ADVERTISING

Advertising is often thought of as the paid, nonpersonal
promotion of a cause, idea, product, or service by an identified
sponsor attempting to inform or persuade a particular
target audience. Advertising has taken many different
forms since the beginning of time. For instance, archaeologists
have uncovered walls painted in Rome announcing
gladiator fights as well as rock paintings along Phoenician
trade routes used to advertise wares. From this early beginning,
advertising has evolved to take a variety of forms and
to permeate nearly every aspect of modern society.
The various delivery mechanisms for advertising
include banners at sporting events, billboards, Internet
Web sites, logos on clothing, magazines, newspapers,
radio spots, and television commercials. Advertising has so
permeated everyday life that individuals can expect to be
exposed to 1,500 to 3,000 different messages each day.
While advertising may seem like the perfect way to get a
message out, it does have several limitations, the most
commonly noted ones being its inability to focus on an
individual consumer’s specific needs, provide in-depth
information about a product, and be cost-effective for
small companies.
FORMS OF ADVERTISING
Advertising can take a number of forms, including advocacy,
comparative, cooperative, direct mail, informational,
institutional, outdoor, persuasive, product, reminder,
point-of-purchase, and specialty advertising.
Advocacy Advertising. Advocacy advertising is normally
thought of as any advertisement, message, or public communication
regarding economic, political, or social issues.
The advertising campaign is designed to persuade public
opinion regarding a specific issue important in the public
arena. The ultimate goal of advocacy advertising usually
relates to the passage of pending state or federal legislation.
Almost all nonprofit groups use some form of advocacy
advertising to influence the public’s attitude toward a
particular issue.
One of the largest and most powerful nonprofit advocacy
groups is the American Association of Retired Persons
(AARP). The AARP fights to protect social programs
such as Medicare and Social Security for senior citizens by
encouraging its members to write their legislators, using
television advertisements to appeal to emotions, and publishing
a monthly newsletter describing recent state and
federal legislative action. Other major nonprofit advocacy
groups include the environmental organization Greenpeace,
Mothers against Drunk Driving, and the National
Rifle Association.
Comparative Advertising. Comparative advertising compares
one brand directly or indirectly with one or more
competing brands. This advertising technique is very
common and is used by nearly every major industry,

16 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION
Advertising
including airlines and automobile manufacturers. One
drawback of comparative advertising is that customers
have become more skeptical about claims made by a company
about its competitors because accurate information
has not always been provided, thus making the effectiveness
of comparison advertising questionable. In addition,
companies that engage in comparative advertising must be
careful not to misinform the public about a competitor’s
product. Incorrect or misleading information may trigger
a lawsuit by the aggrieved company or regulatory action
by a governmental agency such as the Federal Trade Commission
(FTC; see the FTC’s statement of policy regarding
comparative advertising at http://www.ftc.gov/bcp/
policystmt/ad-compare.htm).
Cooperative Advertising. Cooperative advertising is a system
that allows two parties to share advertising costs.
Manufacturers and distributors, because of their shared
interest in selling the product, usually use this cooperative
advertising technique. An example might be when a softdrink
manufacturer and a local grocery store split the cost
of advertising the manufacturer’s soft drinks; both the
manufacturer and the store benefit from increased store
traffic and its associated sales. Cooperative advertising is
especially appealing to small-store owners who, on their
own, could not afford to advertise the product adequately.
For examples of cooperative advertising programs, see
the John Wiley & Sons, Inc. (http://www.wiley.com/
WileyCDA/Section/id-10671.html) and the New Mexico
Department of Tourism (http://www.newmexico.org/
go/loc/department/page/dept-coop-advertising.html)
Web sites.
Direct Mail. Brochures, catalogs, flyers, letters, and postcards
are just a few of the direct-mail advertising options.
Direct-mail advertising has several advantages, including
detail of information, personalization, selectivity, and
speed. But while direct mail has advantages, it carries an
expensive per-head price, is dependent on the appropriateness
of the mailing list, and is resented by some customers,
who consider it junk mail.
