Cases in

Advertising
Management
 Cases in
Advertising
Management

Larry D. Kelley and

Donald W. Jugenheimer
 First published 2009 by M.E. Sharpe

Published 2015 by Routledge

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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
ISBN 13: 9780765622617 (pbk)
 Contents

Preface

Introduction: How to Analyze a Case Study

P ART I. ADVERTISING M ANAGEMENT F UNDAMENTALS

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

P ART II. ADVERTISING F INANCIAL M ATTERS

Case 4 Tinsdale Agency
Issue: Agency Profitability
Case 5 Barrons Agency
Issue: Agency Billing Procedures
Case 6 Vineyard Agency
Issue: New Business Profitability

P ART III. ADVERTISING BUSINESS P LANS

Case 7 St. Joseph Dispatch
Issue: Advertising versus Editorial
Case 8 American Textbook Company
Issue: Outsourcing versus In-house

P ART IV. ADVERTISING P LANNING

Case 9 Phoenix Power Company
Issue: Advertising Message Strategy
 Case 10 Go Organic Company
Issue: Market Segmentation
Case 11 Randall White Dog Food
Issue: Advertising Planning

P ART V. ADVERTISING BUDGET M ANAGEMENT

Case 12 Bosco Hot Sauce Company
Issue: Budget Allocation Analysis
Case 13 Alpha Airlines
Issue: Budget Allocation Analysis
Case 14 Southern Rice
Issue: Advertising Spending

P ART VI. ADVERTISING M ANAGEMENT: DEALING WITH P EOPLE

Case 15 Iportal Media Company
Issue: Employee/Supervisor Review
Case 16 Metropolitan Media Company
Issue: Managing Upward
Case 17 The Davis Group
Issue: Hiring
Case 18 JPT Agency
Issue: Personnel Conflict

P ART VII. ADVERTISING M ANAGEMENT DECISIONS

Case 19 Barrands Agency
Issue: Advertising Spokesperson
Case 20 Zeller Group
Issue: Client Trade-off
Case 21 Boston Life Insurance
Issue: Advertising Strategy

P ART VIII. ADVERTISING M ANAGEMENT ENVIRONMENT

Case 22 Zoomra Motorcycles
Issue: Media Vendor Conflict
Case 23 Glib Media
 Issue: Sales Incentives Ethics
Case 24 Texsize Oil
Issue: SEC Code Violation

P ART IX. M ANAGING THE F UTURE OF ADVERTISING

Case 25 Arends Agency
Issue: Agency Structure
Case 26 Lawrenceville Daily News
Issue: Forecasting
Case 27 Thomson Media
Issue: FCC Media Ownership Impact

P ART X. M ANAGING YOURSELF

Case 28 State University
Issue: Advertising Instruction Ethics
Case 29 KMF Agency
Issue: Ethical Issue of When to Change Jobs
Case 30 Gotham Media
Issue: New Job Responsibilities

About the Authors

Preface

Advertising is a fast-paced, dynamic field that is constantly changing. To be successful 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 application 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 designed 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 management 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.
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 diligently 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.
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 thinking 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 difference 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 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 PROCEOURE

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 follow 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 writing 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 action 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, 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 service 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 pressure 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.

• Business and competition

• Environment
• Consumer trends and attitudes
• Communications strategy of brand and competition

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 challenge 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 competitive 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 legislation 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 competition. 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
problems 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 collection 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:

• Hiring/structure of agency
• Personnel appraisals/salary
• Manpower application

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 subjective 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 discussion 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 obvious 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-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 succinctly 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:

• Monitor the situation and stay the course until you see evidence that brand sales are
significantly eroding.
• Immediately increase spending to match the competitor.
• Test different spending levels to determine the optimum spend.

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 client’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 following 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:

• If we don’t match the levels now, we are in risk of losing distribution to the competitive brand.
• If we test different levels, it will be at least a year before we can read the results and by then, it
may be too late to implement a broad based plan.
• Since our brand is in a stronger financial position than the competitor, by matching its spend we
put a financial burden on the competitive brand.
• Our brand plans to take a price increase within the next quarter, which can offset the increased
advertising spend.”

A recommendation is a straightforward statement followed by bullet-pointed rationale 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 recommendation is the best course of action.
Some students may feel that they do not have enough information to make a decision. 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 discussion 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:

• Authorize incremental spending of $5 million for the balance of the year.

• Approve the media plan that details the incremental spending by 7/24.
• Upon approval of the plan, the incremental spending will begin on 8/24.
• We will measure the impact of the spending in the next wave of the AAU study on 11/2.”

The action plan is very detailed. Put in specific money and dates. It is not acceptable to say
something like the plan will be implemented within the next four weeks 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 action. 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 problems. 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 studies. 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
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 organization. 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 account 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 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 organization. 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 management 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 beliefs, 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 leading the agency, setting agency policy, and working with—or for—both external and
internal stakeholders. Depending upon the type of organization, 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 departments 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.
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 doing 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 follows. 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 prominence 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 investment. Management must set the tone for the business and provide the
leadership necessary to deal with any workplace issues. Finally, management 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 Management textbook.
Case
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 negotiator 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.

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%

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 largest 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 income,” 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
growing 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.
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 financial 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 Hawaiian 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 research 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.
Exhibit 1.2 Boswell Agency: Dallas Office’s Agency Structure (Conventional)

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 American 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 Chicago. 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 decisions 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 office. 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.
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?
Case
2
The Leaky Oil Company
ISSUE: New Business Trade-off

Last Friday, you, as president of your advertising agency, were invited to meet with the top marketing
executives of a major oil company. They stressed to you the need for secrecy, and then told you that
your agency was just one of three agencies that had been prescreened for this account review. The oil
company was to embark on a public policy campaign as well as a branding campaign for their three
thousand-store retail brand.
This was a very heady opportunity for your agency, which had suffered a loss of a major oil
company through consolidation just two years ago. The marketing director of this prospective oil
company went on to discuss the retail branding effort, which would be twice the level of spending of
any other brand in the category. This was more than $40 million in advertising. That alone would be
twice the size of any existing account in your agency.
Then the marketing director went on to discuss the need for a public policy campaign. He said that
the company, which had been a joint venture between a U.S. company and a Venezuelan company, was
now going to be majority owned by the Venezuelan government. Recently, the Venezuelan dictator had
blasted U.S. energy policy and threatened to not sell oil to the United States.
The marketing director said that he and his U.S. counterparts would run the marketing but that the
board of directors of the company would all be from Venezuela. While he assured you that there was
a need for marketing, he indicated that he did not know how the tensions between the United States
and Venezuela would ultimately play out. He also said that this information was strictly confidential.
He had made a point of having all the agencies sign a NDA (non-disclosure agreement) so that if
something was leaked to the press, his company would sue. “The Venezuelan government has very
deep pockets,” said the marketing director. That was a warning to not say a word on this sensitive
topic.
Back at the office, you convened a meeting of your top executives representing each discipline. You
described the situation to them and told them that it is highly confidential. If word leaked out, there
would be significant penalties. You described that while this is an unusual situation, the size and
magnitude of the account would greatly enhance the agency’s profitability.
“We have always talked about landing the big one,” you told the team.
“While there is some risk in this, it is unlikely that there will be another account of this size coming
down the pike anytime soon,” you added.
Not everyone shared your views on the account. A couple of the top executives were very put off
that you would even consider this account given the political implications.
Judy Miller, the head of your public relations company said, “Can you imagine the fallout from our
other clients if we take this on? Why, we will be called the anti-American agency.”
You thought about this over the weekend and on Monday morning you are about to call the
marketing director of the prospective oil company, when your administrative assistant tells you that
three of your top executives want to see you now.
 The spokesperson for the group, an old-line account manager, tells you that if you continue to pitch
this account, they will leak the news of this to the press and will try to persuade the rest of the staff to
quit. They also threaten to tell your other clients about the company that you might do business with.
What do you do?
QUESTIONS

1. Do you decide to pitch the account or do you withdraw from the review?
2. If you decide to pitch the account, how do you deal with the disgruntled faction that doesn’t
want to pitch it?
3. Should you discuss this potential client with any other clients to gauge their reaction?
4. Should you seek legal counsel regarding the faction that is threatening to leak the news to
the press?
5. If you decide not to pitch the account, do you retain the faction that is threatening you?
Case
3
Prime Media
ISSUE: Global Expansion

Bill Meade looked out his window and pondered: “The world is getting closer and closer today, yet
our company is only looking at the United States.” He turned back to his laptop and resumed his silent
contemplation of the screen, shaking his head.
Bill was the CEO of the publicly traded Prime Media Corporation. Prime Media was one of the
leading media companies in the United States. They had holdings in television stations, newspapers,
and some magazines. They had been a real growth story in the early 1990s but lately the growth had
stalled. The newspaper industry was shrinking and the magazine industry was not growing either. The
television stations were in strong markets such as Denver, San Antonio, and Phoenix but that wasn’t
enough to offset the slower growth in the print division.
The Board of Directors of Prime Media wanted more growth out of the company. They were
pushing Bill and his management team to consider moving into higher growth markets that were
digital. While Bill agreed that digital media were a growth platform, he also believed that
international growth should be considered.
On his desk, he fumbled for the article that had started his thinking. It was an economic trends
article that detailed the GDP (gross domestic product) growth in various world economies. The
forecast for the United States advertising growth was at 2.3 percent while other key industrial markets
were running nearly twice that level—from Australia at 4.6 percent to Germany at 5.7 percent.
If these industrial nations weren’t enough, there were also the emerging economies of China and
India, which were rocketing along in double-digit growth. It seemed that anything that was in these
markets was turning to gold. Through his media connections, he had friends in the governments of
both Asian countries. Perhaps there was something that he could find that might be attractive for his
company in these huge untapped markets.
He also had been approached by a group of German newspapers, who wanted to sell to a larger
company. He had brushed them aside, since his board had made their feelings known that they were a
U.S.-only company.
“What do we really know about the rest of the world,” said one of the elder board members.

