', and McDonald‘s. While these three companies may be direct competitors, each brand appeals to very different people. Starbucks appeals to men and women, likely ages 25-40, who likely have higher incomes. Their website offers a sleek, contemporary design that appeals to this age group‘s need to have products act as status symbols. They attempt to garner customer loyalty through the promotion of their loyalty program. Dunkin' appears to target more working-class or lower-income audiences as their prices are significantly lower. The site/brand in general utilizes much brighter colors that make it appear more affordable and approachable than the dark colors Starbucks utilizes. Dunkin' wants to be an all-day coffee supplier. They promote their breakfast sandwiches, coffee, and donuts in the morning, their teas and iced coffees for the afternoon, and decaf options and food in the evenings, likely to appeal to the working class who may be working non-traditional hours. McDonald‘s appears to cater to working-class consumers who just want to grab an affordable cup of coffee on their way to work in the morning. They appear to cater to people who enjoy a good cup of coffee but those who do not necessarily need a great deal of customization or flavor variety. Their prices range from $1.00 to $4.00, and they only have about 10 flavor varieties, whereas Starbucks and Dunkin' offered endless options for drink customization.

2. IMC perspective 2-2 discusses the differences between millennials and gen Z. Discuss some of the ways these cohorts differ and how they are also the same. Cite some implications for marketers. (LO 2-3) Millennials and members of the gen Z cohort tend to differ in a number of ways. Gen Zers tend to be more individualistic and respond well to brands that recognize this and make the effort to appreciate their individuality. This individualism is not as high of a priority/need for millennials. Additionally, as they have never known a life without technology, gen Z tends to be less focused because they process information more quickly and thus get bored more quickly. Again, because of their life lived with technology, gen Zers are also better at multitasking. In terms of spending, millennials tend to be more thrifty whereas gen Zers are less conscious of price and prefer to support brands with highquality products or brands that stand on social issues. For marketers, this means that to appeal to gen Zers, it would be beneficial to focus on product quality, corporate social responsibility efforts of the brand, and create shortened messages that quickly grab consumer‘s attention. For millennials, marketers should focus on price/value and do not need to focus as much of their efforts on promoting CSR efforts or individualism. 3. Discuss some examples of companies’ positioning strategies. Who do you think these companies are targeting? Explain your reasoning. (LO 2-4) 5-hour Energy, an energy-boosting shot, promotes that the products contain vitamins, have zero sugar, and are low calorie. The brand is positioning based on product attributes and benefits and is likely attempting to reach more health-conscious consumers who need an energy-boost or want a healthier energy supplement. Other brands choose to position themselves based on price/quality characteristics. Kohl‘s is a department store that positions itself as a family-friendly store that offers quality products at affordable prices. Kohl‘s is attempting to target families. Their promotions highlight the fact that they are a one-stop shop for both parents and children‘s clothing as well as home goods. Rolex is a luxury watch brand that positions itself based on price/quality. A basic Rolex can start around $10,000, and their watches are only sold in very exclusive, high-end locations. They are trying to reach extremely wealthy target markets who have the ability to splurge on a $10,000 or more watch. Shark vacuums is a brand that positions itself based upon use or application. Their advertisements often show a consumer getting the tough stains out of their carpet by using their Shark vacuum. They are likely trying to reach middle-class consumers who own homes and are concerned with keeping their carpets clean or pet owners who are concerned with the same thing. 4. Discuss the difference between a push and a pull strategy. How do these strategies differ in advertising and promotional strategies? (LO 2-5) In a push strategy, the communication and selling emphasis targets the channel of distribution members. Thus, programs are designed to persuade the trade to stock, merchandise, and promote manufacturers‘ products. The goal of the strategy is to push the product through the channels by promoting them to the trade. In a pull strategy, the target audience is the end buyer and/or consumer. The goal is to create demand among consumers and have them demand the product from middlemen. Once retailers see the demand, they will request the product from the wholesaler or manufacturer directly. Companies may employ either a push or pull strategy. Proctor & Gamble—a perennial leader in advertising to consumers—learned years ago that it must get the products on the shelves to be sold. Thus, the company shifted much of its consumer targeted advertising to the trade to ensure that it was stocked—thus, pursuing both a pull and push strategy. Others have used a pull strategy—for example, the Philadelphia Magazine ran an advertising campaign urging consumers to visit a newsstand to demand their magazine be carried. Companies pursuing a push strategy tend to rely more on their 1-37 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

