Case study on advertising agency

Case

Cases in Advertising

Management

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Cases in Advertising

Management

Larry D. Kelley and Donald W. Jugenheimer

Routledge Taylor & Francis Group

LONDON AND NEW YORK

R O

U TLED

G E

Library of Congress Cataloging-in-Publication Data

Kelley, Larry D., 1955– Cases in advertising management / by Larry D. Kelley and Donald W. Jugenheimer. p. cm. ISBN 978-0-7656-2261-7 (pbk. : alk. paper) 1. Advertising—Management—Case studies. I. Jugenheimer, Donald W. II. Title.

HF5823.K3443 2009 659.1—dc22 2008039868

First published 2009 by M.E. Sharpe

Published 2015 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN

711 Third Avenue, New York, NY 10017, USA

Routledge is an imprint of the Taylor & Francis Group, an informa business

by Routledge

Copyright © 2009 Taylor & Francis. All rights reserved.

No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented,

including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

Notices No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use of operation of any methods, products, instructions or ideas

contained in the material herein.

Practitioners and researchers must always rely on their own experience and knowledge in evaluating and using any information, methods, compounds, or

experiments described herein. In using such information or methods they should be mindful of their own safety and the safety of others, including parties for

whom they have a professional responsibility.

Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.

ISBN 13: 9780765622617 (pbk)

v

Contents

Preface ix

Introduction: How to Analyze a Case Study xi

PART I. ADVERTISING MANAGEMENT FUNDAMENTALS 1

Case 1 Boswell Agency Issue: Structuring of an Advertising Agency 5

Case 2 The Leaky Oil Company Issue: New Business Trade-off 11

Case 3 Prime Media Issue: Global Expansion 13

PART II. ADVERTISING FINANCIAL MATTERS 15

Case 4 Tinsdale Agency Issue: Agency Profitability 17

Case 5 Barrons Agency Issue: Agency Billing Procedures 19

Case 6 Vineyard Agency Issue: New Business Profitability 21

PART III. ADVERTISING BUSINESS PLANS 25

Case 7 St. Joseph Dispatch Issue: Advertising versus Editorial 27

Case 8 American Textbook Company Issue: Outsourcing versus In-house 31

vi CONTENTS

PART IV. ADVERTISING PLANNING 35

Case 9 Phoenix Power Company Issue: Advertising Message Strategy 37

Case 10 Go Organic Company Issue: Market Segmentation 39

Case 11 Randall White Dog Food Issue: Advertising Planning 43

PART V. ADVERTISING BUDGET MANAGEMENT 49

Case 12 Bosco Hot Sauce Company Issue: Budget Allocation Analysis 53

Case 13 Alpha Airlines Issue: Budget Allocation Analysis 55

Case 14 Southern Rice Issue: Advertising Spending 57

PART VI. ADVERTISING MANAGEMENT: DEALING WITH PEOPLE 61

Case 15 Iportal Media Company Issue: Employee/Supervisor Review 63

Case 16 Metropolitan Media Company Issue: Managing Upward 65

Case 17 The Davis Group Issue: Hiring 67

Case 18 JPT Agency Issue: Personnel Conflict 71

PART VII. ADVERTISING MANAGEMENT DECISIONS 73

Case 19 Barrands Agency Issue: Advertising Spokesperson 75

Case 20 Zeller Group Issue: Client Trade-off 77

CONTENTS vii

Case 21 Boston Life Insurance Issue: Advertising Strategy 79

PART VIII. ADVERTISING MANAGEMENT ENVIRONMENT 85

Case 22 Zoomra Motorcycles Issue: Media Vendor Conflict 87

Case 23 Glib Media Issue: Sales Incentives Ethics 89

Case 24 Texsize Oil Issue: SEC Code Violation 91

PART IX. MANAGING THE FUTURE OF ADVERTISING 93

Case 25 Arends Agency Issue: Agency Structure 95

Case 26 Lawrenceville Daily News Issue: Forecasting 99

Case 27 Thomson Media Issue: FCC Media Ownership Impact 103

PART X. MANAGING YOURSELF 105

Case 28 State University Issue: Advertising Instruction Ethics 107

Case 29 KMF Agency Issue: Ethical Issue of When to Change Jobs 111

Case 30 Gotham Media Issue: New Job Responsibilities 115

About the Authors 119

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ix

Preface

Advertising is a fast-paced, dynamic field that is constantly changing. To be success- ful in the field of advertising, you will need a broad knowledge base, experience, and the ability to assess a problem and develop a cogent point of view quickly. Cases in Advertising Management is designed to help you gain this skill set.