Informational Advertising. In informational advertising,
which is used when a new product is first being introduced,
the emphasis is on promoting the product name, benefits,
and possible uses. Thus, informational advertising is used
early in the product life cycle. Car manufacturers used this
strategy when sport-utility vehicles were first introduced.
Billboards, such as these along the Palmetto Expressway in Miami, Florida, are a popular form of advertising. AP IMAGES

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 17
Advertising
Institutional Advertising. Institutional advertising takes a
broad approach to advertising, concentrating on the benefits,
concept, idea, or philosophy of a particular industry.
Companies often use it to promote image-building activities,
such an environmentally friendly business practices
or new community-based programs that it sponsors. Institutional
advertising is closely related to public relations,
since both are interested in promoting a positive image of
the company to the public. As an example, a large lumber
company may develop an advertising theme around its
practice of planting trees in areas where they have just
been harvested. A theme of this nature keeps the company’s
name in a positive light with the general public
because the replanting of trees is viewed positively by most
people. For example, the idea that “The Future Is Growing,”
is noted on the Weyerhaeuser (http://www.weyerhaeuser.
com) Web site.
Outdoor Advertising. Billboards and messages painted on
the sides of buildings are common forms of outdoor
advertising, which is often used when quick, simple ideas
are being promoted. Since repetition is the key to successful
promotion, outdoor advertising is most effective when
located along heavily traveled city streets and when the
product being promoted can be purchased locally. Only
about 1 percent of advertising is conducted in this
manner. For more information on outdoor advertising,
see the Lamar Advertising Company Web site at
http://www.lamaroutdoor.com/main/home/default.cfm.
Lamar Advertising Company is among the largest in the
United States.
Persuasive Advertising. Persuasive advertising is used after
a product has been introduced to customers. The primary
goal is for a company to build selective demand for its
product. For example, automobile manufacturers often
produce special advertisements promoting the safety
features of their vehicles. This type of advertisement could
allow automobile manufacturers to charge more for
their products because of the perceived higher quality the
safety features afford. Both Ford Motor Company
(http://www.ford.com) and General Motors Corporation
(http://www.gm.com) provide extensive information
regarding product safety on their Web sites.
Product Advertising. Product advertising pertains to nonpersonal
selling of a specific product. An example is a regular
television commercial promoting a soft drink. The
primary purpose of the advertisement is to promote the
specific soft drink, not the entire soft-drink line of a company.
Reminder Advertising. Reminder advertising is used for
products that have entered the mature stage of the product
life cycle. The advertisements are simply designed to
remind customers about the product and to maintain
awareness. For example, detergent producers spend a considerable
amount of money each year promoting their
products to remind customers that their products are still
available and for sale. Reminder advertising is often used
during the maturity stage of the product life cycle.
Point-of-Purchase Advertising. Point-of-purchase advertising
uses displays or other promotional items near the
product that is being sold. The primary motivation is to
attract customers to the display so that they will purchase
the product. Stores are more likely to use point-ofpurchase
displays if they have help from the manufacturer
in setting them up or if the manufacturer provides easy
instructions on how to use the displays. Thus, promotional
items from manufacturers who provide the best
instructions or help are more likely to be used by the retail
stores. For more information regarding point-of-purchase
advertising, see the Point-of-Purchase Advertising International
Web site (http://www.popai.com//AM/Template.
cfm?Section=Home).
Specialty Advertising. Specialty advertising is a form of
sales promotion designed to increase public recognition of
a company’s name. A company can have its name put on
a variety of items, such as caps, glassware, gym bags, jackets,
key chains, and pens. The value of specialty advertising
varies depending on how long the items used in the
effort last. Most companies are successful in achieving
their goals for increasing public recognition and sales
through these efforts. For more information about specialty
advertising, see the Specialty Advertising Association
of California Web site (http://www.SAAC.net).
ADVERTISING OBJECTIVES
The objectives of advertising are to reach specific customers
during a particular time frame and get them to buy
a particular product. A company that advertises usually
strives to achieve one of four types of advertising objectives:
trial, continuity, brand switching, and switchback.
Which of the four advertising objectives is selected usually
depends on where the product is in its life cycle.
Trial. The purpose of the trial objective is to encourage
customers to make an initial purchase of a new product.