relationships with the trade, using IMC tools such as advertising, sales promotions, etc. that reach the middlemen. It is not at all uncommon for companies to incent sales employees to push their brands at the retail level. Decisions as to whether to emphasize a push or pull strategy depend on a number of factors including the company‘s relation with the trade, the promotional budget, and demand for the product. Companies with favorable channel relationships often use a promotional push strategy and work closely with channel members to encourage them to stock and promote their products. Firms with limited promotional budgets may not have the funds for advertising and promotion that are required for an effective pull strategy and may find it more feasible to target their efforts to the trade. Products with favorable demand resulting from unique benefits, superior advantages, and/or popularity among consumers may use a pull strategy. 5. What is the difference between product symbolism and functional product attributes? Give examples of brands that reflect each of these in their marketing strategies. (LO 2-5) Product symbolism is a description of what a product or brand means for consumers and what they experience in purchasing and using it. High-end designer handbag brands such as Kate Spade or Coach provide the symbolic image of status, wealth, and high fashion. A protein bar brand such as CLIF bars provides the symbolic image of someone who cares about their health but wants a convenient, on-the-go snack. Functional product attributes are those attributes of a product that appeal to the functionality of the product rather than focusing on the social or psychological benefits of the product such as status symbols. Tire brands such as Michelin promote the quality of their tires and their good value as well as their performance of durability. A brand such as Jiffy Lube, a car repair and oil change shop, stresses the time-saving aspects of their services while also stressing that they are fast and still high-quality. 6. IMC Perspective 2-1 discusses Buick’s attempt to reposition its car to a younger audience. Explain why this may or may not work. (LO 2-4) The Buick brand attempted to reposition themselves to reach and appeal to a millennial aged audience. They created new product lines and a number of marketing and advertising efforts that attempted to position the Buick brand as a new, fun brand that wasn‘t like the old Buick brand at all. These efforts might not be successful if the already-held perceptions of the brand cannot be erased or altered. Buick could spend all of their time and efforts on attempting to reposition the brand to appeal to millennials and then survey a large sample of millennials after the campaign has run and determine that perceptions of the Buick brand among millennials are exactly the same as they were prior to these efforts. It is important for brands to assess ahead of repositioning efforts whether or not this perception of their brand could actually be altered. 7. Many companies compete in a number of market segments. Discuss an example of one such company and describe how it communicates with its customers in different market segments. (LO 2-4) Perhaps the best example might be an automobile company like Toyota. First of all, Toyota makes cars, trucks, SUVs and vans, offering a vehicle for the needs and wants of a variety of segments. The car segment offers a range from its low-priced entry the Yaris to the higher end Avalon. In between are sports oriented vehicles, family vehicles and, of course, the hybrid Prius. Toyota also offers six varieties of SUVs again, reaching various segments based on price as well as lifestyle, as the selection ranges from a small fuel-efficient RAV 4 to the large V8 Land Cruiser. Models at various prices offering specific benefits are offered in between. Lexus, made by Toyota, is targeted to the luxury car market. Another good example is the Marriott hotel chain. A visit to the 1-38 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Marriott website shows that the chain includes offerings from over 15 brands ranging from economy pricing to luxury suites, and appealing to pleasure travelers, business travelers, families, and long-stay occupants. The Marriott products reach a variety of segments based on a number of segmentation criteria. 8. Discuss the role that IMC assumes in the marketing mix. That is, how is this element of the mix coordinated with pricing, distribution, and product functions? (LO 2-5) IMC can be used to develop a brand image by focusing on the source, message, and media available to create the image sought. The source of the message (consider the use of Tiger Woods or Lance Armstrong as a spokesperson before and after their problems) creates an image of the type of person that might use the brand. The message—that is, what is said about the brand—positions the brand the way the marketer wants it to be perceived. Is it a luxury brand (Jaguar) or a low-cost brand (Walmart) or a combination (Kohls, Target). The photography, the background and the message all contribute to the brand‘s overall image. Advertisers have discovered a new-found emphasis on media in developing a brand image. As one might expect, the medium in which the ad appears impacts the perception of the brand. An ad appearing in Vogue or GQ will be impacted differently than one in Time or The Economist. Ads appearing in or on different websites will be impacted by that medium as well. Recently, an ad featuring U2‘s Bono appeared in a number of upscale print media including Vogue and Vanity Fair. The clothing ad had a setting with a small aircraft in the background in what appeared to be Africa. As one might imagine the ad was designed to create a high-class image for the brand by using well known and liked celebrities in an image that spoke to high class. At the same time, ads for other brands may use non-celebrities such as everyday looking people to create their own image of being for everyone not just beautiful people. The Dove campaigns targeted to women are a classic example of successfully employing this strategy. 9. As the media environment changes, explain how this impacts the role of advertising and promotion. Why is the IMC process different than it was, say, 20 years ago? (LO 2-1) A careful analysis of the marketplace should lead to alternative market opportunities for existing product lines in current or new markets, new products for current markets, or new products for new markets. Market opportunities are areas where there are favorable demand trends, where the company believes customer needs and opportunities are not being satisfied, and where it can compete effectively. The Manischewitz company—you may have heard the ad slogan ―Man-O-Manischewitz! What a wine!‖—a marketer of kosher foods, has revived its decades-old slogan to take advantage of a new marketing opportunity. Based on research that showed that four out of five buyers of kosher foods are not traditional Jewish consumers, Manischewitz has increased its marketing efforts in an attempt to capture more of the mainstream market. Knowing that there has been an increase in interest in ethnic foods and health consciousness and that, as a result of the recession, more consumers are eating meals at home, the company hopes to reach more consumers (Exhibit 2-1). The company‘s new IMC program includes a multimillion-dollar advertising budget, web programs, in-store promotions, a ―Cook Off,‖ and public relations activities designed to promote its kosher food line. One of the major changes from 20 years ago is in media. The Internet, social media, and mobile, of course, have changed everything, and public relations now plays a much more important role in the IMC program. Traditional media, while still important, seems to be getting much less attention.