Knowledge is based on information. Information is only as good as your appli- cation of it to solving a specific problem. The Advertising Management casebook provides a variety of advertising business situations. Through these cases you should gain a broad knowledge base of technical advertising skills, personnel management interaction, and business applications of running an advertising company. You will be asked to read, interpret, and apply your knowledge to solve real-world, real- work situations.

BACKGROUND

This casebook was developed to give students and practitioners in training programs a contemporary resource to guide their management training. The casebook is de- signed to be a companion to the Advertising Management textbook by Donald W. Jugenheimer and Larry D. Kelley. However, the management textbook was written so that it can be a stand-alone publication or be used with other advertising manage- ment texts on the market.

The casebook includes actual advertising cases and information (although in many instances the names of organizations and individuals have been changed). The cases reflect the changing nature of advertising that include a significant amount of digital media and integrated marketing communications situations.

ORGANIZATION

This book consists of many individual cases, each one dealing with a different area of advertising management. Each chapter is organized to include a case study as well as tips for interpreting the information. As with all case study textbooks, there is no right or wrong answer. You must assess each case and develop your point of view based on the information available. As long as you can explain and justify your decisions and recommendations, you can support your solutions.

x PREFACE

As you go through this book, think about how to apply the information you are learning, how you might use it in your advertising career, and how you would use it to make decisions, explain those decisions, and justify your recommendations

ACKNOWLEDGMENTS

The authors would like to thank the following for their help and support during the writing and editing of this book: Debbie Stanford and Debbie West, who worked dili- gently on putting this book into its final form and to the management of FKM, who provided much of the information and input into this project. We especially would like to thank our spouses and families for all their support, without which this project would not have been possible.

xi

Introduction

How to Analyze a Case Study

The objective of the case method is very simple. It is to provide a framework for putting into practice what you are learning in the classroom. Case studies offer a realistic look at business situations and how you might solve them. Sometimes the answers are quite academic. Sometimes the answers go against everything that you have learned.

That is why the case method is so important. It is the one opportunity to make mistakes, take risks, and challenge conventional wisdom without fear of failure. Since each case is different, you must apply your knowledge and skill set to solve problems that are not always interrelated. This will raise your level of skills, and at the same time improve your proficiency at both written and oral communication.

The most important aspect of the case method is the experience it provides in think- ing logically about different situations. The development of your analytical ability and your judgment is the most valuable and lasting benefit that comes from working with real-world cases.

Most cases in this book are drawn from experiences in real advertising firms. The names and locations may be disguised to protect the interests of the companies involved, but the overall situations are true. The final decisions are omitted, enabling you to reach your own conclusions without being forced to criticize the actions taken by others.

The case method is as close to real-world as possible. However, there is a big dif- ference between real-world advertising management and this casebook. In a typical business situation, executives do not usually have the facts presented as neatly and clearly as they are here. Problem solving in the business world begins with extensive data collection, something that the cases have essentially done for you. Another big difference between the classroom and the boardroom is the time necessary to make the decisions. Here you read a case, ponder the problem, and develop a cogent response. In any business day, an executive may need to react to a problem immediately or within a limited time frame in order to optimize his or her solution. Finally, while your grade may be at stake in a class, an advertising executive may have client

xii INTRODUCTION

sales, relationships, or employees’ livelihoods at stake within the context of his or her decisions. So, the stakes are much greater and the performance pressures more intensive at the business level.

That being said, the case method is, perhaps, the best and only way to simulate these conditions. It will certainly make you a much better advertising executive and a better, well-rounded person.

CASE ANALYSIS PROCEDURE

You can approach a case analysis in a wide variety of ways. For this case textbook, which focuses on advertising problems, we believe that the case analysis should fol- low a traditional business procedure. The following steps are the framework of any business white paper or detailed memorandum.

1. Purpose: Statement of problem 2. Background or situation analysis 3. Discussion of alternatives 4. Recommendation/rationale 5. Action plan or next steps 6. Contingency plan

This framework will aid in organizing your thoughts. Within the business world, this procedure may be too formal for many recommendations. Many business managers request that a one-page memorandum be the longest form of written document. In this case, the same procedure will work if you eliminate the discussion of alternatives and a contingency plan. Many times it helps if you can condense your thinking to a single page of text. That demonstrates that you have clearly thought out the position and are not using extraneous words or thoughts. However, for writing an analysis of a case study for a class project, this framework will be an excellent guideline for you.