Exhibit 3.1
Five-Year Advertising Outlook in Key Industrialized and Emerging Countries
5-Year AVG
Country CAGR
Major Markets
United States 2.3
Canada 2.5
Japan 1.5
Germany 5.7
 United Kingdom 3.0
Australia 4.6
France 3.0

Emerging Markets
China 10.2
India 8.3
Brazil 6.5
Mexico 5.5

Note: CAGR = Compounded Annual Growth Rate

“There is plenty of growth in the U.S. before we go abroad,” he added.

Bill continued to stare at his screen. There was a board meeting in a few weeks. He must pull
together a presentation that would open their eyes to consider a broader range of growth
opportunities.
He thought out loud, “How should I tackle this one?”
QUESTIONS

1. Do you think that the information Bill Meade has is enough to go to the board of directors
with?
2. What other information should he get to strengthen his case?
3. What are the other considerations for a company deciding between domestic and
international growth?
4. Are there examples of other companies that have faced similar circumstances that Bill
could use as support for his premise?
PART II
ADVERTISING FINANCIAL MATTERS

CASE 4 TINSDALE AGENCY

ISSUE: Agency Profitability

CASE 5 BARRONS AGENCY

ISSUE: Agency Billing Procedures

CASE 6 VINEYARD AGENCY

ISSUE: New Business Profitability

Every manager needs to know something about accounting and finance. And there’s no exception in
the advertising business. You may not need to know every detail or how to calculate financial ratios,
but you must understand the basics of accounting and finance.
At a fundamental level, advertising is an expense that must be accounted for. It is also an aspect of
a company’s profit and loss, or P&L statement. A CEO of any company that is advertising will assess
if the money he is investing in advertising could be better used to fund something else. Since
advertising is an expense, it can impact a company’s cash flow, the money that is readily available to
make purchases or pay the bills.
Senior management in both advertisers and advertising agencies spend much time and attention
understanding how advertising contributes to a company’s profits on both a short-term and long-term
basis. These types of financial analysis serve as the basis for how many advertising dollars are
budgeted.
It is important that you have a firm grasp of the implications of the ways in which advertising
dollars are impacting the company’s financial position—regardless of the type of management
position you are in, whether it be with the agency or the advertiser.
Accounting and finance are fundamentals in the daily operation of any business, since every
business must generate a profit to stay in business. If you are an account manager at an advertising
agency, you will have P&L responsibility on the specific account(s) you manage. This means that you
will answer to senior management on how much profit your account is generating. In an advertising
agency, the profit and loss on an account is a direct proportion of the amount of income an account
generates compared to the man-hours put into it. If the account you manage is unprofitable, it might be
due to a lack of efficiency on the account. Or you may need to ask the client for more money if you
feel you aren’t properly compensated. Regardless, it is up to you, the manager, to fix the problem so
that the account becomes more profitable.
The hiring of personnel and how people apply their time—both have an impact on the profit
potential of a business. As a manager, it is important to strike a balance between keeping costs down
and providing the necessary resources to get the job done right. Many times this results in conflicts,
since you may elect to sacrifice some profit potential to produce a higher quality product or provide
better service.
 Another aspect of accounting that is fundamental to business is the fiscal year. A fiscal year is the
company’s budget year. It may be a calendar year. It may be a July to June year or any other annual
configuration. Regardless of the fiscal year, advertising dollars spent in a year are accounted for in
that year. There are times when companies will allocate dollars in two fiscal years so that the
financial impact in any given year is lessened. For example, if you are scheduling a large-scale
production, the advertising company may ask you to begin production in one fiscal year and end it in
another to amortize the expense into two fiscal years.
If you are a senior manager or head of an advertising agency, you will be responsible for the
overall financial condition of the company. Your role may be to help guide financial policy, and this
can include vacation time, health benefits, or sick leave, among other things. All of these items have a
financial impact on the company. You will be responsible for how you treat your own cash. You may
elect to use it to fund an acquisition or to reward stockholders or to save it as a cushion to ride out
any down times.
The higher you get in a company’s management structure, the more emphasis and responsibility you
will have for making direct or indirect financial decisions. Your understanding of the basics of
accounting and finance will be paramount in determining how much responsibility you will ultimately
have in the organization.
For more information on advertising financial matters, see Chapters 4 and 5 of Jugenheimer and
Kelley’s Advertising Management textbook.
Case
4
Tinsdale Agency
ISSUE: Agency Profitability

As the president of Tinsdale Agency and Design, Lou Tinsdale had always been lax in his
management approach. Perhaps it was his design background that made him a pretty laid-back
manager. The creative capability of his graphics design firm had led to more advertising work. Soon,
he found himself the president of one of the largest advertising agencies in Nashville.
Lou had just hired a new CFO, Bob Armstrong, who had a big agency pedigree. Bob had been with
large agencies in New York and Chicago. He recently was with JWT until they closed their Nashville
office after losing their largest account. Lou was excited to get someone of Bob’s magnitude and
hoped that Bob’s influence would help the Tinsdale Agency become more sophisticated. However, he
worried that Bob would not fit into the laid-back culture that he had cultivated.
That day, Bob had stormed into Lou’s office waving a cost accounting report. Bob said, “Lou, this
is crazy. Do you realize that we could be making at least 15 percent more money if everyone filled out
their time sheets? We need to change this right now.”
Bob went on to say that not everyone was keeping a time sheet. Camille and Jason, the receptionist
and mailroom guy/runner, hadn’t ever kept a time sheet. Jim, one of the old time copywriters was
three months behind in his time sheet. Carol puts her travel time as a nonbillable agency expense. Yet,
as Bob pointed out correctly, she is traveling on client business.
When Lou questioned why Camille and Jason needed to do time sheets, Bob was quick to point out
that even though a high percentage of their time could be reported against the general office, there are
times when they can legitimately report direct client time.
“Didn’t both Camille and Jason deliver agency proofs to a client last week,” questioned Bob
indignantly. “That is an example of billable time,” he added. Then Bob went on a tirade on how lax
the agency was on keeping time. He said that was one of the reasons they were barely making a profit.
“You’ve got to stop giving away the farm,” said Bob to Lou. Bob went on to outline a detailed plan
to have everyone keep a time sheet by the quarter hour and have it done by every Monday. He also
said that if they don’t turn in their time sheets on time, he would withhold their paychecks.
“Let’s make this agency into something,” said Bob. He added, “I have no trouble being the bad guy
on this. We need more discipline on this issue. Withholding their paychecks will send a message that
we are serious.”
Lou closed his door and began to think about what Bob had said. He wanted to be more
sophisticated but he wanted to retain his culture. He needed to do something, but what?
QUESTIONS

1. What should Lou do to ensure that his employees better keep track of their time?
2. Should every employee be required to record their time?
3. How should he distinguish between client billable and nonbillable time?
4. How should he treat travel time?
5. What should Lou do with chronically late time sheets?
6. How should he address the agency on this issue?
Case
5
Barrons Agency
ISSUE: Agency Billing Procedures

Julie Higby, the account executive on the High Plain Bank account, told you that her client was
questioning the hourly rate charges on the account.
Julie said that the client knew some of the copywriters on the account personally and, as a result,
he knew what their salaries were and had a good idea of how many hours they worked.
For example, Julie said that one of the junior copywriters on the business played tennis with the
client and told him that he made $40,000 per year. The client then computed that if he worked 40
hours a week on the account he would have put in 2,080 hours per year. The client then divided the
salary of $40,000 by 2,080 and came up with an hourly rate of $19.23. “But we bill out this
copywriter at nearly $30.00 an hour before we apply our overhead factor to it,” Julie reported.
Julie went on to say that the client feels that we are overcharging him by 50 percent. “He is
hopping mad” she said.
As the CFO of Barrons Agency, this wasn’t the first time that you had encountered this question.
You were a bit surprised by it since you had gone over in detail how you bill out various people on
the account with the client. Before Julie left, you discussed with her how the agency bills for their
services.
“Here,” you said, “let me give you an example with Jim, the junior copywriter on the High Plains
account:

• Jim has a base salary of $40,000.

• We add an extra 30 percent to this base salary for FICA, insurance, state employment taxes, and
other benefits. At his salary, that amounts to another $12,000.
• So, the total annual cost of Jim’s services to the agency is $52,000.”

“This total annual cost is then divided by the agency’s normal annual base working hours. In our
case this is 1,750 hours. Here is how we get to that number:
• We have a 37.5-hour workweek times 52 weeks in the year. That equals 1,950 hours.
• We then subtract from that amount our vacation, paid holidays, and sick leave allowance.
• In our case, we have two weeks of vacation or 75 hours, paid holidays that equal 68 hours, and
sick leave allowance of 57 hours. That is a total of 200 hours.
• If you subtract 200 hours from the 1,950 total, you get 1,750 hours.”