10. Discuss the difference between benefit and demographic segmentation. Give examples of companies employing each. Is it possible for a company to employ both forms of segmentation simultaneously? (LO 2-4) Demographic segmentation is the segmenting of markets based on age, income, sex, race, etc. Clearly, there are products targeted to the sexes. Those marketed to men and women, including media as well as products themselves. We have shown in the text that the teenage market is much different than those in midlife and those in older age brackets. Higher income groups are marketed to differently than lower income groups. Think of the strategies for Jaguar, Mercedes, and Bentley versus those for VW, Kia, and Hyundai. The pricing is different, the product quality is different, and certainly the IMC strategies are different. Remember that Lexus and Infinity are distributed in different dealerships. Benefit segmentation relates to the development of segments based on the specific benefits sought. Think about low-fat or gluten-free products, electric cars, or high gas mileage cars versus SUVs and sports cars—what benefits drive the sale?

Additional Discussion Questions (not in text) 11. Marketers continue to increase their marketing efforts to the Hispanic market, while at the same time evidence suggests that younger Hispanics are becoming more integrated into the mainstream. What are the implications of these acculturation issues for the future of marketing? (LO 2-3) As shown in the text, the Hispanic market—already very substantial in some areas of the country— continues to grow in size. This alone makes it an attractive market segment. While many of the younger Hispanics become more and more a part of the overall market in respect to values, lifestyles, etc., some will do so to a lesser degree. What this means is multiple market opportunities. For those who emulate the overall market, products and services that are adopted by the ―mainstream‖ will become more desirable to the Hispanic market. Evidence of this exists, as many of the high-end name brands now have high adoption rates among Hispanics. In addition, many of the media adopted by the mainstream market will now experience higher rates of adoption among Hispanics, including those who communicate in English. At the same time, there will always be those who do not assimilate into the ―mainstream,‖ continuing to hold on to their cultural heritage as opposed to becoming ―like everyone else.‖ For this group, brands that are targeted to Hispanics, rather than the mainstream market, will achieve success as Hispanics maintain their identity, and use products and brands that appeal to them on this basis. Overall, the growth of the Hispanic segment, and the increases in socioeconomic status that are also occurring make the Hispanic market attractive to many marketers. Marketers will have to determine which of the sub-segments of this market they wish to target—those who will attempt to integrate into the mainstream and purchase products and brands associated with that group, or those who will maintain their own identities and use brands more associated with them. The likelihood is that marketers will attempt to do both, as both are likely to increase in attractiveness. 12. As noted, packages are now becoming communications tools, serving as advertising vehicles. At the same time, packages are changing the other marketing mix elements as well. Discuss how packages are being used to impact price and distribution strategies as well as promotional strategies. (LO 2-2)