PURPOSE: STATEMENT OF PROBLEM

Once you have read the case study and become familiar with the issues, you can then define the purpose of your analysis. It is good practice to assume that you are writ- ing an analysis to a senior manager within your company. You have been given this project, and your analysis of the situation may help shape your career. To that end, it is crucial to clearly state the purpose of the analysis or to define the problem.

The following is an example of a purpose statement introducing an informational analysis:

“The purpose of this memo is to provide an analysis and a recommended course of ac- tion based on the second quarter competitive advertising spending information.”

This clearly states that you are providing an analysis of the competition and that based on this information, you will provide some course of action. Within the purpose,

INTRODUCTION xiii

you don’t need to state the course of action or the timetable associated with it. The initial statement is meant to tell the reader what the document is all about.

Alternately, the following is an example of a purpose statement that introduces the problem to be solved:

“This provides an analysis and recommendation to blunt the recent competitive push of Dean’s Beans into Bob’s Baked Beans heartland markets.”

This clearly states that Dean’s is intruding on Bob’s territory and we need to do something about it. Here the problem is clear. Any manager who would receive this document would be quick to read it and respond. The key to the purpose is to clearly articulate why you are providing this document to your manager and what will be the outcome. In each of the cases, the outcome will be some course of action based on the competition. Be succinct in your approach and use words that paint a clear picture of the issue at hand.

BACKGROUND OR SITUATION ANALYSIS

The background or situation analysis provides the context for the problem. This is where you paint a picture of why there is a problem in the first place. In the case of advertising management, there are two overall areas that are typically addressed. The first area is external, which is client related. Advertising agencies are in the ser- vice business, and the client is at the forefront of their business. The second area is internal. The advertising agency business is a people business. An agency’s assets, famously, go up and down the elevator every day. So, personnel issues are the other key area for advertising management to focus on. Let’s take a look at each of these two areas and discuss some of the typical issues that you will be addressing within advertising management.

EXTERNAL FACTORS OR CLIENT ISSUES

Advertising agency management and agency performance are closely tied to how a client’s business is performing. If the client’s business is good, there is love between the agency and client. If the business is not good, the client will put significant pres- sure on the advertising agency to fix the problem. Many advertising agencies have internal brand reviews where the account team briefs management on issues facing the client’s business, so that management can head off any problems before they become critical.

For most advertising problems, there are four key areas to consider in a situation or background section of the document.

xiv INTRODUCTION

Typically, these are the four major buckets that contain some form of problem. The initial one is the business or competition. The brand that you work on may have some business situation that has presented itself to you. This can be an internal chal- lenge or an external challenge. Internally, you may consider the 4P’s as a framework for the challenge. These are product, price, place, or promotion. There could be a change in the product, the pricing of the product, the distribution of the product, or the promotion of the product that has surfaced as a problem. Externally, a competi- tive brand may have changed something about its marketing efforts that is placing pressure on your brand.

The second major bucket is labeled the environment. Here we are talking about the economic environment as well as the overall business landscape. If the price of oil hits $150 a barrel, and gas prices go to $6.00 a gallon, you might see a significant decrease in your traffic if you are a restaurant. If we go to war, there is a negative consumer psychology that might dampen the consumer spirits. There could be leg- islation that might impact your brand. So, the environment is that myriad of outside influences that might impact your brand.

The third bucket holds consumer trends and attitudes. You may find that what once was a cool brand is now passé. Perhaps there is a new consumer attitude toward your brand that is impeding progress or making your brand less relevant. Perhaps there is an emerging market segment or key audience that should be considered for the brand. How the consumer views the world is a key area for marketers and can emerge as a problem area if not tracked and managed.

The fourth bucket contains the communications of the brand and of the competi- tion. There are a number of components to consider. The first is the message itself. Is it relevant and unique? The second is the media mix and spending level. Is it on target and able to rise above the noise level? The third is the creative execution. Is it distinctive and compelling? Marketers are constantly fighting to carve out unique space in their communications. This is another key area in which advertising prob- lems can arise.

The purpose of this section of the analysis is to discuss the most important facts that are the context to the problem. If the competition has changed creative strategy so that their message is similar to yours; then you should state what it is and how much you feel they are allocating to it. This is the area of the document where you are stating facts. This is not the area where you state hypotheses. Your goal is to give the reader the background necessary to assess your recommendation.

INTERNAL FACTORS OR PERSONNEL ISSUES

The second area that consumes considerable time for advertising agency management is personnel. Personnel are the largest cost on the agency balance sheet and they are the engine that creates the agency’s product. Having the right people, keeping them motivated, and balancing talent cost with profit goals is a large part of the agency management role.