“So, that is why Jim’s billable rate is nearly $30.00 an hour,” you said in an even voice. Julie
nodded and indicated that it made sense to her, but she had her doubts about the client.
“There are a couple of issues that the client is going to surface,” she said.
She went on to say that last year Jim put over 2,000 hours of billable time on the account. The
client is going to ask why the rate doesn’t decrease if the hours increase. She also felt that the client
would indicate that the 30 percent benefits should be included in the overhead charge that was also
applied to the account. Right now the overhead factor was at 2.0. This meant that the hourly rate was
multiplied by 2 when it was billed.
In this case, the overhead amounted to all the office services, including executive salaries that were
amortized across all the accounts. It did not include individual salary or benefits. This was the
standard practice in the advertising industry.
Before Julie left, she said, “Good luck in dealing with him. I know that he is going to try to lower
the rate somehow.”
As she left, you knew that you had to prepare to meet with the client and explain the billing
procedures to him. High Plains Bank was an important account and you didn’t want your integrity
questioned. You sat down and began to prepare for the meeting.
QUESTIONS

1. How do you deal with the client situation?

2. Should you consider changing the way your bill if you are challenged?
3. Should you bill more or less if a person works more hours than the normal work week on
an account?
4. Should you confront the client and/or Jim regarding the discussion of confidential salary
information?
5. How do you explain the need for keeping employees’ benefits tied to their total billable
hours?
Case
6
Vineyard Agency
ISSUE: New Business Profitability

Founded in 1990, the Vineyard Agency had emerged as one of the South’s most successful advertising
agencies. With a staff that totaled over two hundred people in 2001, the agency was seen as a creative
powerhouse. All of this great work was based on the strategic thinking of Bill Vineyard, the founder
of the firm.
In fact, the agency was a contender for “Agency of the Year,” which was a prestigious award given
out by Advertising Age. Bill Vineyard was a driven man and he built the agency on what he perceived
to be a gap in the market. That gap was tourism. He focused on this sector and it served him well. He
had won national accounts that represented airlines, tourism boards, hotels, and rental cars.
Bill Vineyard was a renowned speaker on the tourism circuit. He had everything going for him until
the tragic events of September 11, 2001. Once 9/11 hit, the travel and tourism business tanked. Hotel
and resort bookings moved to historic lows. Clients began to reduce spending and he began to reduce
his staff.
The biggest blow to the agency came when his head account management person and his top
creative team left to form their own agency. His creative product began to suffer and his usually
reliable new business pipeline began to run dry. Normally Bill would get a call nearly every month to
pitch a new piece of business. Now, the phone was silent. He needed to restart the agency and gain
some momentum.
ENTER THE NEW BUSINESS SAVIOR

Tony Wright was a slick New Yorker who had recently turned around two agencies in Manhattan. The
most recent was Mariner, which he doubled in size within three years. They had just sold to WPP.
After a transition period in the buyout, WPP dismissed Tony from the agency, saying that they wanted
more of a traditional CEO. So, Tony was looking for a new adventure.
A New York-based recruiter called Bill Vineyard to introduce Tony’s credentials to him. “If you
want a proven new business rainmaker, this is your guy,” said the recruiter to Bill.
Bill wondered why Tony would leave New York. He was a bit skeptical that a hard-charging New
Yorker would like the slower pace of the South. But, the recruiter said that Tony was ready to leave
New York and wanted to show the New Yorkers that he could energize an agency regardless of the
location.

Exhibit 6.1
Vineyard Agency: Income Statement (March)
Item YTD Actual (000) YTD Budget (000) Prior Year (000)
Gross Income
Production Commission 162 200 117
Media Commission 893 738 550
Fees 36 36 32
Total Gross Income 1,091 1,174 699
Loss of Revenue 786 809 387
Gross Profit 305 365 312
Operating Expenses
Salaries 170 150 130
Rent 19 19 19
Travel 3 3 2
Entertainment 15 2 1
Computer, Phone 3 3 3
Legal 5 2 1
Depreciation 6 6 6
New Business 16 12 11
Misc. 1 1 1
Total Expenses 238 198 174
Other Income Interest 5 5 3
Net Income Before Extra Items 72 172 141
Agency Write-off 20 — —
Net Income 52 172 141

Tony and Bill met in a neutral setting of Washington, D.C. Although Bill was not comfortable with
Tony, he recognized that Tony would be a new business machine.
 “With my contacts, I will be able to double your business within a year,” said Tony to Bill.
“All I ask is that you give me control of the new business process and some resources to get the job
done. It takes some money to get some money,” he added.
Bill was in no position to say no. He needed new business and here was a proven big league new
business guru. He thought that it was best for the business if he hired him, whether he liked his style
or not. So, Bill hired Tony, who immediately went to work.
FINANCIAL IMPACT OF TONY WRIGHT

As Bill and his CFO looked over the March income statement, Bill began to see the impact that Tony
Wright was making on his organization.
On the positive side, Tony had been a great new business guy. Gross income was up by over 50
percent from a year ago. Tony had brought in different accounts from the ones the agency traditionally
had handled. Instead of just tourism-related accounts, Tony had expanded the list to include luxury
retail accounts and even some upper-end package goods accounts. This had certainly been a breath of
fresh air to the agency. Even Advertising Age was giving the agency kudos for new business.
However, to get this new business, Bill and his CFO had budgeted for greater expenses. There
were increased salaries to add more creative staff to the fold and there was a significantly larger
amount of money devoted to new business. While the March numbers were a bit higher than they had
budgeted, Bill wasn’t too worried about it.
“We need the creative horsepower to get more business and we should be increasing our
expenditures on new business,” he told his CFO.
“I understand that, Bill, but I do worry that the new business Tony is picking up has a lower margin
than our current accounts,” said the CFO.
However, the numbers that concerned the CFO were not the salaries or the new business expense.
The CFO pointed out the extremely high entertainment number.
“Tony’s entertainment number is higher in one quarter than we have had in the last three years
combined,” said the CFO to Bill. He went on to say that at this rate, the agency would spend a huge
amount on entertainment.
“Is this guy just buying accounts?” questioned his CFO.
The other number that the CFO brought to Bill’s attention was the agency writeoffs. The agency had
been very good about not writing off any items in the past. They had made their fair share of mistakes
but rarely did they have to eat any outstanding costs. Now, they had write-offs that they had never
seen before.
“Bill, you must find out what is behind these write-offs,” said the CFO. He went on to say that this
type of write-off level was just unacceptable.
“Bill, I know that we need new business, but while we have increased our top line income, our
bottom line is less than half that of last year,” said the CFO. The CFO voiced more concerns about the
bottom line of the company. He was concerned that all the focus on the new business efforts was not
going to help the overall financial health of the agency.
BILL’S DECISIONS

After meeting with the CFO, Bill walked back slowly to his office. His mind was racing. On the one
side, he knew that hiring Tony Wright had been a gamble. But, the gamble seemed to be paying off
with the rapid growth of new business. The agency was getting mentioned again in the trade
publications as a “hot shop” and the people in the office were much more excited about the work.
On the other hand, he shared some of his CFO’s concerns over Tony’s lack of controls over
spending. He wasn’t sure if all the entertaining that Tony did was necessary. He had heard that Tony
lived an extravagant lifestyle but he had hoped that this was just a Manhattan circumstance that would
go away after he moved to the South.
The one thing that he couldn’t overlook was the large agency write-offs. That was just like flushing
money down the drain.
Bill also thought about the different accounts that Tony was bringing in. If they have a lower
margin, he wondered if they were really worth it.
Bill had a number of decisions to make about the agency’s future.

• Should he continue on this course with Tony Wright or not?

• Should he require that Tony get a certain margin on the new accounts or not take them?
• Should he rein in Tony’s entertainment expenses?
• Should he penalize those involved in the write-offs to set an example for the rest of the staff?

Bill wanted his CFO to take another pass at giving him an analysis of the March income statement
so that he could better understand the relationship of the top line income and the bottom line. He
hoped that by getting a bit more detail he could better understand what he should do.
He closed his door and hoped that he had made a good decision by bringing in Tony Wright. The
consequences of changing again were not appealing.
QUESTIONS

1. Look at each question that Bill identified. What are the pros and cons of each possibility?
2. What further questions would you ask yourself?
3. How would you pursue each of the above questions?
4. What types of analysis would you do to get a better handle on the financial picture of the
agency?
5. Do you feel that the short-term expense is worth it in the long term for the agency?
6. What would you do to solve the problem?
PART III
ADVERTISING BUSINESS PLANS

CASE 7 ST. JOSEPH DISPATCH

ISSUE: Advertising versus editorial

CASE 8 AMERICAN TEXTBOOK COMPANY

ISSUE: Outsourcing versus In-house

Every business requires some form of planning. Managing an advertising agency or media company,
or being an advertising manager for a company, all require some form of ongoing business planning.
Business planning requires both a short-term view, or goal setting, and a longer-term view, or
objective setting. Business planning asks the manager to think about what success looks like for the
organization.
In setting goals and objectives for an organization, a manager has three fundamental questions to
answer.
1. WHERE ARE WE GOING?

