Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

16. Advertising and Sales
    Promotion

Text © The McGraw−Hill

Companies, 2002

470 Chapter 16

Exhibit 16-5 shows a list of eight of the largest agency networks and examples of

some of the products they advertise. Although their headquarters are located in

different nations, they have offices worldwide. The move toward international

marketing is a key reason behind the mergers.

Before the mergers, marketers in one country often had difficulty finding a capable,

full-service agency in the country where they wanted to advertise. The mega-agency

can offer varied services—wherever in the world a marketing manager needs them.

This may be especially important for managers in large corporations—like Toyota,

Renault, Unilever, NEC, Philips, Procter & Gamble, Nestlé, and PepsiCo—that adver-

tise worldwide.^23

In spite of the growth of these very large agencies, smaller agencies will continue

to play an important role. The really big agencies are less interested in smaller

accounts. Smaller agencies will continue to appeal to customers who want more

personal attention and a close relationship that is more attuned to their marketing

needs.

Traditionally, U.S. advertising agencies have been paid a commission of about

15 percent on media and production costs. This arrangement evolved because media

usually have two prices: one for national advertisers and a lower rate for local adver-

tisers, such as local retailers. The advertising agency gets a 15 percent commission

on national rates but not on local rates. This makes it worthwhile for producers and

national middlemen to use agencies. National advertisers have to pay the full media

rate anyway, so it makes sense to let the agency experts do the work and earn their

commission. Local retailers—allowed the lower media rate—seldom use agencies.

Now, however, many firms—especially big producers of consumer packaged

goods—resist the idea of paying agencies the same way regardless of the work

performed or the results achieved.The commission approach also makes it hard

for agencies to be completely objective about inexpensive media or promotion

Are they paid
too much?

Exhibit 16-5 Top Eight Advertising Agency Supergroups and Examples of Products They Advertise

Worldwide Gross Income,

Organization Headquarters 2000 ($ millions) Products

WPP Group London $7,971.0 American Express, AT&T,

Campbell’s, Ford, IBM

Omnicom Group. New York 6,986.2 Anheuser-Busch,

DaimlerChrysler, McDonald’s,

PepsiCo, Visa

Interpublic Group of Cos. New York 6,595.9 Coca-Cola, GM,

Johnson & Johnson,

Microsoft, UPS

Dentsu Tokyo 3,089.0 Honda, Japan Air Lines,

Kao, Matsushita, Toyota

Havas Advertising Paris 2,757.3 Intel, Philips, PSA

Peugeot-Citroen,

Volkswagen, Worldcom

Publicis Groupe Paris 2,479.1 BMW, British Airways,

L’Oreal, Renault, Siemens

Bcom3 Group Chicago 2,215.9 Canon, Delta, Hallmark,

Heinz, Suzuki

Grey Advertising New York 1,863.2 British American Tobacco,

GlaxoSmithKline, Mars,

Procter & Gamble, 3M