As in most service businesses, people in advertising present fundamental personnel issues. However, unlike most service businesses, the advertising agency is a collec-

INTRODUCTION xv

tion of unique talents and personalities, so it requires a blend of special skill sets to keep it on course.

That being said, the typical internal issues of an advertising agency revolve around the following:

The initial bucket holds the elements of the staffing and the structure of the agency, which go hand in hand. Within this bucket is how the agency is organized today and how it might be organized tomorrow. With the rapidly changing nature of advertising from traditional media to digital media, an agency invests a great amount of time in how to structure itself and what types of talent it should seek. This is a key planning area for advertising agency management and has huge implications for the staff of the agency as well as the clients that the agency serves.

The second bucket is used to assess the current staff within the context of the agency structure. Since an advertising agency is a creative organization, personnel appraisal is vital to how the agency performs. Determining who is performing well and who isn’t takes a lot of time and effort from management. Since people’s livelihoods are on the line, it is a delicate area for management to address.

The third bucket for personnel contains manpower application: how the staff is used on various accounts within the agency. It is management’s responsibility to ensure that the agency operates profitably. So, management reviews the profit and loss on every account in the agency to determine where there may be gaps or a misuse of manpower. The agency management must determine where it might invest disproportionately in an account in hopes of generating profit down the line.

All of these internal issues are intertwined. Who is hired, what their talents are, and how they are used within the agency—all these impact the accounts and agency profitability. And they ultimately impact the agency’s reputation within the advertising community and its ability to generate new business to sustain itself.

From a case perspective, it is tempting to discuss personnel issues in more subjec- tive ways. From a management perspective, it is important to initially treat personnel from an objective perspective since it is a business decision. Only after determining the best business decision, should management then determine if subjective criteria is more important than objective criteria. So, in using this casebook, keep the discus- sion in the background section of the case study to the facts.

DISCUSSION OF ALTERNATIVES

Once you have written the background or situation analysis, your next step is to define possible alternatives to resolve the problem. Some of these may become obvi- ous from the case itself. Others may emerge from your own background or further research into the topic.

Regardless of the origins of the alternatives, it is important not to generate an over-

xvi INTRODUCTION

whelming number of alternatives for consideration. Management is not interested in wading through a litany of alternatives. They want to see that you have thought the problem through but not that you can generate a mind-numbing amount of ideas.

Typically three or, at the most, four alternatives are sufficient for discussion. One alternative should be to maintain the status quo, or to do nothing about the problem. There is always a tendency to change in reaction to the problem when sometimes doing what you have been doing can be the best course of action.

The discussion of alternatives is the heart of the case. First, you will want to suc- cinctly list each of the alternatives in a sentence, so that management can clearly understand the course of action.

For example, if an issue is that a client’s competitor has significantly increased its spending in advertising; you might consider the following alternatives:

are significantly eroding.

Management can clearly see that there are three paths to take. One is status quo, another is to become aggressive, and a third is to test a variety of strategies.

From these alternatives, you can then discuss the pros and cons, or advantages and disadvantages, of each. Sometimes it is helpful to actually make a list of pros and cons on a column within the case discussion. This makes it easy for management to quickly see what the risks or rewards are for each strategy that you have outlined.

RECOMMENDATION/RATIONALE

Once you have analyzed the alternatives, you are ready to make a recommendation. This is the time to stand up and be counted. Either an external situation with a cli- ent’s business or an internal personnel decision will have many “right” or “good” answers. But, this is not the time to be wishy-washy. A recommendation must be made with a strong persuasive argument, or your management will not believe in your recommendation. Many times, a passionately crafted wrong argument will trump a hedged argument.

This does not mean that you can concoct any argument and win, but it does mean that you must have some conviction about the direction you are proposing. The fol- lowing is an example of a recommendation, with rationale, regarding how your brand responds to a competitor that has increased its spending:

“Based on the above analysis, we recommend that the brand immediately match our competitor’s spending levels:

competitive brand.

and by then, it may be too late to implement a broad based plan.

INTRODUCTION xvii

- ing its spend we put a financial burden on the competitive brand.

the increased advertising spend.”

A recommendation is a straightforward statement followed by bullet-pointed ratio- nale points. Most managers look for at least three reasons why the recommendation is solid. Plus they want to see why this course of action is best among the alternatives you have just cited. In other words, you should be to the point on why the recom- mendation is the best course of action.