One such example is that of Coors Light‘s cans, which change colors when the product is at the preferred drinking temperature. This is just one of many examples, of the use of packaging more effectively in the marketing mix. In the Coors case, the uniqueness of the package design is, in itself, a potential selling point. As the same time, it is a beneficial package element that helps insure that the product is consumed at the point at which it will have the most flavor. From a promotional standpoint, packages can be effective in attracting attention, differentiating the product, and creating a brand image. The role of the package is to communicate and establish a position for the product and/or brand. Packages are also being used to make the product more convenient. Think about how lids have changed. Plastic is becoming more popular than cans, tuna can now be carried in an easy-open pouch instead of a can. Separate tops for consuming drinks while participating in sports, walking, etc. have now become more attractive. Package sizes are used to differentiate—family size bottles, to regular size cans, to half-cans, or mini-cans make consumption more convenient. Ultimately, the different packages impact the price variable. Sticking with the drink example, the sports packaged drinks cost more than the same amount of beverage in a non-sports package. Convenience packages of potato chips, cookies, etc. used for school children‘s lunches cost more than larger bags, etc. Typically, larger size containers cost less (on a relative basis) than do these convenience packaged items. Many companies have changed their package designs to accommodate retailers. With the enormous battle for shelf space comes a marketing opportunity or necessity. Uniquely designed packages that do not fit or take up too much room on the shelves must give way to those that do. Packages that are more durable are also being required in an attempt to eliminate or reduce breaking or spilling. Finally, from an IMC perspective, the package communicates a lot about the brand. The examples of Heinz or Arm & Hammer baking soda immediately communicate about what is inside of the package, its quality, and it‘s longevity. Expensive brands rely on packaging as much as do the inexpensive ones in informing the consumer as to what to expect inside. 13. The text describes a number of different positioning strategies. Give examples of products and/or brands that utilize each of these different strategies. (LO 2-5) The text lists a number of ways that companies can position their products. These include: a. Positioning by product attribute and benefits—In this case, a company differentiates itself based on specific characteristics and/or benefits that it offers. Apple has positioned itself on its‘ innovative technology and exciting products. BMW on its handling capabilities. b. Positioning by price/quality—Companies like Bose and Bang & Olefsen position themselves as very high-quality brands that are worth the extra expense associated with their purchase. While not irrelevant, the companies want to communicate that price should not be the major factor considered in their purchase. Motel 6, on the other hand, positions itself as low cost, while still stressing the fact that they have not sacrificed quality in their motel rooms. c. Positioning by use or application—Again using Bose as an example, the company advertises its expensive headset as the best for listening to music, and also as the best for its technological capabilities for noise reduction (for example when riding on an airplane). The company‘s print campaign ―Use it as a sanctuary or…. Reflects this positioning well. d. Positioning by product class—The now famous ―Pork, the other white meat‖ is an excellent example of positioning by product class. A number of juice companies position themselves as a 1-41 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

substitute for eating fruit, and V8 says to ―drink your vegetables.‖ Yogurt has positioned itself as a fruit. e. Positioning by product user—Canon positions its cameras as being the best for the serious picture taker. The University of Phoenix positions itself as a college for working persons—not ―your typical four year school.‖ f.

Positioning by competitor—Credit card companies like Discover position themselves as offering more services than their competitors with no fees. Others credit card companies compare their rewards programs directly to competitors‘.

g. Positioning by cultural symbols—The Jolly Green Giant, the Keebler elves, and the Pillsbury Doughboy are all examples of companies that have cultural symbols. Speedy Alka-Seltzer, Ronald McDonald, and the Wells Fargo stagecoach are other examples of this form of positioning. 14. IMC Perspective 2–1 discusses Buick's attempt to reposition its cars to a younger audience. Explain why this may or may not work. (LO 2-4) A number of General Motors cars are no longer being sold new—Oldsmobile, Pontiac, and Saturn for example. The average age of Buick and Cadillac owners skews high (high 50s to low 60s). GM knows that if they don‘t attract more younger buyers, Buick and maybe eventually Cadillac may soon be gone. As a result, Buick has embarked on this campaign to attract younger buyers. The Buick campaign features young and attractive actors in a variety of settings ranging from small gatherings to formal meetings to baby showers. The idea is to show that younger people buy Buick—not just grandfathers and grandmothers. In addition, a number of new Buick models have been introduced, that, in general, are smaller and sportier than the previously ―boat size‖ automobiles on the market. Even a convertible has been re-introduced—clearly, a car for younger people. As a result, there is evidence that Buick is being successful as the average age of the buyer has dropped from 64 to 57. On the other hand, images don‘t change over night. If you ask younger people today, many (if not most) still perceive the brand as ―their grandfather‘s car‖ and would not consider it in their consideration set. It may take a generation for this image change to occur. The question is, can GM wait that long? 15. What is meant by repositioning? Discuss some companies that have successfully employed this strategy. (LO 2-4) Sometimes due to a downturn in sales, changing marketing conditions, or other reasons, companies may need to change their positioning strategy, also known as re-positioning. Perhaps the most often cited example of this is Rolling Stone magazine, which changed from a predominantly music-oriented medium to include articles that reach a broader audience. Another example is MTV, which started as a channel playing music to one that now contains much broader programming and only a small portion of music playing. It is not difficult to find companies that have repositioned themselves in recent years. A few of these include: 

Cadillac—the flagship of the GM line has tried to move away from the image of ―my grandfather‘s car" to attract a younger market. Using rock stars, young athletes, entertainment stars, and product placements are just a few strategies Cadillac has employed.



IBM—once a computer company, IBM now has a completely different image as a solutions provider. 1-42 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.



Xerox—the copy machine company has almost no identity with copying services.



Kia and Hyundai—these Korean manufactured automobiles have been forced to reposition from a low-price positioning to one of higher quality. Both are doing so quite successfully.



Abercrombie—the difference between the Abercrombie of today and 20 years ago is worlds apart.