This involves setting specific goals and objectives that are measurable, and ensuring that the all of the
manager’s stakeholders understand and buy into the direction.
2. WHAT IS THE ENVIRONMENT?

Another way of saying this is: What are the barriers that we might encounter in achieving our
objectives? The environment can refer to internal or external factors.
Internally, the focus may be on the company itself. Is the company prepared to meet the goals? Do
you have the resources necessary to do the job? Will senior management support your goals? These
are typical internal issues or possible constraints.
Externally, there are competitive pressures, economic forces, outside vendors or partners. All of
these external environment factors can impact your ability to achieve success.
3. HOW DO WE GET THERE?

Once you know where you want to go and have surveyed the environment, your final step is to
prepare a plan to meet your goals and objectives. The trick in how you get there is to balance short-
term goals with achieving the long-term objectives.
Business plans contain two overall sets of goals and objectives. The first makes some form of
revenue forecast. The second states what type of organization you want to become.
All businesses must forecast or project future revenue. Revenue becomes the building block on
which to develop your plan. There are many types of methods of forecasting revenue. The advertising
agency business must rely on forecasts of income from current and sometimes potential clients.
Forecasts can vary wildly depending upon the aggressive or conservative nature of management.
Advertising businesses must also decide what type of organization to build. This can reflect what
types of skills you want to develop within your organization, which will impact the types of clients
that you can attract and retain. Beyond the skill sets of the organization, management must decide what
the company stands for. This involves what its corporate values are and what its culture and
personality should be. In a highly creative business like advertising, setting the cultural tone for the
company is as critical as properly forecasting revenue. The cultural aspect of an advertising company
will greatly impact how attractive the firm is to both employees and clients.
Advertising business planning requires diligence and vision. While answering the three questions
posed in this text may seem simple enough; great thought should be given to those answers. Business
planning sets the stage for where the advertising firm will be in the future. With the great changes
taking place in the advertising business, that is no small task.
For more information on advertising business planning, see Chapters 6 and 7 of Jugenheimer and
Kelley’s Advertising Management textbook.
Case
7
St. Joseph Dispatch
ISSUE: Advertising versus Editorial

Chuck Walker is a retail advertising account executive for the St. Joseph Dispatch metropolitan
newspaper. Chuck was one of the top salesmen for the St. Joseph Dispatch. He had worked his way
up from calling on “mom and pop” retailers to handling the automotive sector of the newspaper. This
was the top-billing segment for the paper and was given only to the best salesperson.
Over the past year, Walker was able to grow the automotive sector by 20 percent. This was a huge
accomplishment.
His approach to the automotive sector was to act like an advertising agency instead of a newspaper
salesperson. He employed a combination of market research data and speculative creative to pitch the
accounts on both the printed and online version of the newspaper. As a result, Walker had it rolling.
His prize account was Urbandale Motors. Urbandale was the newspaper’s largest account. It was a
mega-dealership that had a number of manufacturers ranging from General Motors to Toyota. Chip
Urbandale was the owner of Urbandale Motors. He was a tough businessman but was also a true
pillar of the community. He had donated much of his personal wealth to build a new library for the
city as well as a new football stadium for the high school.
Mr. Urbandale loved Chuck Walker’s aggressive style. He had been so pleased with the results of
the St. Joseph Dispatch’s advertising program that he had personally written letters to the
newspaper’s management praising Chuck’s efforts.
The publisher of the paper, Dick Heath, had circulated the letters to his management committee for
review. Mr. Heath said that Urbandale Auto had relied heavily on local radio and television until
Chuck Walker took over the account. By combining the newspaper’s print product with its rapidly
growing online presence, Chuck was able to take a significant share of the dollars from broadcast and
turn it toward the newspaper.
“Chuck is one of the few salesmen that can help stem the tide of our sliding advertising sales,” said
Mr. Heath to his management committee.
A NEW EDITOR ENTERS

To help ensure that the newspaper keep up with the times, Mr. Heath had hired a new editor, Dan
Frank. Dan was particularly interested in being a consumer advocate. He had led investigative
journalistic efforts at his previous paper, to take on many local businesses that he felt were duping
consumers.
He felt so strongly about this cause that he had instructed his news department to set up an “action
line” that appeared every day in the paper. The “action line” was staffed by seven reporters who led
the charge to help consumers solve their problems.
After gathering information from the “action line,” the reporters would call the business and get
them to help the consumer. If the business didn’t comply, they would list the problem and then name
the consumer, store owner, and store name in the column much like a police report.
The feature had become very popular with the community. In fact, Dan Frank even had a two-
minute feature on the local ABC television station to go over any juicy items. Most of the stories
featured “shady” businesses and people trying to dupe the public. However, there were times when
regular businesses were mentioned. This always led to tension between the advertising and editorial
departments when advertising clients were cited.
Last month a segment of the “action line” dealt with a consumer’s complaint at Urbandale Motors.
The customer had purchased a new car at the dealership and three weeks later the engine block in the
new car developed a serious crack in it. Despite repeated attempts to install a new block, the
customer was still without his new car. The reason was that there was a strike at the producing
factory that made getting the right engine block impossible. However, the complaint was given
prominence on the “action line” with no mention of the strike at the producing plant. The “action line”
screamed that Urbandale Motors was not responsive to the consumer.
Chip Urbandale was incensed at the “action line” item. Not only did they not cite the labor union
strike that prevented the part from being shipped, no one had called him to ask his side of the story.
Plus, Urbandale Motors had provided a demonstration new car to the customer at no charge until they
could get the part from the factory to fix his car.
Chip called Chuck about the story and said that he thought that a follow up story or a retraction
would be appropriate.
Chuck agreed and went to the editorial department to plead his case. But, no one would listen.
When he got more aggressive about the poor job of reporting; the lead reporter for the “action line”
said that he wasn’t objective since it was his client that was in the “action line” item.
With nothing forthcoming from the newspaper, Chip Urbandale cancelled all of his advertising with
the St. Joseph Dispatch. Mr. Urbandale told Chuck that he bore no personal ill feelings toward him
but that he felt that he was mistreated. He added that he knows that advertising and editorial are two
distinct departments but he felt like the journalism was irresponsible.
“I am going to put my money in the community newspapers that treat me right,” he said. “I would
love for you to work for them and handle my account,” offered Mr. Urbandale.
Chuck Walker was dazed. All the hard work to develop the largest account in the history of the
newspaper was gone in a moment. It wasn’t just the commissions that he would lose but it was the
loss of the relationship that really bothered him. Mr. Urbandale was a good man and he had helped
him become even more successful through his savvy advertising recommendations. Now it was all for
naught.
Chuck wasn’t going let it go. The next morning he knocked on the publisher’s door. He hoped that
Mr. Heath would be a voice of reason in this mess. He hoped that Mr. Heath would not only get the
account straightened out but would get more cooperation from the editorial group.
What should Mr. Heath do?
QUESTIONS

1. What should be the policy regarding editorial items that impact an advertiser?
2. Should Mr. Heath print a retraction for Urbandale Motors?
3. Should Mr. Heath question the journalistic practices of the reporter for the
“action line?”
4. Should Mr. Heath require that advertising and editorial meet regularly on features
that impact the newspaper?
5. Should advertising be allowed to suggest news items or features for the
newspaper?
Case
8
American Textbook Company
ISSUE: Outsourcing versus In-house

Founded in 1955, the American Textbook Company has grown and prospered. It is now one of the top
college textbook publishers in the world. The company has sales of $200 million. It is the recognized
publishing leader in many vertical markets including accounting, marketing and advertising,
economics, and management. The sales of American Textbooks have always had a United States
focus. However, in the past five years the sales mix of American Textbooks has changed from 97
percent U.S. to 70 percent U.S. and 30 percent international. The international market has become a
rapidly growing aspect of the business. The other key change in the business has been the move from
print to digital. E-books and e-commerce now account for 20 percent of the sales and rapidly
growing.
The company has always done all of its own advertising through the use of an “in-house”
advertising agency. The advertising department consists of an Advertising Manager, three
copywriters, four art directors including an interactive art director, a media director who does
traditional and online media placement, and two assistants who fill in various roles depending upon
the departmental needs.
The advertising department is always busy. They write all the copy for mail brochures, letters, and
direct mail pieces. And this is just the beginning. They’ve also done a variety of advertising including
trade publication, trade show events, continuous updating of the Web site, and even search-engine
marketing. Then, there is the annual catalog that they prepare for each division of the firm; it’s always
very large. So the volume of work is enormous. Just organizing over one thousand book titles for their
promotional material and pricing changes alone is quite a task. The media person also has to maintain
the entire database of 250,000 names of college and university teachers, bookstores, and individual
book buyers.
TO OUTSOURCE OR NOT

Steve Carter, the new Vice President of Marketing for American Textbook, came from Meredith
Publishing where they used both an in-house agency and a variety of advertising agencies to handle
each of their divisions.