Companies will typically employ creative advertising
strategies in order to cut through other competing advertisements.
The reason is simple—without that first trial of
a product by customers, there will not be any repeat purchases.

18 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION
Advertising
Continuity. Continuity advertising is a strategy to keep
current customers using a particular product. Existing
customers are targeted and are usually provided new and
different information about a product that is designed to
build consumer loyalty.
Brand Switching. Companies adopt brand switching as
an objective when they want customers to switch from
competitors’ brands to their brands. A common strategy is
for a company to compare product price or quality in
order to persuade customers to switch to its product
brand.
Switchback. Companies subscribe to this advertising
objective when they want to get back former users of their
product brand. A company might highlight new product
features, price reductions, or other important product
information in order to get former customers of its product
to switch back.
ADVERTISING BUDGET
Once an advertising objective has been selected, companies
must then set an advertising budget for each product.
Developing such a budget can be a difficult process
because brand managers want to receive a large resource
allocation to promote their products. Overall, the advertising
budget should be established so as to be congruent
with overall company objectives. Before establishing an
advertising budget, companies must take into consideration
other market factors, such as advertising frequency,
competition and clutter, market share, product differentiation,
and stage in the product life cycle.
Advertising Frequency. Advertising frequency refers to
the number of times an advertisement is repeated during
a given period to promote a product’s name, message, and
other important information. A larger advertising budget
is required in order to achieve a high advertising frequency.
Estimates have been put forward that a consumer
needs to come in contact with an advertising message
three times before it will be remembered.
Competition and Clutter. Highly competitive product
markets, such as the soft-drink industry, require higher
advertising budgets just to stay even with competitors. If
a company wants to be a leader in an industry, then a substantial
advertising budget must be earmarked every year.
Examples abound of companies that spend billions of dollars
on advertising in the United States alone in order to
be key players in their respective industries (e.g., Ford
Motor Company, Johnson & Johnson, and McDonald’s
Corporation).
Market Share. Desired market share is also an important
factor in establishing an advertising budget. Increasing
market share normally requires a large advertising budget
because a company’s competitors frequently counterattack
with their own advertising blitz. For example, when General
Motors Corporation initiated an employee pricing for
everyone campaign, both DaimlerChrysler and Ford
Motor Corporation established similar offers. Successfully
increasing market share depends on advertisement quality,
competitor responses, and product demand and quality.
Product Differentiation. How customers perceive products
is also important to the budget-setting process. Product
differentiation is often necessary in competitive
markets where customers have a hard time differentiating
between products. For example, product differentiation
might be necessary when a new laundry detergent is
advertised. Since so many brands of detergent already
exist, an aggressive advertising campaign would be
required. Without this aggressive advertising, customers
would not be aware of the product’s availability and how
it differs from other products on the market. The advertising
budget is higher in order to pay for the additional
advertising.
Stage in the Product Life Cycle. New product offerings
require considerably more advertising to make customers
aware of their existence. As a product moves through the
product life cycle, fewer and fewer advertising resources
are needed because the product has become known and
has developed an established buyer base. Advertising
budgets are typically highest for a particular product during
the introduction stage and gradually decline as the
product matures.
SELECTING THE RIGHT
ADVERTISING APPROACH
Once a company decides what type of specific advertising
campaign it wants to use, it must decide what approach
should carry the message. A company must decide on
such items as frequency, media impact, media timing, and
reach.
Frequency. Frequency refers to the average number of
times that an average consumer is exposed to the advertising
campaign. A company usually establishes frequency
goals, which can vary for each advertising campaign. For
example, a company might want to have the average consumer
exposed to the message at least six times during the
advertising campaign. This number may seem high, but in
a crowded and competitive market, repetition is one of the
best methods to increase the product’s visibility and to
increase company sales. The more exposure a company

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 19
Advertising
desires for its product, the more expensive the advertising
campaign. Thus, often only large companies can afford to
have high-frequency advertisements during a campaign.