While many companies successfully re-position, many others are less fortunate. To successfully reposition, brands must commit to the strategy in total. Failure to do so, will lead to failure in the marketplace. 16. Many companies have maintained their same brand identity for years by keeping the same logos, packaging, and so on, while others have made changes. Give examples of companies employing both of these strategies and discuss their results. (LO 2-5) What comes to mind when you see the package or logo of Coke, Jaguar, Budweiser, Target, or the Penn State football team? Each of these brands is clearly identifiable, with strong recognition and image identification. (In 2012, Penn State changed its uniform for the first time in over 50 years by putting names on the back of the players‘ jerseys.) When a consumer sees a Target store logo, it is clear as to what it means and what is inside of that store. The BMW and Jaguar logos are clearly recognizable. UPS has extended its brown label to their packaging and shipping stores. On the other hand, what comes to mind when you see the package or logo of less well known and identifiable brands? Can you describe what the Xerox logo looks like? What about Duracell batteries? Do you easily recognize a Postal Annex sign? While the first group sends a clear signal about what they stand for through their packages and or logos, the latter does not—either as a result of not building the brand image or changing it too often. To establish a strong brand image, brands must promote and establish their logos and packages to add an extra communications contact point. They must also stick with this position and identity and not change it too often. In 2013, Saab, American Airlines, VH1, and the Miami Dolphins NFL team all changed their logos—some drastically, others minimally. Time will tell how this works out. 17. Some marketers feel that grouping consumers into age cohorts like millennials, baby boomers, and so forth, results in unreliable generalizations and that such strategies might not be successful. Give the pros and cons of this argument. (LO 2-2) This chapter discusses the strategy of segmentation, whereby groups exhibiting common characteristics (demographic, psychographic, etc.) are targeted with similar marketing and IMC strategies. Simply put, the assumption is that the commonalities between the groups allow for efficiencies in implementation, cost savings, and more effective strategies overall. Some believe that this strategy may not be as effective—particularly if taken to the extreme. We already noted in the chapter that not all Hispanics are the same and that stereotyping them as such could backfire on the marketer. Likewise, all millennials are not the same. While you may be very similar to your friends, for example, you no doubt know many others who are in your age range, in your college, etc, who are very different from you. Their lifestyles, values, interests, etc. make them seem almost alien, and you share nothing in common. When marketers segment, they are stereotyping to an extent. And while this strategy has been proven to be effective, it can also be dangerous if the marketer is to assume that by segmenting on any particular basis leads to one homogenous group that requires only one marketing strategy.

IMC Exercise The text discusses a number of efforts by marketers to reach diverse market segments by targeting various ethnic groups and subcultures such as teenagers. Have students find ads targeted to specific market segments and have them bring these ads to class and discuss which market segment is being targeted, the type of appeal used in the ad, and whether they feel the targeting effort will be successful.

CHAPTER 3 ORGANIZING FOR ADVERTISING AND PROMOTION: THE ROLE OF AD AGENCIES AND OTHER MARKETING COMMUNICATION ORGANIZATIONS Chapter Overview The purpose of this chapter is to familiarize the student with the various ways that organizations might organize for purposes of developing and executing integrated marketing communications programs. Students often have little or no idea of the roles of various participants in the advertising and promotional program and how the IMC function is organized and coordinated. The chapter begins with a presentation of the various participants involved in the promotional planning process—advertisers, advertising agencies, media organizations, marketing communication specialist organizations, and collateral service organizations. This is followed by a discussion of the various organizational systems and the advantages and disadvantages of each. An in-depth discussion of the role and functions of advertising agencies is provided, as is an explanation of how agencies are compensated and evaluated. The chapter also discusses organizations that provide specialized integrated marketing communication services including directresponse, sales promotion, and interactive agencies as well as public relations firms. It is very important for students to understand that a variety of different organizations may play a role in the development of various aspects of a company‘s integrated marketing communications program.

Learning Objectives 1. Describe how companies organize for advertising and integrated marketing communications functions. 2. Compare the advantages and disadvantages of different ways to organize for advertising and promotion. 3. Identify the types of advertising agencies and the roles they play. 4. Explain how to select, compensate, and evaluate advertising agencies. 5. Identify the role and functions of specialized marketing communication organizations. 6. Compare the pros and cons of using an integrated marketing services agency.

Chapter and Lecture Outline I. PARTICIPANTS IN THE INTEGRATED MARKETING COMMUNICATIONS PROCESS This chapter examines the various organizations that participate in the integrated marketing communications process, their roles and responsibilities, and their relationship to one another. Some companies choose to handle advertising, media buying and other parts of their IMC programs in-house. However, most major marketers use advertising agencies and other types of promotional specialist organizations to handle the various areas of their IMC programs as they do not have these capabilities internally. Marketers are always searching for creative ways to communicate with their customers and are looking for agencies that can offer a range of integrated marketing communication capabilities and help them compete in the rapidly changing world of advertising and promotion. The opening section provides an overview of the various participants in the integrated marketing communications process. The student should become familiar with the various players including clients, advertising agencies, media organizations, specialized marketing communications specialists, and those who provide collateral services. It is particularly important to note that with the movement toward IMC, marketing communication specialist organizations such as direct response agencies, sales promotion agencies, public relations firms, and digital/interactive agencies are playing an increasingly important role in the development and implementation of programs in their areas of expertise. However, decisions also have to be made regarding the coordination and control of the IMC program and whether this should be the responsibility of the client or turned over to the control of an outside agency.