Exhibit 8.1
American Textbook Company: Advertising Budget
Item $(000)
Tradeshows/Events 1,000.0
Media (Traditional/Online) 1,500.0
Catalogs 500.0
Direct Mail/Brochures 1,500.0
Net 4,500.0

Exhibit 8.2
American Textbook Company: Advertising Department Salaries
Title # of People Total Annual Salary
Ad Manager 1 $90,000
Copywriters 3 $150,000
Art Directors 4 $200,000
Media Director 1 $65,000
Assistants 2 $60,000
Total $565,000

When Steve landed at American Textbook, he was surprised to find that the company had never
used an outside resource. He felt that an outside agency could provide the best service in developing
individual brand personalities for each division, as well as handle the ever-growing and more
complex media situation. He also believed that an outside advertising agency would look at each
division more objectively and spend its efforts making each one distinctive.
“It seems like we are being penny-wise and pound foolish to have just an in-house agency,” Steve
thought. He felt that all the work of the in-house group looked the same and he wondered whether they
were really taking advantage of the media world’s changing dynamics.
He understood that he would have to fund an advertising agency. He felt that the budget he spent on
advertising would support a firm if he allowed them to take a 15 percent markup or commission on
media and production.
He also believed that if he hired an advertising agency, he could reduce the current advertising
department to a coordinator for the database and a person to update the Web site. He might or might
not need a manager depending upon the strength of the outside advertising firm.
Jim Lavaca, the Advertising Manager, was vehemently opposed to this move. He was opposed to it
for the following reasons:

• He felt that the agency fees would not be large enough to get the best talent of the agency
working on the account.
• There was such a steady stream of materials that the job was very task-oriented, which isn’t an
agency’s bread and butter.
• His team was seasoned, and knew what to do, and did it with as much style and grace as time
allowed.

“Why should we spend more and get less from an agency,” Jim said to Steve. He added that every
time someone in the past had suggested hiring an agency, they had found that it wasn’t cost effective.
He went on to say that very few advertising agencies were capable of producing “effective”
advertising in short time periods. Plus the anticipated “start-up” time would be expensive and fraught
with potential errors.
“If we miss a mailing or get behind, the division presidents will scream,” cried Jim.
Finally, he said that the cost for using advertising agencies could be higher than expected. He said
that most would charge a commission of 15 percent for media and 20 percent for production, plus
they would charge at least $100 an hour for creative time.
Steve Carter listened to Jim Lavaca’s arguments but wasn’t convinced that keeping things in-house
was the best course of action. He felt that Jim was just protecting his turf. While he didn’t blame Jim
for wanting to keep the status quo, he knew that he had been brought in to make a difference. He also
knew that his boss, Bob Hebron, would listen to both Jim and himself on this issue. So, if he wanted
to pursue this course of action, it had to be well thought out.
So, the question that would be posed by Mr. Hebron would be: “Keep the status quo or use an
outside advertising firm? What do you believe is the best course of action for the American Textbook
Company?”
Questions

1. What criteria should the American Textbook Company use to assess if they need
to use an outside advertising firm?
2. Are there other options that either Steve Carter or Jim Lavaca haven’t
considered?
3. Do you believe that the quality of the creative work is worth a premium price
over an in-house agency?
4. Can you name some examples of effective in-house advertising departments?
5. Can you name some examples of advertisers moving from an in-house situation to
an advertising agency?
PART IV
ADVERTISING PLANNING

CASE 9 PHOENIX POWER COMPANY

ISSUE: Advertising Message Strategy

CASE 10 GO ORGANIC COMPANY

ISSUE: Market Segmentation

CASE 11 BANDALL WHITE DOG FOOD

ISSUE: Advertising Planning

Advertising planning must be viewed in a broader context of marketing. The decision to advertise is
typically weighed within a company against other means of growing its business. As a CEO of a
company, you can follow two paths to growth. One is to grow your existing business. The means to do
that is by marketing. The second is to acquire other businesses. After that, marketing is still essential
for further growth. So, marketing becomes a key aspect for any company.
Advertising is typically the catalyst for growth within the marketing mix. However, advertising is
not the only tool in a marketer’s arsenal. The 4Ps of marketing are:

• Price—Pricing of the product relative to others in the category.

• Place—Distribution of the product within a retail set or geographical area.
• Product—Positioning of the product and the attributes of the product.
• Promotion—Any form of promotion including public relations, sales promotion, and
advertising.

A marketer must weigh each of these four areas in terms of how to grow a brand. Not only must
you, as a marketer, weigh each of these elements but you must decide the interrelationship among
them. For example, the quickest way to increase sales is to increase the price of the product, the first
P. However, this assumes that consumers will pay more for the brand. Advertising can be used to
strengthen the value of the brand within the consumer’s mind. The same can be said for gaining
distribution—place, the second P. If you open a new market and don’t advertise your brand, it is
likely that you will lose the distribution that you worked so hard to gain.
Obviously, advertising and the product are intertwined. How the product is positioned in the
marketplace has a direct bearing on how one promotes or advertises it. Product positioning, the third
P, typically dictates how a marketer segments the market. Segmentation is a key element in the
advertising objectives or planning of an advertising campaign.
How the brand is integrated within the sales organization has ramifications on advertising planning.
Advertising must support sales whether it is internal or external to the brand. When planning an
advertising campaign, how the brand is actually sold plays a central role in how an advertising
campaign is developed and executed.
 The final P, or promotion, includes advertising as part of an integrated marketing communications
(IMC) effort. Advertising may play the central role or it may be a supporting cast member in the IMC
mix.
Advertising planning goes hand in hand with marketing planning. Good advertising planning works
in concert with marketing planning so that it is aligned with the overall marketing goals and
objectives.
Advertising planning also plays a role in product testing. Many brands test either new products or
improvements to existing products through the use of concept testing. Concept testing is a method
through which a marketer will develop a value proposition about the brand and test it with
consumers. Advertising becomes a key aspect of this testing since communicating the value
proposition falls squarely in the advertising arena.
To develop a proper advertising plan, you need to understand who you are marketing to, where you
are marketing, when you are marketing. The advertising plan then becomes the how you will do it.
The “how you will do it,” or the plan itself, shouldn’t be executed in a vacuum. Any good
advertising plan must take into account the competition and their plans. The competition along with
other inside and outside environmental influences then become a part of a situation analysis or SWOT
analysis (covering Strengths, Weaknesses, Opportunities, Threats); this forms a foundation for
advertising planning.
In summary, advertising planning is a part of marketing planning. They must be aligned. Advertising
planning must take into account all aspects of the brand from positioning to sales. To be effective in
the marketplace, advertising planning should take into account any outside influences and provide a
SWOT analysis as a foundation for planning.
For more information on advertising planning, please consult Chapters 8 and 9 in Jugenheimer and
Kelley’s Advertising Management textbook.
Case
9
Phoenix Power Company
ISSUE: Advertising Message Strategy

Phoenix Power’s electric rates are among the highest in the country, a fact that is resented by many of
the company’s customer base.
In an attempt to overcome this negative public opinion, Phoenix Power had borrowed a technique
that has proven to be effective for other energy marketers. This involved developing an advertising
campaign that demonstrated how customers could save energy costs by using better insulation in their
homes or by purchasing more energy efficient appliances, including air conditioners. By using all of
these conservation methods, homeowners could save up to 20 percent on their cooling bill. In
Phoenix, where the summer temperatures are continually above 100 degrees, that could be a
substantial amount of money.
Now the company was applying for a rate increase to help offset the increased cost of doing
business. The increase was largely due to the proposed building of a nuclear reactor in Arizona that
would become a power source for the city of Phoenix. The new reactor was also controversial
because many people in the state were concerned about having a nuclear plant close to them.
Regardless of the consumer sentiment, the legislature approved Phoenix Power’s plans to build the
nuclear reactor and will likely give the company permission for at least part, if not all, of the
requested rate increase.
Once the nuclear power plant is built, Phoenix Power management believes that energy prices can
be reduced, since the company will no longer have to import energy from power plants in California.
“Once the nuclear plant is built, Arizona will have a total in-state energy solution,” said a Phoenix
Power spokesperson.
Now Phoenix Power wants to develop a short-term advertising campaign to explain to customers
why rates will be rising and to prepare customers for the anticipated rate increase.
What creative strategy can be used to help communicate this unpopular message to a very skeptical
and unreceptive audience?
QUESTIONS

1. Should Phoenix Power advertise at all or should it put its efforts into public relations to
help tell its story?
2. If Phoenix Power does advertise, what medium do you believe would be the best at telling
the story?
3. What type of creative execution do you believe would be the best approach?
4. What type of research might you consider before coming out with a campaign?
Case
10
Go Organic Company
ISSUE: Market Segmentation