Some students may feel that they do not have enough information to make a deci- sion. So they may recommend that you postpone a decision until you receive more information. This is unacceptable in the business world and it will be unacceptable in the case study world. Most business decisions are time sensitive. You never have enough information. But, you must make a decision to the best of your ability within the time frame that you are given. The same is true within the realm of case studies. They are simulations for the real world and should be treated with the same intensity that you would face the problem in real life.

ACTION PLAN OR NEXT STEPS

Once you have made a decision, now you have to implement it. Your next phase of the case write-up is the action plan or next steps. Here you will detail the necessary action to put your recommendation into motion.

Typically this involves a timeline of when things must happen, as well as a discus- sion of budget ramifications. You may also recommend how you will measure the actions that you have outlined. During this phase, if you feel that more research is necessary to get at the root of the problem, you can recommend it here. You may want to discuss any methodologies for measurement that you recommend, or any types of research necessary in this phase.

The key items for management are the time frame and the money involved. Those are the crucial items that a manager must approve. Managers are prone to action, so be sure to spell out the specifics of what you want to happen.

For example, here is an action plan based on the last recommendation regarding the increased spending for the brand:

“To implement this aggressive course of action requires the following next steps:

on 11/2.”

The action plan is very detailed. Put in specific money and dates. It is not accept- able to say something like the plan will be implemented within the next four weeks

xviii INTRODUCTION

or that the money is around $5 million. Be very specific in your action plans or your management will feel that you are not buttoned up. If you feel that it is necessary to add a timeline or flowchart, that is certainly acceptable.

CONTINGENCY

Even though your recommendation is well thought out and based on the facts at hand, unforeseen things can happen in the future to make you reconsider your course of ac- tion. Since the future does not always unfold in a tidy way, you may want to develop contingency plans based on potential outcomes or reactions to your plan. These can be based on a competitive reaction in the marketplace or economic conditions. They may be based on an emotional reaction from a personnel decision. Regardless of issue, it is good to have thought out the ramifications of the decision. This gives management a good sense of the risks of the outcome and how it might deal with them. Like the other elements of your analysis, the contingency plan need not be long—just simple statements in the vein of: If this happens, we would do that.

SUMMARY

The case analysis is designed to give you the opportunity to solve real-world prob- lems. It is a great method to teach critical thinking processes. As you move into the business world, you will find that your daily activities are a series of mini case stud- ies. However, in the real world, they do not come as neatly packaged as the cases in this book. The case method is a training ground for making decisions with the data at hand. Remember, however, that the recommendations you make are worthless unless you can sell management on the validity of taking your course of action. But coupling the logical analysis with a passionate presentation is a winning combination in case studies, and in real life.

Cases in Advertising

Management

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PART I

ADVERTISING MANAGEMENT FUNDAMENTALS

CASE 1 BOSWELL AGENCY ISSUE: Structuring of an Advertising Agency

CASE 2 THE LEAKY OIL COMPANY ISSUE: New Business Trade-off

CASE 3 PRIME MEDIA ISSUE: Global Expansion

The fundamentals of advertising management are similar to those practiced in running any other business. You have to bring people together for a common goal; organize your workplace, lead the charge, and always be looking to the future. Advertising is no different from other businesses in that respect.

Advertising differs from other businesses, however, in that it is a unique blend of people. So, while advertising is categorized as a professional services business, it is much different from the accounting or the legal profession, for instance. The closest profession to advertising is that of architecture where business and creative elements intersect. That is what makes advertising an unusual and exciting business. It also brings with it management challenges.

ORGANIZATIONAL STRUCTURE

Every business, including every advertising agency, has its own unique organization. There are advertising holding companies that manage a myriad of communications companies including advertising agencies, interactive agencies, public relations firms, consulting firms, and a wide variety of specialty companies. There are many advertising agencies that are privately held and there are many in-house advertising groups that service a specific organization.

In the advertising agency world, there are two major themes used in agency orga- nization. The first is the departmental organization. This is where various advertising functions are grouped together in departments. For example, there may be a research department, media department, creative department, production department, and ac- count management department. Work flows from one department to another.

In the department structure, the workers are specialists in a certain activity. Some are copywriters and work in the creative department. Others are media specialists who

1

2 ADVERTISING MANAGEMENT FUNDAMENTALS

may be media planners or media buyers. In fact, large media agencies have a variety of specialists that include network television buyers, interactive buyers, and print buyers, among others. The advantage of the department structure is that many of the workers work on a variety of accounts. This helps the agency manage workload and it provides new types of work so that the agency team doesn’t get stale.

