Get Complete Project Material File(s) Now! »



The historical overview of the marketing communication industry of South Africa provided in the previous chapter has clearly reflected a change in the importance of below-the-line promotions relative to above-the-line advertising. This shift facilitated the development of marketing communication structures other than the traditional above-the-line advertising agencies. Nowadays, traditional above-the-line advertising agencies are no longer providing above-the-line services only. Below-the-line services also seem commonplace in these structures.
It is probably safer to refer to the structures catering for both above- and below-the-line activities as full-service agencies. Not every agency is a full-service agency, nor is every agency a large organisation. Furthermore, many advertisers are not interested in paying for a full service but may be interested in some of the specific services agencies have to offer. As an alternative to the full-service agency, various specialist agencies have placed themselves as worthy competitors within the marketing communication industry. Due to beliefs of some companies that they could economise on the cost of advertising, own in-house agencies have developed simultaneously.
The most important role players and participants in the South African marketing communication industry oftoday are portrayed in figure 3.1. The role players are viewed from the advertiser’s point ofview.
Figure 3.1 shows the most important marketing communication structures that developed over time. The listed structures cater for services related to the development, implementation and evaluation of any potential marketing communication effort by advertisers or the contracted agency. A more detailed description of role players and their current status within the South African marketing communication industry is contained in the sections to follow.


Several factors, such as the size of the company, the number of products marketed, the size of the budget, etcetera, influence marketing communication decisions. An advertising department, headed by an advertising or communications manager that operates under a marketing director usually undertakes the marketing communication decisions. This system is known as a centralised marketing system. Under such a system, marketing communication activities are placed alongside other marketing functions, such as sales, marketing research and product planning. All above-the-line advertising and below-the-line promotional activities are channelled through the advertising department.
The most common example of a centralised system is where the advertising manager of an advertising department controls the entire operation. He or she therefore draws up the budget, coordinates with advertising agencies and specialist service providers the creation and production of advertisements, plans media schedules and monitors and administers the below-the-line promotional programmes for all ofthe company’s products and services (Koekemoer 1998: 87). A typical centralised marketing system is depicted in figure 3.2.
For many years the centralised advertising department structure was the most commonly used organisation system. However, for those companies who expanded and developed more products and services, the centralised marketing system became a less attractive option, especially insofar as its coordination and responsibility functions are concerned. Centralised systems are criticised for the fact that marketing decisions are often made by several functional managers, a process which requires coordination by someone in the marketing department. Furthermore, no specific department in such a system has responsibility for the welfare and problems of individual products or brands.
Due to these problems, many companies developed decentralised systems, such as the product or brand manager organisation. This organisational system is now the most common structure in large consumer and industrial products companies. With this system a product group manager is responsible for the planning, implementation and control of the marketing programme of an individual brand. The product group manager is also responsible for sales projections and profit performance ofthe brand and must develop and coordinate the budget. Companies utilising this form of organisation will generally support group managers with a structure of marketing services, including sales, marketing research and advertising departments. The product group management system is depicted in figure 3.3.
In a product management system the responsibilities and functions associated with above-the-line advertising and below-the-line promotions are often transferred to the brand manager. In such a system the brand manager acts as the link between outside service agencies and is involved with the advertising agency in the development of the marketing communication programme. Although this system secures concentrated managerial attention for each brand and allows for easy adjustments to the advertising programme, it is not without deficiencies. Brand managers often lack the experience in above-the-line advertising and below-the-line promotions and they may be concerned with short-term and administrative tasks rather than long-term strategies. Also, individual brand managers often end up competing for limited resources, which can lead to unproductive rivalries and potential misallocation of funds (Koekemoer 1998:89).


A third option besides centralised and decentralised systems is also available. This option entails the establishment of a separate agency within the firm also known as an ‘in-house agency’. These advertising agencies are owned and supervised by the company who advertises. They are organised as independent agencies and can take a variety of forms. The advertising director for the company is usually the chief executive officer of the agency. The director supervises account managers responsible for brands or business groups. The in-house agency has writers and artists, traffic personnel and media specialists. If the company has a research department, this service will probably not be duplicated in the in-house advertising unit. The in-house agency may do its own billing, paying and collecting, but is more likely to use the company’s accounting department.
Due to beliefs that own marketing communication departments can handle marketing communication accounts more effectively than large independent organisations, some large advertisers, such as the supermarket groups in South Africa, have developed their own in-house agencies. Besides savings, the development of an in-house agency is considered on the grounds of specialisation, priority service and minimum staffing (Wells, Burnett & Moriarty 1995).