Go Organic Foods, based in Omaha, Nebraska, is one of the newest package foods companies to
jump on the organic bandwagon. Go Organic offers a variety of products that can be found in grocery
stores, specialty health food stores, and even some restaurants and other food-service establishments.
One of the best-selling brands in their product line is Go Organic frozen food. This was the
brainchild of founder Robert Sierra, who learned of a method called “flash frozen,” where you can
maintain all the nutrients in the food even though it is frozen. Mr. Sierra was tremendously excited
about this process since he believed that it would solve a larger problem in America, that of obesity.
Mr. Sierra had studied America’s eating habits for years and realized that much of the country’s diet
consisted of high fat and sodium frozen food meals. In fact, Mr. Sierra had seen his own mother and
father gain considerable weight and later develop heart disease as a result of poor dietary habits. All
Mr. Sierra could remember was that their diet was driven by frozen food.
So, Mr. Sierra used this new technology to develop a line of frozen dinners that were low in fat,
sodium, and cholesterol, and high in nutrients. Even with this seemingly large breakthrough, grocers
were reluctant to carry the items. They didn’t believe that there was a large consumer demand for
natural or organic foods. They told Mr. Sierra that it was a niche item.
Undaunted, Mr. Sierra finally convinced the president of a small independent chain of high-quality
stores to carry the product. Sales of the Go Organic dinners began to take hold. The flavor of Go
Organic products exceeded expectation and soon those who wished to eat a low-fat, nutritious meal
without sacrificing flavor were flocking to the brand. Retailers who had previously been reluctant to
carry the brand began to call Go Organic.
Although men tend to eat frozen dinners more often than women, the Go Organic line of frozen
dinners was aimed primarily at women over the age of forty. However, the company soon learned that
men also liked the Go Organic dinners as well. This popularity spurred Go Organic to expand their
product line to include more frozen dinners, some breakfast items, and even desserts.
Naturally, the competition in the frozen food category did not stand still while Go Organic captured
market share. They also focused on health in their advertising, and soon introduced their own organic
or part organic frozen food products. The frozen food marketplace was becoming an organic and
natural foods battleground.
Carol Hart, the vice president of marketing for Go Organic, looked at the trends of the business
with some trepidation. The competition had significant capital compared to the small, privately held,
Go Organic. Carol was concerned about the growth of the brand and if they could keep up with the
constant battle for market share.
While she was mulling things over, Mr. Sierra entered her office and tossed an article on her desk.
He said that this article summed up the market segment that he felt was still untapped by his brand. He
asked Carol to read the article and to provide him with a point of view on the best way to develop
consumer segmentation for the brand.
THE ARTICLE PROVIDED THE FOLLOWING INFORMATION

According to a recent government report, obesity among adults had doubled since 1980, while being
overweight had tripled among adolescents. One study cited rates as high as 15 percent of teenage
boys and girls being overweight.
Hispanics and African Americans had a much higher prevalence for being overweight than the
Caucasian population. Women were more likely to be obese compared to men.
Mr. Sierra turned to Carol and said, “Look at these statistics. We need to rethink our market
segmentation strategy. Why, homes that have teens and ethnic audiences are totally untapped markets
for us. I would like a report on how we segment our future market within the next week.”
As Mr. Sierra left, Carol felt very conflicted. She knew that he was passionate about wanting to
help people who had a high proclivity for being obese, yet she was looking at other demographic
information on frozen food purchasers and organic food buyers that was very different from this
information.
Given the recent amount of competition in the marketplace, she knew that they had to be right in
how they segmented the market. She began to quickly review the data and assemble a presentation.
She hoped that she was right.
QUESTIONS

1. Do you think that the information about segmentation is enough to develop a segmentation
scheme for the brand?
2. Which information do you consider more valuable, the trends Carol was looking at or the
facts in the article? Why?
3. What trends would you consider as you developed a segmentation strategy?
4. Do you feel that the segmentation strategy should be based on adding new purchasers to the
brand or adding frequency to current buyers?
5. What would be the ideal information to have to make this decision?
6. Would you go with the information you have, or recommend that you take more time and do
primary research on the market before making a decision?

Exhibit 10.1
Information According to a Recent Government Report
Demographics Frozen Dinner Consumption Organic Food Consumption Obesity Likelihood
Average Index 100 100 100
Gender
Men 110 50 80
Women 90 150 120
Age
Teens 13–17 65 20 120
Adults 18–24 120 30 110
25–34 110 100 70
35–54 80 110 70
55–64 70 140 90
65+ 130 60 120
Ethnicity
Caucasian 100 130 70
African American 100 50 140
Hispanic 70 40 150
Asian 110 150 60
Native American 20 30 180
Education
High School or Less 115 30 150
High School Grad 105 70 120
Some College 100 100 100
College Grad 95 130 75
Grad School 60 180 50
Income
$50k or Less 100 40 150
$50k to $100k 120 80 110
$100k or More 90 170 60

Note: Index to Average is 100. Above 100 is more likely, below 100 is less likely.
Case
11
Randall White Dog Food
ISSUE: Advertising Planning

The Randall White Feed and Milling Company is an old-line regional marketer of farm feeds, grits,
and corn meal. It was established in 1929 in Berry, Georgia, by Robert White.
Berry, Georgia, has been dubbed the “bird dog capital of the world” by Popular Huntingmagazine.
Robert White was a hunting enthusiast. His favorite avocations were hunting quail and raising bird
dogs. He and his son, Randall, had been recognized as a top father/son hunting duo by Popular
Hunting.
Robert White soon turned his passion into profits. He used his money and the resources from his
milling operation to develop and market a dry dog food formula specially made for hunting dogs. He
named the brand after his son, Randall, and launched the Randall White Complete Dog Ration brand.
Today, Randall White Complete Dog Ration is the company’s largest volume and highest profit
margin product. It is also the number one brand of dog food in its limited distribution area.
THE PRODUCT

Randall White Complete Dog Ration is a high energy, high protein, complete and nutritionally
balanced dry dog food in concentrated form. The brand has historically been positioned as a high
performance dog food for dog owners who desire superior nutrition. This positioning was designed
specifically for hunting dogs and for working farm dogs. It is a premium priced product and appeals
to the hunting enthusiast and to dog owners who have large, active dogs.
THE DOG FOOD MARKET

The dry dog food market is big and growing fast. Sales for the last year nationally and in the
Southeast (Randall White’s marketing area) were both very strong.
From a distribution perspective, grocery stores are the dominant outlets; closely followed by pet
food stores and by feed and farm implement stores. Randall White had sales disproportionately
weighted to the feed and farm implement stores in its region. The brand also had strong grocery sales
in the Southeast but had yet to crack the national pet food distribution market. All of Randall White’s
pet food sales were to local mom and pop retailers and dog kennels.

Exhibit 11.1
Dry Dog Food Sales and 5-Year CAGR
Total Sales Millions $ % CAGR
National 2,000 8.6
Southeast 750 13.3
Note: CAGR = Compounded Annual Growth Rate

Exhibit 11.2
Sales Distribution of Dry Dog Food Sales and Randall White Brand (% Distribution)
Grocery National Pet Stores Farm/Feed Kennels/Local
National 55 30 5 10
Southeast 50 25 10 15
Randall White 50 0 30 20

Dry dog food is categorized into two overall product groups, ration—or meal type—brands such
as Randall White, and expanded products such as Checkerboard Chow, Gravy Boat, and Puppy Puff,
all made by the national marketer, Ralston Dog Food.
Ration-type brands are blended of separate ingredients mixed together in particle form, providing
higher protein energy levels in highly concentrated form. They are generally priced at lower levels
than expanded products and are most indigenous to the Southeast and Midwest where outdoors
activities, including hunting, are the strongest
Expanded products are homogeneous in appearance with all ingredients ground and blended
together. They are often “puffed” with air to have a larger than life appearance. Usually they are in
“nugget” or simulated “hamburger” form and priced at premium levels. Expanded products are the
mainstay of house pets and smaller dogs. Most nationally advertised brands are of the expanded
product variety.
In the Southeast, the ration-type brands account for about 40 percent of the market yet nationally,
they account for only about 20 percent of the market. Even within the Southeast, the ration-type brand
varies markedly by state.
THE CONSUMER PROFILE

There are three basic markets for dry dog food. The first and largest is the pet dog owner. The second
is the hunting/working dog owner. The third is the show dog or pure breed market. This last is a very
specialized market with specific niche dog food products tailored to each breed.

Exhibit 11.3
Ration-Type vs. Expanded Formula Sales: Geographic Analysis (in %)
Geography % Ration-Type % Expanded
National 20 80
Southeast 40 60
Tennessee 40 60
Mississippi/Alabama 45 55
Georgia 50 50
Florida 25 75
Virginia/North Carolina 20 80
South Carolina 30 70

Of the two larger markets, each has a distinctive consumer profile. Nationally syndicated research
shows the consumer profile for the pet dog owner dog food market to be as follows:

• Women, age 25–49

• Married with children age 5–17
• Attended or graduated college
• Living in suburban areas of highly populated DMAs (designated marketing areas)
• Household income levels of $75,000+
• Owns a single dog

This is contrasted to the consumer market for the hunting/working dog market, which breaks down
as follows:

• Men, age 35–64

• Married with either teenage children or no children
• High school education
• Living in C and D counties
• Household income level of less than $75,000
• Owns multiple dogs
 On a per capita basis, the hunting/working dog owner is the heaviest consumer of dog food due to
its multiple dog ownership. Because he is an extremely heavy user of dog food, the hunting/working
dog owner is extremely price conscious.
RANDALL WHITE CHALLENGE

Within Randall White’s marketing area, Randall White has been the number one brand for many years.
However, its market share has been consistently eroding over time.