II. ORGANIZING FOR ADVERTISING AND PROMOTION IN THE FIRM: THE CLIENT’S ROLE How a firm organizes for advertising and promotions is a function of a number of factors including (1) the size of the organization, (2) the number of products it markets, (3) the role that advertising and promotion assume in the product mix, (4) the advertising and promotions budget, and (5) the structure of the firm. Three organizational designs are discussed: A.

The Centralized System—In a centralized system, marketing activities are organized along functional lines. A common form is to have an advertising manager (or marketing communications manager) responsible for all advertising and promotions activities including planning and budgeting, administration and execution, and coordination with other departments and outside agencies.

The Decentralized System—In a decentralized system, individual products or brands are the responsibility of the brand manager (or product manager). All advertising and promotion for the brand or product will be this person‘s responsibility (including responsibilities for working with all external agencies) and s/he will be in charge of all planning, implementation and control for that product or brand.

In-House Agencies—Some companies develop their own internal ad agencies. The design of these agencies may vary from small advertising departments to operations as large as an external agency. In the latter case, the in-house agency will operate as a separate entity and control advertising and promotional expenditures in millions of dollars. Large companies that use inhouse agencies include Hyundai, Land Rover, Benetton and Revlon. The advantages and disadvantages associated with each of these organizational systems are shown in Figure 3-4. This exhibit can be used as an effective slide for class discussion purposes. Digital and Social Media Perspective 3-1 discusses why more companies are bringing advertising in-house. 1-46 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Professor Notes:

McGraw-Hill Connect ®: Advertising Organization Systems Type of Activity: Click and Drag Activity Summary: In this activity, students will match the advertising organization system with the advantages and disadvantages associated with it. Activity Learning Objectives: 03-01 Describe how companies organize for advertising and integrated marketing communications functions. 03-02 Compare the advantages and disadvantages of different ways to organize for advertising and promotion. Concept Review: Many companies have an advertising department headed by an advertising or communications manager operating under a marketing director. An alternative used by many large multiproduct firms is a decentralized marketing (brand management) system. A third option is to form a separate agency within the firm, an in-house agency. Difficulty: 2 Medium Bloom‘s: Understand AACSB: Analytical Thinking

III.

ADVERTISING AGENCIES

Many large companies employ the services of an external advertising agency. More than 14,000 U.S. and international agencies are listed in the Advertising Red Books (the ―Red Book‖ can be accessed at www.redbooks.com); however, most are individually owned small businesses employing fewer than five people. The U.S. ad agency business is highly concentrated. Nearly two-thirds of the domestic billings are handled by the top 500 agencies. A.

Agency Consolidation—There are four large agency holding companies including WPP, Omnicom Group, Interpublic Group, and Publicis Groupe. These four holding companies own multiple advertising agencies, media specialist companies, public relations firms, digital agencies, and other types of marketing communication organizations. The top ten U.S. advertising agencies are shown in Figure 3-5 of the text. An updated version of this is made available each year by Advertising Age and is available on the adage.com website.

The Ad Agency‘s Role—External agencies provide a variety of services to their clients, including those discussed in the previous section. Though many clients have the capabilities of performing these roles themselves, they elect to use outside agencies for the following reasons: (1) the skills offered, (2) objectivity, and (3) experience.

Types of Ad Agencies—All agencies are not the same of course. This section discusses the various types of agencies including the following: 1. Full-Service Agencies—These agencies offer their clients a full range of services including account services, marketing planning and research, media planning and buying, sales promotion, creative services, and interactive media. The various departments of a full-service agency include: 2. Account Services—The link between the advertising agency and its clients. Account executives serve as the liaison between the agency and client and are responsible for coordinating the agency's efforts in planning, creating and producing ads. 3. Marketing Services—Many full-service agencies provide a variety of marketing services to their clients and maintain departments such as research, strategy and planning and media. In many agencies the marketing services department may include account planners who are individuals that gather information that is relevant to the client‘s product or service and can be used in the development of the creative strategy as well as other aspects of the IMC campaign. The research and media department provides important services that full-service agencies need to plan and execute their client‘s advertising programs. 4. Creative Services—Agency personnel in this department include artists and copywriters who are responsible for the creation and execution of the clients advertising messages. Creative services may also include print and broadcast production departments, which are responsible for actually producing the advertising messages and putting them into final form. The traffic department coordinates all phases of production and sees that all ads are completed on time and deadlines for submitting the ads to the media are met. 5. Management and Finance—Like any other business, an advertising agency must be managed and must perform basic operating and administrative functions such as accounting, finance, and human resources. 6. Agency Order and Structure—Attention should also be given to the two basic types or agency organization structures used by agencies. Under the departmental system, each of the agency functions is set up as a separate department and is called upon to perform its specialty for all of the agency‘s clients. Many agencies use the group system in which individuals from each department work together as teams to service a particular account. Many clients prefer the group system because agency employees become very familiar with their business and it ensures continuity in servicing the account.