Nowadays the broad functions provided by advertising agencies not only cater for above-the-line advertising. Below-the-line promotional activities also seem commonplace. This is especially evident from the listing of the top marketing communication groups of 1998, 1999, 2000 and 2001 reflected in table 3.1. The table lists the top marketing communication groups annually ranked in terms of income from fees, commission and mark-ups generated within South Africa. In addition, the table reflects the share that above-the-line advertising represents in terms of the total marketing communication mix (above-the-line advertising and below-the-line promotions) handled by the listed groups.
The figures depicted in table 3.1 represent agencies/groups which derive at least 40% of their income from above-the-line (classical) sources. It is clear from table 3.1 that marketing communication groups currently cater for more than just above-the-line advertising activities. For agencies such as Magi com and DWF Advertising, below-the-line activities measured even more than half of their total marketing communication activities during 2001. Undoubtedly, below-the-line activities are growing and alive in the structures of the listed marketing communication groups.
Significant portions of income (in some cases more than 50 %) for conventional advertising agency groups are not earned from advertising at all but from design, direct response or any other below-the-line discipline (AdFocus 1999:33). That the top agencies were able to grow at a rate of26% in 1998, while Adindex’s adspend figures grew only 17 %, is partly a reflection of the growing extent to which agencies earn their money from non-traditional (non-media) advertising and marketing sources. Agencies now earn 29% of their income below-the-line. Below-the-line promotion as a category is growing even faster than media advertising.
There are no exact figures on the growth rate ofbelow-the-line activities, but from secondary sources it is clear that advertising agencies increased their below-the-line activities by an average of 38 % in 1998 (AdFocus 1999:33) and continued to increase these activities ever since (AdFocus 2000:30 & AdFocus 2001:50). The broadening of services beyond above-the-line advertising could be explained partly by the merges and takeovers amongst various agencies. The integrated company structure ofFCB South Africa, referred to in table 3.1 and depicted in figure 3.4, is used as an example to illustrate this broadening of services.
Despite the broadening over the years of the servtce functions provided by advertising agencies, they still operate in fundamentally the same way they have for years. In short, the advertising agency acts on behalf of advertisers and plans for and books advertising space and time with the media. The present day complexity ofthis task requires special skills which companies use to ensure effective advertising exposure.
The two most important functions provided by advertising agencies are its media function and its creative function.
The media function. This function includes plans regarding where, when and how advertising is to be placed. This function is carried out by the media planner who constructs the media plan (detailing the advertising programme) and contracts the media buyer who will negotiate with the media and book both the advertising time and space. The advertising agency takes commission on media owners’ advertising rates for all bookings placed by themselves on behalf of clients. This anomalous situation, where media owners pay agencies to work for their own clients, dates back to the early days of advertising. However, it is an important source of income for agencies just as the business of agencies is an important source of income for the majority of media owners. Nowadays income from agencies therefore comprises both commission and fees for advertising related services. The new ruling of the Johannesburg Stock Exchange (JSE) that companies will, from October 2002, have no compulsory obligation to announce their company regulations in newspapers (INTERNET: has the potential to influence the future commission or fee earnings of agencies placing newspaper advertisements on behalf of clients. However, with the JSE new requirements for listings, companies will still be compelled to publish regulatory announcements on the Stock Exchange Network System (SENS), which could secure fee earnings for advertisements published via the Internet.
The creative function of agencies to create advertisements that will fill the time and space booked. The creative function is carried out by conceptualisers, copywriters and artists who combine to create an advertisement which conveys the advertiser’s message to the target market.
Closely linked to the media function is the financial function, which handles the internal administration ofthe agency and is responsible for billing clients and making payments to the various media. The operations function handles business aspects and looks after human resource issues. The strategic planning area, in tum, is responsible for gathering and analysing data to enable the agency to answer a variety of questions, such as which is the most effective advertising theme, the best media mix, the most appropriate budget, and so forth. It also does strategic planning on specific brands. Finally, the accounts management function in marketing services is responsible for agency-client relations.
In the daily task of producing advertising the account executive on the side of the agency and the brand manager on the side of the client are the parties who work together closely. When an effective marketing and promotion strategy has been developed, the account executive communicates the strategy to the creative staff, the media planners and others in the various support groups of the agency as needed.
Most large, full-service agencies have a senior executive handling new business. Sometimes this function is performed by the CEO, sometimes by a project team consisting ofthe CEO, creative director, media director, strategic planning director and one or more account directors. Separate subsidiaries usually exist to cater for public relations, promotions, direct response advertising, et cetera.
Agencies providing all types of services discussed above are known as full-service agencies. The structure ofa typical full-service advertising agency is shown in figure 3.5.