Exhibit 11.4
Dry Dog Food: Sales by County Size (in %)
Southeast County Size % Population % Category Sales % Randall White Sales
A 22 18 11
B 36 45 31
C 23 21 28
D 19 16 29
100 100 100

Exhibit 11.5
Randall White Sales and Distribution by State (in %)
State % Sales % ACV
Alabama 20 100
Georgia 18 100
Florida 6 40
South Carolina 13 100
Mississippi 13 100
North Carolina 8 70
Tennessee 14 100
Virginia 60 60
Note: ACV = All Commodity Volume

Exhibit 11.6
Randall White 5-Year Market Share Trends (in %)

Randall White’s losses are primarily traceable to the dynamic growth of private-label brands of
dry dog food that is priced 30 percent below Randall White.
Other factors are compounding this problem. The first is the urbanization of the Southeast. Fewer
and fewer farms are being worked, and with fewer working dogs. The growth of the Southeast has
been in large cities and Randall White has been and continues to be more of a rural brand.
The largest factor is that Ralston has begun a specific campaign in the South to launch its new high
protein dry dog food mix targeted at large dogs. It is made with 20 percent more protein than Randall
White and is sold at a price point 10 percent less than the Randall White brand.
The other day, Randall White sat in this office, thinking about his father’s legacy and what he might
do in this situation. With his father’s death three years ago, Randall had assumed the head of the
company. He knew that he had to not only arrest the declining share of his market but that he needed to
find ways to increase his brand volume.

Exhibit 11.7
Advertising Media Competitive Spending (000)
Brand Spending ($000) Media Mix
Ralston Checkerboard Chow 15,000 80% Network TV, 20% Magazine
Gravy Boat 500 60% Network TV, 40% Magazine
Puppy Ruff 3,000 100% Magazine
Kennel Club 6,500 100% Spot TV (Pacific, Northeast)
Randall White 1,500 100% Spot TV (Southeast)
Others 7,500 Various
Total 46,000

His marketing people had been hounding him to spend more money on advertising but he had felt
that he couldn’t compete with Ralston in that arena. His product people had begged him to expand his
line into the pet owners’ market. His salespeople had felt that, if he expanded his geographical
distribution to other feed stores and even other grocery chains, he might not be so vulnerable. His
neighbor had said that he had just switched to a private label brand since it was so much cheaper.
That really got to Randall. He began to wonder if his product was out of touch with the market.
He knew that he must take some action. So, he asked all of his key management to develop a plan of
attack. The question was: What course of action should he take?
QUESTIONS

1. What analysis do you think that Randall White should ask for to determine his proper
course of action?
2. How would you construct a SWOT analysis based on the 4Ps (product, price, place, and
promotion) of marketing?
3. Is there any missing information that you would need to make a decision?
4. What decision could you make to have an immediate impact on sales?
5. If Randall White introduced a new product, what would you recommend?
6. What role should advertising play in Randall White’s future plans?
PART V
ADVERTISING BUDGET MANAGEMENT

CASE 12 BOSCO HOT SAUCE COMPANY

ISSUE: Budget Allocation Analysis

CASE 13 ALPHA AIRLINES

ISSUE: Budget Allocation Analysis

CASE 14 SOUTHERN RICE

ISSUE: Advertising Spending

Budgeting is perhaps the most important task that an advertising manager must accomplish. For
without a proper budget, there is likely to be an ineffective advertising plan.
Even though budgeting for advertising is a crucial exercise, for some it can be daunting, and for
those higher up in the organization it can be very frustrating. Advertising budgeting begins with an
economics issue and ends in an activity or allocation issue.
From an economics perspective, an advertising manager must be prepared to answer the following
questions:

1. What is the relationship between advertising and sales?

2. What is the effective threshold for advertising?

a. How high is up? Where is the point of diminishing returns?

b. When is the level too low to have an effect?

3. What is the impact of advertising on each aspect of the brand’s purchase funnel, which leads to a
consumer buy?

a. How does advertising impact awareness?

b. How does advertising impact brand consideration?
c. How does advertising impact purchase?
d. How does advertising impact loyalty?

These are not easy questions to answer. Most marketers and advertisers struggle to answer any of
them. Yet, they are central to the task of advertising. The only reason to believe in advertising is that it
has some sort of impact on the consumer’s awareness, intent to purchase, and loyalty toward a brand.
Depending upon statistical sophistication, information available, and the stage in a product’s
lifecycle, there are a variety of methods used for determining an advertising budget. Some of the more
common methods are:
 • Historical Plus Inflation. Last year the brand spent $1.0 million. We estimate that inflation
will be at 5 percent, so this year we will budget at $1.05 million. The advertising spending
level is adjusted for inflation so that the brand doesn’t lose buying power.
• Percentage of Sales. Our brand budgets at 3 percent of sales. So, with $500 million in sales,
the advertising budget is $15 million. Many companies and brands use some form of
advertising-to-sales ratios to guide their advertising spending.
• Objective/Task. Our goal is to achieve a 10 percent market share in the second year so we will
spend at 20 percent share of spending to achieve it. Some brands use an analysis that is formed
around achieving an objective. There is a body of research that indicates a correlation between
advertising investment and market share. To achieve a higher market share, the brand must
spend at a disproportionately higher rate than its current market share.
• Margin Utility. Our analysis shows that for every dollar spent on advertising we return an
incremental $1.50 in sales up to a point of $15 million, where it levels off. Many sophisticated
marketing organizations utilize multi-regression analysis to help them budget for advertising
based on historical evidence of marginal utility.

Once you have an advertising budget, the next task is to determine how best to allocate the dollars.
The allocation of advertising dollars has two key phases:

1. Allocation among different activities.

2. Allocation among various segments within each activity.

The allocation among different activities means how advertising dollars are divided between
production of advertising and the placement of advertising. Activities can also mean dividing the
budget among sponsorships, media, production, trade shows or events, Web site, and other
advertising items.
Within each activity, there are a myriad of segments that can be applied. For example, there are a
variety of media that can be chosen for a media plan. Advertising dollars can be allocated differently
by geography. Advertising can be allocated differently by timing or seasons. Advertising can be
allocated differently based on target market segmentation. Advertising can also be pegged to a certain
competitive situation.
Advertising budget allocation can take on many scenarios. How an advertising manager allocates
dollars greatly determines the success or failure of the advertising campaign.
In summary, budgeting is an essential advertising management task. To develop an advertising
budget requires the advertising manager to consider the economic foundation that underlies the entire
advertising and marketing process. There are a wide variety of methods to determine a budget, from
historical to sophisticated statistical models. Once an advertising budget is established, the
advertising manager must determine how best to allocate those resources. There are a variety of
factors in, and uses for, an advertising budget. Allocation of the advertising budget takes into account
advertising activities and combines those with various ways of segmenting the budget.
For more information on advertising budget management, see Chapter 10 in Jugenheimer and
Kelley’s Advertising Management textbook.
Case
12
Bosco Hot Sauce Company
ISSUE: Budget Allocation Analysis

The United States hot sauce market comprises a wide variety ofregional and national brands. The
total hot sauce market is pegged at $700 million. It is growing at a rate of 7 percent per year.
Regional consumption of hot sauce varies dramatically from the national average. Since hot sauce
is colored by regional tastes, the variations of the category can be very extreme.
The Bosco Hot Sauce Company management believes that these regional differences in hot sauce
category consumption could be utilized in allocating their advertising dollars. This would be
particularly true if the company were to promote the Bosco brand in line with market opportunities
and total category potential.
Statistics are given in Exhibit 12.1 for three important markets in which the Bosco Hot Sauce
Company is interested in gaining market share. The company plans on investing $1 million in
advertising in these three markets next year.
The former marketing manager of Bosco Hot Sauce had been given the assignment of maximizing
the effectiveness of the advertising budget. He had begun to work on the task but before he was
finished, he abruptly left the company. Now the marketing group is well behind in their planning for
the year.
You have just been brought in to manage this brand. One of your first tasks is to finish the analysis
that your predecessor had left. How do you tackle it?
QUESTIONS

1. How would you prioritize the markets based on the analysis?

2. Is there another way that you might analyze the markets to make an allocation decision?
3. Is there information missing from the analysis that would make it better? If so, what is it?
4. What questions doesn’t the analysis answer?

Exhibit 12.1
Bosco Hot Sauce
Case
13
Alpha Airlines
ISSUE: Budget Allocation Analysis

Jim Burns was the advertising manager of Alpha Airlines. He stared at the advertising budget sheet
prepared by the media department of his advertising agency, KFM. He was perplexed by the initial
pass at how to allocate the budget across his top revenue markets.
Alpha Airlines was positioned as a serious business airline. It had flights only to the top markets in
the United States. The goal of Alpha Airlines was to dominate these key markets in the country by
having the lowest fares, most flights, and best service. The strategy seemed to be working. Alpha
Airlines had been growing steadily since its inception. More established airlines had various
strengths in these markets but they typically lacked the strength in each of the top markets. This made
them vulnerable to Alpha Airlines.
Jim was told by management that he really needed to grow the Atlanta and Chicago markets. In
each of these markets, the current hub carrier was facing financial peril that might bankrupt them. As a
result, costs had been cut that had impacted the service level of each of these carriers. Research
showed that passengers of these airlines were looking for alternatives. Alpha Airlines was positioned
to be that alternative.
With this in mind, Jim scanned the advertising budget document prepared by KFM. The questions
and concerns that he had were as follows:

• He was concerned that he was spending the most advertising dollars in Los Angeles. In fact, he
was spending more there than in New York. He had been told by the KFM media team that Los
Angeles was a very expensive media market but he was concerned that he was overspending
the market.
• He also questioned the spending in Atlanta. Hartsfield, the Atlanta airport, was one of the
busiest in the world. It was already a strong market for Alpha Airlines, but the advertising
spending didn’t seem to reflect this.
• He also questioned the light spending in Chicago. Again, here was an opportunity market but
the advertising spending didn’t seem to reflect this. In fact, the spending in Los Angeles was
nearly twice that of Chicago, while Chicago was close on the heels of Los Angeles in terms of
revenue.