Media Impact. Media impact generally refers to how
effective advertising will be through the various media
outlets (e.g., television, Internet, print). A company must
decide, based on its product, the best method to maximize
consumer interest and awareness. For example, a company
promoting a new laundry detergent might fare better with
television commercials rather than simple print ads
because more consumers are likely to see the television
commercial. Similarly, a company such as Mercedes-Benz,
which markets expensive products, might advertise in specialty
car magazines to reach a high percentage of its
potential customers. Before any money is spent on any
advertising media, a thorough analysis is done for each
one’s strengths and weaknesses in comparison to the cost.
Once the analysis is done, the company will decide which
media outlet is best to use and will embark on its advertising
campaign.
Timing. Another major consideration for any company
engaging in an advertising campaign is when to run the
advertisements. For example, some companies run ads
during the holidays to promote season-specific products.
The other major consideration for a company is whether
it wants to employ a continuous or pulsing pattern of
advertisements. Continuous refers to advertisements that
are run on a scheduled basis for a given period. The
advantage of this tactic is that an advertising campaign
can run longer and might provide more exposure over
time. For example, a company could run an advertising
campaign for a particular product that lasts years with the
hope of keeping the product in the minds of customers.
Pulsing indicates that advertisements will be scheduled
in a disproportionate manner within a given time
frame. Thus, a company could run thirty-two television
commercials over a three- or six-month period to promote
the specific product is wants to sell. The advantage with
the pulsing strategy is twofold. The company could spend
less money on advertising over a shorter period but still
gain the same recognition because the advertising campaign
is more intense.
Reach. Reach refers to the percentage of customers in the
target market who are exposed to the advertising campaign
for a given period. A company might have a goal of
reaching at least 80 percent of its target audience during a
given time frame. The goal is to be as close to 100 percent
as possible, because the more the target audience is
exposed to the message, the higher the chance of future
sales.
ADVERTISING EVALUATION
Once the advertising campaign is over, companies normally
evaluate it compared to the established goals. An
effective tactic in measuring the usefulness of the advertising
campaign is to measure the pre- and post-sales of the
company’s product. In order to make this more effective,
some companies divide up the country into regions and
run the advertising campaigns only in some areas. The different
geographic areas are then compared (advertising
versus nonadvertising), and a detailed analysis is performed
to provide an evaluation of the campaign’s effectiveness.
Depending on the results, a company will
modify future advertising efforts in order to maximize
effectiveness.
SUMMARY
Advertising is the paid, nonpersonal promotion of a cause,
idea, product, or service by an identified sponsor attempting
to inform or persuade a particular target audience.
Advertising has evolved to take a variety of forms and has
permeated nearly every aspect of modern society. The various
delivery mechanisms for advertising include banners
at sporting events, billboards, the Internet, logos on clothing,
magazines, newspapers, radio spots, and television
commercials. While advertising can be successful at getting
the message out, it does have several limitations,
including its inability to focus on an individual consumer’s
specific needs, provide in-depth information
about a product, and be cost-effective for small companies.
Other factors, such as objectives, budgets,
approaches, and evaluation methods must all be considered.
SEE ALSO Advertising Agencies; Promotion
BIBLIOGRAPHY
Adams, R. (2003). WWW.advertising: Advertising and marketing
on the World Wide Web. New York: Watson-Guptill.
Boone, Louis E., and Kurtz, David L. (2005). Contemporary
marketing 2006 (12th ed.). Eagan, MN: Thomson South-
Western.
Brierley, S. (2002). The advertising handbook (2nd ed.). New
York: Routledge.
Churchill, Gilbert A., Jr., and Peter, Paul J. (1998). Marketing:
Creating value for customers (2nd ed.). New York: Irwin
McGraw-Hill.
Farese, Lois, Kimbrell, Grady, and Woloszyk, Carl (2002). Marketing
essentials (3rd ed.). Mission Hills, CA:
Glencoe/McGraw-Hill.
Kotler, Philip, and Armstrong, Gary (2006). Principles of marketing
(11th ed.). Upper Saddle River, NJ: Pearson Prentice-
Hall.
Pride, William M., and Ferrell, O. C. (2006). Marketing concepts
and strategies. New York: Houghton Mifflin.