The second type of organization is the account team. In this case, the agency is organized into small teams of specialists who work only on a single account or similar accounts. It is like having a small agency within the larger agency. Obviously, this is how the in-house agency is set up. The advantage of the account team setup is that teams become accustomed to working together and know the account very well. The downside is that work can ebb or flow and that the staff isn’t exposed to other thinking.

The role of management is to establish the right structure for the organiza- tion. The goals are to make it productive in terms of its ability to do quality work, as well as to generate a reasonable profit. It is the management’s duty to ensure that each of these goals is met and to properly balance the need for talent and workload with the necessity of being profitable.

LEADERSHIP

In the advertising business, leadership opportunities occur in the manage- ment of most advertising functions. A good creative director, research director, or media director at an advertising agency must be a good leader. The role of the account manager is to be the leader of an account. Their entire role is that of being a leader.

One of the key roles in management is setting the tone or culture of the company. This is particularly true in advertising, where culture is one of the major differentiation points among agencies. Culture is the set of be- liefs, practices, behaviors, and reactions to the business environment that differentiate one advertising firm from another.

Leadership in an advertising agency comes from all levels. However, there are key differences between the responsibilities of top management and departmental management. Senior management is tasked with lead- ing the agency, setting agency policy, and working with—or for—both external and internal stakeholders. Depending upon the type of organiza- tion, senior management may be involved with a board of directors and stockholders, and also work with a variety of outside counsel including legal and accounting.

Department managers and supervisors are responsible for leading their de- partments from a personnel standpoint. This may include training, mentoring, and evaluating current and potential employees. This level is also responsible for administering the accounts that they work on in terms of their specific areas of responsibility. For example, the creative director is responsible for the creative product on the accounts that he or she supervises.

ADVERTISING MANAGEMENT FUNDAMENTALS 3

Leadership is a key quality required of any manager. The same is true in the advertising industry. Setting the tone and ensuring that all employees are do- ing their best to achieve success are vital aspects of advertising leadership.

TRENDS

The advertising business is changing rapidly. It is nearly impossible to keep up with trends and new directions. Yet, one large part of management is to understand where the business is going so that you can be poised to capitalize on the changes.

There are three macro trends that are impacting the advertising industry.

1. The rapid movement to digital or interactive media 2. The move towards engagement—having a two-way conversation

with the consumer. 3. The move towards globalization.

As an advertising agency manager, you must recognize these and other trends, and be prepared to deal with them. This may mean that you need to reevaluate your staffing needs in light of a change to more interactive media. Or it may mean that you must create an alliance with a foreign firm if you have only a domestic operation. Regardless of the decision, keeping abreast of trends and how they impact your business is another key aspect of management.

Obviously, economic trends are among the ones that management fol- lows. If your agency has 60 percent of its income tied up in travel accounts and fuel costs significantly rise, this trend weakens the travel market, which in turn has a huge impact on your clients and ultimately your business.

Another key trend that management must focus on is the nature of the competition. If a new technique or service appears to be gaining promi- nence in the market, then it is management’s role to decide if it needs to be integrated into the agency, and then figure out how to bring that about.

Keeping up with emerging trends is hard. As a manager, you want to keep up to date but not overreact to something that will prove to be the “flavor of the day.”

In summary, the fundamentals of advertising management are the ones practiced in any sound business. Management must properly organize its workplace to get the best product, yet produce a sufficient return on in- vestment. Management must set the tone for the business and provide the leadership necessary to deal with any workplace issues. Finally, manage- ment must take a long view of the business and be prepared to reposition the company based on emerging trends.

For more information on advertising management fundamentals, see Chapters 1, 2, and 3 of Jugenheimer and Kelley’s Advertising Manage- ment textbook.

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5

1 Boswell Agency

ISSUE: Structuring of an Advertising Agency

Jill Williams arrived at DFW airport at 9 PM on Blue Sky Airlines from New York. The flight was on time.

“Thank goodness we came in on time,” she thought. “I’ve got enough on my plate without having to discuss a flight delay when I meet Tom Bradley tomorrow.”

Tom Bradley was the president of Blue Sky Airlines. He was a real no-nonsense figure who had many run-ins with labor unions in the past. He was a tough negotia- tor and an equally tough client. In fact, he was the largest client of Boswell Agency. Jill was being asked to head up the Dallas office of Boswell after being an executive with the agency’s New York office. The president of the Dallas Boswell office had recently resigned and since Jill had prior airline experience with Continent Airlines, and had run the tourism group for Boswell’s New York office, she was the choice to run Dallas. Naturally, this was stressful for her family. Her husband was an IBM salesman, so the move wouldn’t disrupt his work. However, her son and daughter were both in high school, so they were not excited about relocating. Her daughter was especially distraught since she had recently performed at the New York City Ballet and was in a special performance arts school. They all liked the Manhattan lifestyle so Dallas seemed like a foreign country to them.