READ  Trading volume in information asymmetries


As mentioned earlier, not every agency is a full-service agency. Many advertisers are not even interested in paying for the services of a full-service agency but may be interested in some of the specific services agencies have to offer. Over the past few decades several alternatives to full-service agencies have evolved, including the following (Belch & Belch 1993:94-95):
Creative boutiques.
A creative boutique is an agency that specialises in and provides only creative services. These specialist agencies have developed in response to some advertisers’ desires to utilise only the creative aspect of an outside provider while maintaining the other functions internally. The advertiser may seek creative talent outside because an extra creative effort is required or because personnel within the organisation do not have sufficient skills in this regard. Creative boutiques are normally formed by members of a creative department of a full-service agency who leave the firm and take with them clients primarily interested in their creative expertise. The boutiques usually perform the creative function on a fee basis.
Media-buying services.
Another type of specialised service was developed in the 1960s to provide assistance for smaller agencies and creative boutiques. Media-buying services are independent companies that specialise in the buying of media time, particularly on radio and television. As the task ofpurchasing advertising media time has grown more complex (owing to the proliferation of specialised media), media-buying services have found a niche by specialising in the analysis and purchase of advertising time and space. Some specialise in media coordination for large advertisers. Both agencies and clients utilise their services, usually developing their own media strategies and using the buying service to execute them. Because media-buying services purchase such large amounts oftime and space, they receive substantial discounts and can save money on media purchases for the small agency or client. Media-buying services or media independents are paid a fee or commission for their work. To provide an indication of the size of the media independents in South Africa, table 3.21ists the leading media independents according to total media billings from 1997 to 2001.
Judged by the information reflected in table 3.2, relatively significant growth (Penta Communications Services and Media Coordination excluded) occurred in media billings from 1997 to 2001.
Minority agencies.
Agencies that focus on an ethnic group, or minority agencies, grew substantially in the 1980s in America as marketers realised that African-Americans and Hispanic-Americans, the two largest minorities, have different preferences and buying patterns from the general market. These agencies are organised in much the same way as full-services agencies, but they are specialists in reaching and communicating with their specific markets. In South Africa, Herdbuoys Advertising and Marketing is an example of an agency owned and managed by black South Africans who offer expertise to the black market (although they are not a minority group in South Africa).
A la carte agencies.
Many agencies offer for a fee just part of their services that advertisers want. The a la carte arrangement is used mostly for creative services, for media plarming and placement and for research services.
Rolodex agencies.
These agencies are run by several advertising specialists, usually accounts and/or creative people, and have no basic staff. They hire specialists in marketing, media planning, creative strategy, writing, etcetera to work on a project basis. The concept is similar to using freelance creative people to execute advertisements, except that the experts are hired as needed. Rolodex agencies claim to be able to provide the advertising expertise that small full-service agencies cannot match.
Direct marketing agencies.
Direct marketing, using such strategies as telemarketing, interactive video, television, radio, direct mail, et cetera, is not commission bearing. Direct marketing has therefore found its way into the full-service agencies only recently, largely by way of mergers. Nevertheless, numerous direct marketing shops have developed creative skills. Because direct marketing is growing dramatically, the use of these agencies is increasing. Many large full-service agencies now have direct marketing subsidiaries working mainly on a fee basis.
Below-the-line agencies.
Below-the-line agencies specialise in trade and consumer promotions, pack design, logo design and functions where classical media are not involved and where the focus is not on image-type advertising.
A profile ofthe South African specialist agencies (design, promotion, direct response and other specialist or below-the-line shops) by income, turnover and type of services provided from 1999 to 2001 is shown in table 3.3.
Besides the specialist services provided by the agencies outlined above, advertising and media research (also regarded as a specialist function) is provided either in-house or by outside experts, such as advertising agencies or private market research institutions. Specialist research organisations provide primary data collection services ranging from data collection (questionnaire and sampling design, interviewing) to data analysis. Research can be provided in different stages of the advertising campaign. The stages ofresearch in advertising planning and scheduling are shown in figure 3.6.
Against the background of the four stages (I-IV) of research outlined in figure 3.6, the role of research and the most popular research methods and techniques that are used to support the planning and scheduling of advertising are outlined in figure 3. 7.
The research methods and techniques listed in figure 3. 7 are explained in the glossary (Annexure A). These methods and techniques are used to collect, analyse and interpret information for decision making on the advertising strategy, which comprises the planning, creative development, pre-testing and post-testing of advertising and the evaluation of advertising campaigns.
The above section focussed on the research methods and techniques involved in advertising research. Besides advertising research, further possibilities include research on different types of media. Research on various above-the-line media types is illustrated in figure 3.8. The figure shows the most common techniques employed in print, television, cinema, radio and outdoor research (Koekemoer 1987:334-343 and Martins, Loubser & van Wyk 1996:570-585). All terms are defined in the glossary (Annexure A).

Related Posts