20 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION
Advertising Agencies
Richards, Barry, MacRury, Iain, and Botterill, Jackie (2000). The
dynamics of advertising. Amsterdam: Harwood Academic.
Semenik, Richard J., and Bamossy, Gary J. (1995). Principles of
marketing: A global perspective (2nd ed.). Cincinnati: South-
Western.
Special report: Leading national advertisers. (2002, June 24).
Advertising Age.
Tellis, G. J. (2004). Effective advertising: Understanding when,
how, and why advertising works. Thousand Oaks, CA: Sage.
Allen D. Truell
Michael Milbier
ADVERTISING
AGENCIES
Advertising agencies are independent businesses that
evolved to develop, prepare, and place advertising in
advertising media for sellers seeking to find customers for
their goods, services, and ideas (American Association of
Advertising Agencies, 2000). Advertisers use agents when
they believe the agency will be more expert than they are
at planning and creating advertisements or at developing
an advertising campaign. As businesses have become
more complex and diversified, many of them have consulted
agencies to help them carry out their marketing
communication efforts.
The modern advertising agency provides a variety of
important services to clients, including media planning
and buying, research, market information, sales promotion
assistance, campaign development and creation of
advertisements, plus a range of services designed to help
the advertiser achieve marketing objectives. The first
advertising agency in the United States was opened in
Philadelphia by Volney Palmer in 1841 (John Hartman
Center, 2000). At this time, advertising agents were
largely space brokers agents who solicited ads from businesses
and then sold them to newspapers that had difficulty
getting out-of-town advertising (Lane, King, &
Russell, 2005).
EVOLUTION OF THE ADVERTISING
AGENCY FROM THE 1870S TO THE
EARLY 1900S
While the invention of printing paved the way for the
development of modern advertising, the influence of
salesmanship began to influence the evolution of advertising
toward more like what we recognize today. The advertising
agency, working on a commission basis, has been
chiefly responsible for this evolution. During the late
nineteenth century, most advertising appeared in newspapers,
on posters, and in handbills (Wells, Burnett, &
Moriarty, 2000). Because it was difficult to reproduce
illustrations, most of these ads were simple text-based
items.
By 1900, the first specialized magazines had begun to
appear in the United States. Magazines such as Field &
Stream (in 1895) and Good Housekeeping (in 1900) established
niche markets, which allowed for mass marketing
to consumers with varied interests. Also, print technology
had evolved considerably, making full-color illustrations
possible. Advertising agencies began to use the new technology
to create more attractive advertisements for the
new niche markets, thus becoming creative centers rather
than merely space brokerages.
The late nineteenth and early twentieth centuries
were also times of public concern about unethical business
practices. Many professions formed their own organizations
to create ethical standards of operation. The American
Association for Advertising Agencies (AAAA) was
founded in 1917 to represent the agencies, partially in
response to these ethical concerns.
Newspapers also set their own ethical standards concerning
rates charged for advertisements. By 1917, publishers
had agreed to set a flat rate of 15 percent as the
standard commission an advertising agency would receive
with the exception of local advertising, for which there
was generally no predetermined commission (Lane et al.,
2005).
In addition, two laws were passed to alleviate concerns
about unethical advertising practices. The Federal
Trade Commission Act of 1914 was originally designed to
make all unfair methods of competition unlawful. It was
not until 1922 that advertising was legally regulated under
this act. The case that set this legal precedent was FTC v.
Winsted Hosiery Company (1922) (Lane et al., 2005). The
Pure Food and Drug Act of 1906 was the first act that limited
the advertising of patent medicines—drugs that were
advertised using exaggerated claims of effectiveness—for
use by children.
EVOLUTION OF THE ADVERTISING
AGENCY FROM 1920 TO THE EARLY
1950S
During the first part of the twentieth century, agencies
expanded their role from one largely comprised of selling
space to one of “full service” to clients—involvement in all
advertising functions, from market research to ad production,
to space buying (Jones, 2004). Agency development
was stimulated after World War I when consumers were
demanding more goods and services (Wells et al, 2000).
By the 1920s, market research suggested the role of
women in making many family purchasing decisions.