Other Types of Agencies and Services—Many small advertisers are interested in specific services other agencies offer. Several alternatives to full-service agencies have evolved, including the following: 1. Creative Boutiques—These types of agencies specialize in and provide only advertising creative services. They have creative personnel such as writers or artists on staff but do not have media, research or account planning capabilities. Many creative boutiques are formed by members of the creative departments of full-service agencies who leave the firm and take with them clients who want to retain their creative talents. IMC Perspective 3-1 provides 1-48 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

some interesting insights into one agency where they are creatively led, but strategically driven. 2. Media Specialist Companies—These are independent companies that specialize in media planning and buying. Many companies use independent media buying services to plan and purchase media and an advertising agency to handle their creative work. A major development in the purchasing of advertising media in recent years has been the rapid growth of programmatic buying, which refers to wide range of technology. Many of the major agencies have formed independent media services companies that handle the media planning and buying for their clients. Media specialist companies have become very important since many clients are consolidating their media buying to save money and improve media efficiency. Professor Notes:

McGraw-Hill Connect ®: Agency Functions Type of Activity: Click and Drag Activity Summary: In this activity, students will match the advertising agency personnel with the relevant job descriptors. Activity Learning Objective: 03-03 Identify the types of advertising agencies and the roles they play. Concept Review: A full-service advertising agency offers its clients a full range of marketing, communications, and promotions services, including planning, creating, and producing the advertising, performing research, and selecting media. A full-service agency may also offer nonadvertising services such as strategic market planning, sales promotions, direct marketing, interactive capabilities, package design, and public relations and publicity. A full-service agency is made up of departments that provide the activities needed to perform the various advertising functions and serve the client, such as Account Services, Marketing Services, and Creative Services. Difficulty: 2 Medium Bloom‘s: Understand AACSB: Analytical Thinking

IV.

AGENCY COMPENSATION

Agency agencies may be compensated in a variety of ways, including:

Commissions from Media—The agency is compensated based on the time or space it purchases for its client. The commission has traditionally been 15 percent (16 2/3 percent for outdoor), but now is often negotiated downward. The commission system has been the target of criticism for a number of years as critics argue that it ties agency compensation to media costs and encourages agencies to rely too much on expensive, commissionable media such as network television and avoid noncommissionable media. Many advertisers have moved to a negotiated commission system that takes the form of reduced percentage rates, variable commission rates, and minimum and maximum compensation rates. The most recent survey commissioned by the Association of National Advertisers found that 12 percent of clients pay a commission to their agencies. However, most clients do use the 15 percent commission as a benchmark to evaluate their current agency compensation agreement.

Fee, Cost, and Incentive-Based Systems—In situations where billings are low, and/or the client does not wish to pay a direct commission, an agreement may be reached in which the agency is compensated in the way of a fee, cost-plus, or incentive-based compensation system. 1. Fee Arrangement—There are two types: A fixed-fee method is when the agency charges a basic monthly fee for all of its services and credits to the client any media commissions earned. Under a fee-commission combination, the media commissions received by the agency are credited against the fee. If commissions are less than the agreed-on fee, the client must make up the difference. 2. Cost-Plus Agreement—Under a cost-plus system, the client agrees to pay the agency a fee based on costs of its work plus some agreed-on profit margin. This system requires the agency to keep detailed records of costs incurred in working on a client‘s account. 3. Incentive-Based Compensation—While there are many variations on this system, the basic idea is that the agency‘s compensation level will depend upon how well it meets predetermined performance goals for its clients such as sales or market share. Figure 3-8 shows some of the criteria used for incentive-based compensation systems. Incentive-based compensation systems are becoming more prevalent as marketers strive to make their agencies more accountable and reduce costs.

Professor Notes:

Percentage Charges—When agencies purchase services from other outside agencies, they typically add a percentage in the form of a markup charge as their compensation. These markups usually range from 17.65 to 20 percent.

The Future of Agency Compensation—Companies have continued to make significant changes in their agency compensation systems, including increased use of the commission system and valuebased compensation systems. More companies are changing their compensation systems as they move away from traditional mass media advertising and turn to a wider array of marketing communication tools.