COMPANY

The Boswell Agency had grown out of Des Moines, Iowa, where it still maintains its accounting and financial activities. It began as an agricultural agency, but after its early success Charles Boswell went on an acquisition spree. He purchased agencies across the United States including New York, Los Angeles, Dallas, Atlanta, Chicago, and Boston. Through these acquisitions, he built the network of Boswell agencies that was now the twentieth largest in the United States.

This acquisition strategy brought many management challenges. Each office was largely independent and had its own financial goals. Although there were benefits to the network, it was not easy to get all the offices to work together. Power struggles and jealousies were a part of life.

Case

6 ADVERTISING MANAGEMENT FUNDAMENTALS

The Dallas office, which was recently headed by Peter Finch, was the largest in the Boswell system. It was driven by its largest account, Blue Sky Airlines. There was a rivalry between the New York and Dallas offices. New York had the second larg- est account in the system, Unimar Foods, and a variety of nationally marketed food brands. However, Blue Sky Airlines was a higher profile account than Unimar. This galled the New York office, which felt that it should be the hub of the network.

DALLAS OFFICE

In her hotel room, Jill studied the Dallas office client roster. It was very telling. There was Blue Sky Airlines at the top of the list. It represented half the income of the office.

“It also represents more than 10 percent of Boswell’s entire agency network in- come,” thought Jill. “It’s a monster,” she sighed.

The rest of the accounts consisted of a variety of categories. Jill broke them into three overall areas. There were package goods brands such as Goodmark Foods and Roscoe’s Sausages. There were high tech accounts such as Oberon Printers and Bell Cellular. There were local accounts such as Plains Bank, WPBA-TV, and Singleman Auto Group. The oddball was Bluebonnet Cosmetics, which was patterned after Mary Kay Cosmetics.

The local accounts had not grown significantly in years. But they were steady, and from what Jill had heard the agency had good relationships with the senior people in the organization. The packaged goods companies were also steady pluggers. There was not a lot of new product activity from either company, but they had to maintain support of their brands or be forced off the grocery shelf. The wild cards were the high tech accounts. Oberon had doubled in the last year and Bell Cellular was grow- ing at a rapid rate as well. However, Jill knew that as quickly as high tech accounts go up, they can rapidly go down.

Then, of course, there was Blue Sky Airlines. Blue Sky was an aggressive advertiser. They were adding new routes and markets to their system. They had plans to expand internationally, which could add substantial growth to the account. Plus they had a strong business in commercial shipping. They were the only commercial airline to come close to competing with FedEx in this market.

Exhibit 1.1

Boswell Agency: Dallas Office’s Client Roster

Account Billing (millions) Total Office % Income

Blue Sky Airlines 100.0 50% Goodmark Foods 30.0 15% Oberon Printers 22.0 11% Bell Cellular 18.0 9% Roscoe’s Sausages 8.0 4% Bluebonnet Cosmetics 8.0 4% Plains Bank 6.0 3% WPBA-TV 4.0 2% Singleman Auto Group 4.0 2%

$200.0 100%

CASE 1: BOSWELL AGENCY 7

They were very strong in shipping high tech components, since they had many flights from San Francisco to Dallas, New York, and Boston.

AGENCY STRUCTURE

Jill then began to review the agency structure. Each office in the Boswell network was set up a bit differently. The only corporate functions impacting Dallas were fi- nancial controls, which were centralized in Des Moines, and network media, which was centralized in New York. Otherwise, each office had autonomy to set up its own structure as long as it met the corporate profit goals.

The Dallas office had never met the Boswell profit goals. This was largely due to Blue Sky, which took a sizable staff to manage all the aspects of their business. Since Blue Sky was so large, management had always been reluctant to cut back on staff or to ask for more fees to pay for the staff. The fact that Dallas didn’t meet profit goals had always galled the New York office, including Jill.

On the surface, the Dallas office had a conventional agency structure. There was a financial group that reported to her as well as to the corporate CFO in Des Moines. The creative group was headed by Jim Clark, a funny man who always wore a Hawai- ian shirt. He had a four creative directors and a number of writer/art director teams reporting to them. Jim personally wrote and directed the majority of Blue Sky’s advertising. He left much of the rest of the work to the creative directors and rarely reviewed their work.