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 21
Advertising Agencies
Thus, advertising agencies created full-color magazine
advertisements for goods such as automobiles, refrigerators,
and radios. Newspapers continued to use simple
advertisements. In the 1920s and 30s, radio also became
popular for home and family use as an inexpensive form
of entertainment (Wells et al., 2000). Advertising agencies
produced radio programs for the sole purpose of
attracting consumers for popular national products. For
example, the term “soap opera” was coined by the American
press in the 1930s to denote these popular serialized
domestic radio dramas. The “soap” in soap opera alluded
to their sponsorship largely by manufacturers of household
cleaning products (Museum of Broadcast Communications,
2005).
The 1930s were a time of renewed public interest in
legislation concerning unfair and deceptive business practices.
The Robinson-Patman Act of 1936 prevented manufacturers
from providing promotional allowances to a
retail customer unless it also offered promotional
allowances to that customer’s competitors. The 1938
Wheeler-Lea Amendments to the Federal Trade Commission
Act enabled the Federal Trade Commission (FTC) to
protect consumers from deceptive advertising in the food,
drug, therapeutic device, and cosmetic industries (Lane et
al., 2005).
Although World War II suspended production of
many peacetime goods and services, many advertising
agents found employment working for the War Advertising
Council, which was responsible for mobilizing public
support for the war effort. This organization later became
the Ad Council.
EVOLUTION OF THE ADVERTISING
AGENCY FROM THE 1950S TO THE
EARLY 1990S
The end of World War II saw a culmination of more than
a decade of unsatisfied consumer demand as a result of the
Great Depression and war. Most markets for goods and
services found a willing consumer base for new products—
including television sets. Because television is a
medium that combines the visual element available in
print ads with sound and motion, this created a change in
the structure of advertising agencies. For example, prior
to the 1950s, the main source of creativity was the person
writing the advertising message—referred to as the copywriter.
As television became more popular, the art director
and artist became more important (Wells et al., 2000).
Between 1945 and 1960, large numbers of returning
veterans began to marry and have children—the generation
of children known as baby-boomers. For the first
time in the United States, advertising agencies found it
profitable to market certain goods and services directly to
the youth market. Ads for blue jeans and stereo equipment
appeared in newspaper inserts, in youth-oriented
niche market magazines, and on television.
Advances in product design during the 1960s and
1970s forced advertising agencies to become more creative
in order to differentiate their client’s product from competitors’
equally good products. The resulting newer,
more creative advertisements proved both popular and
profitable, allowing agencies to spend more money on
advertising research—often employing behavioral psychologists
to design elaborate studies of consumer buying
behavior. All of this creativity had a cost: it became very
expensive to produce lengthy TV advertisements. Advertising
agencies addressed the cost issue by designing
thirty-second television commercials with memorable
advertising slogans short phrases designed to keep a consumer’s
attention and maintain recognition of a particular
brand of good or service.
As the cost of advertising rose, agency clients began to
demand results for increasingly expensive ad efforts—in
the form of consumer research. During the 1980s and
1990s, many advertising agencies merged in order to
remain financially competitive in this period of consolidation
and rising costs. Some agencies moved toward providing
a range of marketing services options to clients,
including direct marketing, sales promotion, and public
relations (Lane et al., 2005). Some advertising agencies
moved from traditional radio and TV advertising toward
sales promotion techniques such as rebates, coupons, and
sweepstakes that offered measurable proof of increased
sales (Wells et al., 2000).
Evolution of the Advertising Agency from 1995 to the
Present. The traditional advertising agency is now facing
competition from many different directions. In recent
years, a number of advertising media companies have consolidated
their businesses. These large organizations have
sought to blend media, such as television, print, cable, and
Internet to be able to better design messages to meet individual
consumer needs (Lane et al., 2005). Some large
advertisers are directly employing branding specialists,
media specialists and CRM specialists and dissolving their
longstanding relationships with agencies in an effort to
increase the effectiveness of their marketing dollars. Marketing,
branding and research consultancy firms have
developed, with each claiming to provide the strategic
planning offered by agencies. In addition, media firms
and production houses are now delving into concept
development (Williams, 2004).