Professor Notes:

McGraw-Hill Connect ®: AdCreates Client Portfolio Type of Activity: Case Analysis Activity Summary: AdCreate is a full-service advertising agency with several high-profile marketing firms as clients. Given their vast client list and the varied services they provide to different clients, they are compensated differently by different clients. This activity will have students select the best answer for each question related to compensation. Activity Learning Objective: 03-04 Explain how to select, compensate, and evaluate advertising agencies. Concept Review: The type and amount of services an ad agency performs varies from one client to another. As a result, agencies use a variety of methods to get paid for their services. Agencies are typically compensated in three ways: commissions, some type of fee arrangement, or percentage charges. Difficulty: 3 Hard Bloom‘s: Analyze AACSB: Analytical Thinking

EVALUATING AGENCIES

Given the substantial amounts of money being spent on advertising by many companies, demands for accountability are increasing. The agency evaluation process generally involves two types of assessments—financial audits and qualitative audits. The financial audit focuses on how the agency conducts its business including verification of costs and expenses, the number of personnel hours charged to an account and payments to media and outside suppliers. The qualitative audit involves the agency‘s efforts in planning, developing and implementing the client‘s advertising programs and the results achieved. An increasing trend among larger firms is to formalize this process. A.

Gaining and Losing Clients—Agencies are like their clients in the sense that they must solicit business, and they often gain and lose business. The text offers a variety of reasons as to why agencies gain and lose clients, as well as some of the activities they perform in seeking new business. Current issues of Advertising Age or AdWeek will be useful in providing the instructor with examples of recent account changes and some of the reasons clients decided to change agencies. 1. Why agencies lose clients: 

Poor performance or service.



Poor communication.



Unrealistic demands by the client.



Personality conflicts.



Personnel changes.



Changes in 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.



Disagreements over marketing and/or creative strategy.



Lack of integrated marketing capabilities.

2. How agencies gain clients: 

Referrals.



Solicitations.



Presentations.



Public relations.



Image and reputation.

Professor Notes:

VI.

SPECIALIZED SERVICES

In addition to advertising agencies, other outside organizations may provide marketers with specialized services that are important in developing and executing integrated marketing communication programs. A.

Direct-Marketing Agencies—One of the fastest growing areas in IMC is direct marketing, where companies communicate with their customers through telemarketing, direct mail, and other forms of direct-response advertising. Direct response agencies provide their clients a variety of services, including database analytics and management, direct mail, research, media services, and creative and production capabilities.

Sales Promotion Agencies—There are many companies specializing in the provision of sales promotions such as contests, games, sweepstakes, and refund and rebate offers. Services provided by large sales promotion agencies include promotional planning, creative research, tie-in coordination, fulfillment, premium design and manufacturing, catalog production, and 1-52 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

contest/sweepstakes management. Some time might also be spent discussing how promotional agencies are becoming important participants in the development of integrated marketing communications strategies for various companies. C.

Public Relations Firms—Many large companies use both advertising agencies and public relations (PR) firms. Public relations firms develop and implement programs to manage an organization‘s publicity, image, and affairs with consumers and other relevant publics, including employers, suppliers, stockholders, government, labor groups, citizen action groups, and the general public. The role of PR firms is examined in more detail in Chapter 17.

Digital Agencies—With the rapid growth of the Internet and other forms of interactive media, a new type of specialized marketing communication organization has evolved—the digital agency. Many marketers are turning to digital agencies for their expertise in digital media, content marketing, e-mail marketing and lead generation, database and customer relationship management, measurement, and analytics. The growth of social media and the increase in the number of marketers using them is giving rise to companies that specialize in developing applications and campaigns for platforms such as Facebook, Twitter, Instagram, and Snapchat.

Professor Notes:

VII.

COLLATERAL SERVICES

The final group of participants in the promotional process is those organizations that provide collateral services, such as marketing research, package design, consulting, photography, graphic design, talent selection, video production, and event marketing services. One of the more widely used collateral service organizations is market research firms that conduct both qualitative research such as focus groups and quantitative studies such as market surveys.

McGraw-Hill Connect ®: Role and Functions of Specialized and Collateral Services Type of Activity: Click and Drag Activity Summary: This activity provides students with a specialized or collateral service (i.e., direct marketing firm, sales promotion agency, public relations firm, etc.) and tasks students with identifying the functions of, or services provided by, these types of firms. Activity Learning Objective: 03-05 Identify the role and functions of specialized marketing communication organizations. Concept Review: More and more clients now seek the expertise of firms other than traditional advertising agencies to complement the efforts of their advertising agency. Five types of organizations offering specialized services were discussed in the text. Direct marketing agencies, while traditionally utilized primarily for assistance with direct mail campaigns, now specialize in database analytics and management, research, 1-53 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.