The media director was Sally Hogsmeade, a self-made woman, who began her career as a secretary and rose up through the ranks in media. She was noted as a hard-nosed negotiator but not as a deep strategic thinker. Sally ruled her group with an iron fist and had three group media directors who reported to her, and who oversaw the planning on the accounts. Then she had planner/buyers who did the planning and execution of the media. She set up a planner/buyer model largely due to the large local market activity of Blue Sky; the planner/buyers each had a number of markets that they were in charge of. They purchased all the media in those markets.

The production director was Richard Steele. Richard was a former New Yorker who had a print production background. He had a keen eye for design and worked well with the creative group. He had both print and broadcast production plus traffic reporting to him. He had also set up a business manager for the department to help him keep control of costs. The business manager was Emily Litrell. By most counts, she was the one who really ran the department.

The planning department was headed by Ian Howell. Ian was recruited to Boswell from Britain and was the first account planner in the office. He soon recruited a re- search person and a junior planner to help him. Ian was extremely gifted in developing insights and was a very valuable member of the team. His insights had led to the recent work on Blue Sky that had won industry awards. However, Ian often clashed with the creative department, since he felt that they should not be involved in overall strategy. Although the creative group respected his insights, they often felt that he went too far in leading the client into a certain type of execution before they got involved.

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CASE 1: BOSWELL AGENCY 9

Finally, there was the account group. There were four account directors. Hal Green ran the Blue Sky account. Hal was the former marketing director of Blue Sky and was a close friend of Tom Bradley. They had been college roommates. Boswell had been required to take on Hal as one of the conditions for gaining the North Ameri- can account. It was an odd relationship, since Hal worked nearly as much from a client perspective as from the agency viewpoint. He ran the account like an in-house agency. Nearly all the key people on the account reported to him on a de facto basis, regardless of department.

The other three account directors managed the other business. Crystal Heep was only on Bluebonnet. Bob Pugh oversaw Goodmark, Bell Cellular, Roscoe’s, and Plains Bank. Jennifer Meade oversaw Oberon, WPBA-TV, and Singleman Auto Group.

Jill didn’t know much about this group. Bob was a relatively new hire from Chi- cago. Crystal and Jennifer had been with the agency for a number of years. Each of these account directors had a variety of supervisors, account executives, and assistants reporting to them.

DECISIONS

Jill sat back on her hotel room bed and pondered. She had to make a number of deci- sions regarding how she serviced Blue Sky Airlines and how to structure the Dallas office to be more efficient. These goals seemed to be at odds with each other. She had heard of other agencies that had set up an “agency within an agency” concept. This meant that they set up a dedicated account group with all disciplines housed together to serve a single account. Boswell didn’t have another mega-account like Blue Sky Airlines anywhere in the system, so she was not familiar with this approach first hand. However, she had friends at C+E, which handled General Motors and they had gone to that approach. She really needed to find out more about this.

On the other hand, an efficient agency structure should be able to handle any account, regardless of the size. If she set up a separate group just for Blue Sky she wondered if she was just perpetuating the domination of the account within the of- fice. She had heard that the agency had not won as much new business as they should have, because they were known as the in-house Blue Sky agency.

She also thought about what she might offer to Tom Bradley of Blue Sky. He was a hard-edge guy and she must have a game plan ready for his account. Her head throbbed as she went to bed that night. Tomorrow, she must meet with Tom Bradley and then the staff. She then owed a preliminary report to corporate management within two weeks on her observations of the situation and what she would do to make the office better.

She thought about not only the structure of the organization but how she should come across as a leader. She had a very collaborative style in the New York office, but with strong personalities—such as Hal—she wondered if she should modify her style to be stronger and more aggressive.

The next few weeks were going to be long and stressful for Jill. She had to smooth the feathers of the agency’s largest account, figure out a structure that would be more efficient, and demonstrate to the staff that she was a capable leader.

10 ADVERTISING MANAGEMENT FUNDAMENTALS

QUESTIONS

1. How should Jill prioritize her agenda? What do you think should be her 90- day plan?

2. What questions should she ask of Tom Bradley, the head of Blue Sky Airlines, to assess the best course of action with this account?

3. What are the pros and cons of setting up a dedicated unit to service a single large account?

4. Should Jill change any of the reporting structures in the agency? 5. What steps should Jill take to make the agency more profitable? 6. What steps should Jill take to raise the level of the creative product of the

agency?