Present-day agencies employ many of the techniques
that were popular in the early years of advertising. Newspapers
continue to advertise primarily in text format,
although color inserts are becoming popular. Advertising
agencies continue to be able to advertise in smaller and

22 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION
Advertising Agencies
smaller niche-market magazines. Radio remains a popular
advertising medium in local markets. The widespread
availability of cable TV and satellite transmission has fragmented
television advertising into niche markets. However,
new and enhanced technologies plus continuing
innovation in product development are adding an interactive
flavor to advertising. With the development of new
media channels new marketing opportunities will arise.
These developments in the advertising industry continue
to influence how agencies operate. The changes are discussed
next.
Globalization and International Marketing. Advertising
agencies are under increasing pressure to create ads for
products distributed in a global market. Costs for producing
and executing advertising campaigns across international
markets can be very high. Success often depends
on a brand maintaining a uniform position across the
markets in different countries. Agencies must often consider
culture, language, and customs when designing an
advertisement tailored to the international market. In
order to meet the demands of a global market, advertisers
are forming large multinational agencies and continuing
to debate whether to standardize advertising globally or to
segment advertisements by culture or nationality (Wells et
al., 2000).
Interactive Marketing and the Internet. Since 2000,
interactive marketing has been the fastest growing area
within marketing. Interactive marketing includes Internet
advertising, permission e-mail, marketing web sites,
mobile media (including digital mobile communication
devices) and other new media (Stafford & Faber, 2005).
These media are distinctive among the mass media in that
they permit people the chance to communicate outside
the traditional medium limitations of time and space.
The Internet allows advertising agencies to target
consumers worldwide and to conduct market research
inexpensively. The easy access to market research information
may permit advertising agencies to continue
developing ads to reach smaller and smaller niche markets
worldwide. At the same time, certain forces are reducing
the availability and use of information gathered over the
Internet. For example, the Children’s Online Protection
Act (1998), or COPA, is a U.S. law that affects business
transactions by children using the Internet. COPA
requires Web sites soliciting personal information from
children under the age of 13 to prominently post a privacy
policy and require parental consent for the release of personal
information provided by those children before any
business can be transacted. Many countries are developing
laws similar to COPA, and it remains to be seen how
COPA and other impending legislation will affect advertising
agencies that conduct business globally.
The Role of Government in Advertising. Very few industries
have been more thoroughly regulated than advertising.
Advertising’s visibility in society sometimes makes it
a target for criticism. Consumers often believe that many
advertisements are untruthful and manipulative, which
draws attention from citizens, the media, government,
and competitors (Wells et al., 2000). At these times, government
often has taken steps to regulate advertising practices
and content.
The Ad Council is a private, non-profit organization
that marshals volunteers from advertising and communications,
media facilities, and the resources of the business
and non-profit communities to deliver messages to the
American public. Since its founding in 1942 as the War
Advertising Council, the Ad Council has produced public
service ads and acted as an agency that addresses social
issues such as improving the quality of life for children,
preventative health, education, community well being,
environmental preservation and strengthening families
(The Ad Council, 2005).
Changing Incentives. Advertising agencies produce revenue
and profits by charging commissions and fees for
their services. The 15-percent commission has remained
a common practice, with the rate sometimes negotiated
downward are account budgets become large. In recent
years, fees have become the largest source of revenue for
agencies. Increasingly, agency revenues are based on sales
or market distribution goals (Lane et al., 2005).
Evolving Career Fields in Advertising. Today’s advertising
agencies include a vast array of specialists who work
together to create a complete and thorough advertising
campaign. Account managers allocate agency resources,
including time, money, and personnel for individual projects.
An account manager often assembles a team of individuals,
each bringing a particular advertising specialty to
the project. The team includes an art director, creative
director, artist(s), copywriters, and designers. The team
may also include other specialists such as media analysts,
product testers, researchers, and public relations consultants.
SEE ALSO Advertising
BIBLIOGRAPHY
The Ad Council (2005). Retrieved March 21, 2006, from
http://www.adcouncil.org.
American Association of Advertising Agencies (2005).
Retrieved March 24, 2006, from http://www.aaaa.org.