Exhibit 13.1
Alpha Airlines Advertising Budget
Markets # of TV HH (000) Alpha Airlines Revenue (000) Media Cost (Annual)(000)
New York 7,082.3 $215,000 $10,500
Los Angeles 5,318.0 $170,000 $12,300
Chicago 3,351.3 $145,000 $6,500
Boston 2,353.5 $76,000 $4,750
Dallas/Fort Worth 2,195.5 $44,000 $2,600
Washington, D.C. 2,169.3 $50,000 $3,500
Atlanta 1,971.2 $62,000 $3,100
Total 24,641.1 $762,000 $43,250

Jim had told KFM to develop media plans that were the same in all markets so that he could see the
impact of the spending. But, he had also told the agency to adjust markets based on his recent input
regarding Chicago and Atlanta, and to asterisk them if they were adjusted. Since the agency didn’t
have an asterisk by the markets, he assumed that they were all the same media plan.
Jim had a budget meeting with his management later that week to discuss how to properly allocate
the advertising media dollars by market. He knew that if he took this into the meeting, that it would
raise more questions than it answered.
He needed to have the agency develop some other budget scenarios. He wondered if he hadn’t
given them enough information or proper direction.
“I just keeping getting the same numbers back from the agency,” said Jim in frustration to his
advertising team.
“Don’t they get it?” he added. “Or is it something that I am not giving them,” he asked.
Jim called the agency media chief, Bob Alliante, to meet with him and sort it out. He needed a
cogent presentation for his management without any holes. As he prepared for his meeting with Mr.
Alliante, Jim began to make a list of all the information he needed. What would you put on the list?
QUESTIONS

1. Based on the advertising budget, how would you analyze the relationship between market
size, Alpha Airlines revenue, and media cost?
2. What does the current media budget by market tell you about the media cost in the market?
3. Is there an analysis that you can do to quantify the relationship between the media cost and
the market size?
4. What marketing information would help to make this media budget analysis better?
5. What advertising or media information would help to make this analysis more meaningful?
6. What competitive information would help put this analysis into better context?
7. What economic or other information would help add dimension to this analysis?
Case
14
Southern Rice
ISSUE: Advertising Spending

The Southern Rice Company is one of the country’s leading rice brands. The Southern Rice
Company’s distribution area is generally equivalent to the territory south of the Mason-Dixon Line
with some distribution into western states. The Southern Rice brand is the leading seller among
premium-priced brands of rice. The brand costs the consumer approximately 10 cents per pound more
than the other leading brands in the market and 20 cents per pound more than private label or store
brands.
For more than fifty years, the Southern Rice brand has based its entire marketing and advertising
strategy on the sale of a quality brand, which management states costs more due to the natural
harvesting technique that they use to cull their rice from the fields. The Southern Rice approach has
been a hit with consumers, since a large segment of the population in the southern states indicated that
they were willing to pay a bit more to get the type of quality that they enjoy in a rice brand
commodity. Price increases for rice in recent times have begun to impact Southern Rice’s ability to
continue to price its brand at a premium. Consumers have been less willing to pay more for rice as
overall food prices continue to increase.
The initial distribution for Southern Rice began in Atlanta where the company was able to obtain a
good distribution and acceptance within a short period of time. Management believed that this
success was largely due to the association that the brand had with white-tablecloth restaurants that
served the product. In fact, Southern Rice was seen as a part of the old southern gentile restaurant
scene in Atlanta. Southern Rice used its Atlanta strength to expand to other markets in the south.
Southern Rice was natural long grain rice and was slow-cooked. However, the overall market for
slow-cooking rice was dwindling as convenience products entered the picture. Southern Rice saw
that its next logical next step was to enter the instant rice market.
At the present time, instant rice is available in a wide variety of physical forms and compositions.
The most successful instant rice is made by National Rice, which has national distribution and a
strong advertising budget. Instant in a Second by Genfoods is also a strong competitor. Tennessee
Tom’s rice is another regional competitor and a family operated business just like Southern Rice.
Tennessee Tom’s is owned by a colorful character, Tom Thibidoux, who is featured in their
commercials.

Exhibit 14.1
Southern Rice Marketing Formula
2 × SOV =1 × SOM
Note: SOV = Share of Voice; SOM = Share of Market. Spend at least 2 times the category advertising spending to achieve one share
point by the second year.
Exhibit 14.2
Rice Consumption Trends (lbs. per HH per month)
Year Regular Rice Instant Rice
YTD—Current Year 2.70 2.39
Past Year 2.75 2.34
2 Years Ago 2.85 2.30
3 Years Ago 2.90 2.25
4 Years Ago 3.00 2.20
Note: Regular Rice equals 80¢ per lb. while Instant Rice equals $1.50 per lb.
Total: 110 million HH

Exhibit 14.3
Geographic Analysis
Area Natural Rice CDI Instant Rice CDI
New England 40 50
Metro New York 75 95
Middle Atlantic 110 120
East Central 65 70
West Central 90 85
Southeast 185 120
Southwest 125 135
Pacific 115 140
Note: CDI = Category Development Index.

Instant rice household consumption varies from region to region. A recent article stated that instant
rice represented 46 percent of K-Store overall rice sales, in contrast to its overall 30 percent share of
the rice category. Another trade release stated that nearly 40 percent of rice sales in the Publix’s
grocery chain was now instant rice. This was a big trend for Southern Rice since Publix’s was the
leading grocery chain in the South. K-Store was also important since it was the leading national
grocery chain.
Although there are some areas that are strong natural rice areas and weak instant rice areas, the
South is strong in all forms of rice consumption. This was a concern for Southern Rice since they did
not want to introduce an instant rice that might hurt their own natural rice brand.

Exhibit 14.4
Instant Rice Goal
Year % Instant Rice Share
First Year 5
Second Year 10
Third Year 13

Exhibit 14.5
National Market Share (in %)
Brand Regular Rice Instant Rice
Southern Rice* 20 —
National Rice 30 25
Instant in a Second — 30
Tennessee Tom’s* 5 5
Private Label 45 40
* Southern Rice has 35 percent share in the Southeast while Tennessee Tom’s has a 15 percent share in the Southeast.

There were significant differences in who purchased natural rice and instant rice. Natural rice was
purchased by large families and it had a distinctive ethnic bias. On the other hand, instant rice
attracted singles and small families, and had a more upscale consumer base than natural rice.
The bulk of instant rice advertising funds for the leading brands was used for television. The two
national brands, National Rice and Instant in a Second, used national television and some magazines.
Tennessee Tom’s used only spot television in the key southern markets. However, both the national
brands also used spot television in the South to add incremental advertising support in this key region.
The Southern Rice Company is planning on entering the instant rice market in a big way. The
markets that they plan on expanding into include Tampa/St. Petersburg, Charlotte, and Washington,
D.C. The plan is to obtain a 10 percent market share in sales in these markets within the next two
years.
To realize these objectives, Southern Rice management recognizes that it is necessary to spend a
substantial amount of advertising. But, they are unclear on how to determine what the appropriate
spending level should be.
As a guide to its first efforts in these markets, the company plans a test market program. Results
from this test are expected to be in by the end of next year. Southern Rice management expects to
launch their marketing program right after the test market results.
The key question for Southern Rice management continued to be the level of spending required to
make their market share goals. They turned to their advertising firm, Barkley and Peachtree, to help
them determine the number of markets and the level of spending that would be required.

Exhibit 14.6
Advertising Media Expenditures (past year current dollars, in millions)
 Your challenge at the Barkley and Peachtree advertising agency is to determine the advertising
spending for each of the two-year periods in the plan and to justify that spending level.
QUESTIONS

1. How would you approach determining the advertising spending levels?

2. What types of analysis would be the best methods for determining advertising spending
levels?
3. Should you consider developing a test market approach? If so, how would you construct a
test market scenario?
4. What methods would you consider to justify the spending?
5. What primary research would you consider to aid in determining the advertising spending
or the outcome of the advertising?
PART VI
 ADVERTISING MANAGEMENT: DEALING
WITH PEOPLE

CASE 15 IPORTAL MEDIA COMPANY

ISSUE: Employee/Supervisor Review

CASE 16 METROPOLITAN MEDIA COMPANY

ISSUE: Managing Upward

CASE 17 THE DAVIS GROUP

ISSUE: Hiring

CASE 18 JPT AGENCY

ISSUE: Personnel Conflict

Advertising is a business that deals with people. In fact, managers spend more than two-thirds of their
working time dealing with people and people issues.
There is an old saying from a Madison Avenue CEO that goes: “unlike most businesses, all of my
assets go up and down the elevator every day.” Talented people are the lifeblood of advertising.
People also account for the majority of costs for an advertising agency. Typically, 50 percent to 60
percent of the total advertising agency revenue is spent on employee salaries.
How to deal with people and get the most out of them becomes a central role for any manager
within the advertising business. One of the key areas that requires effective management is conflict
resolution. The advertising business is often rife with conflict. Unlike nearly any other industry,
advertising departments or advertising agencies have a wide variety of people and personalities. You
have artists, writers, producers, planners, negotiators, business strategists, and financial and
administrative personnel. Advertising reflects skill sets ranging from very visual and creative to very
business oriented. So, natural conflicts will arise. Advertising is also about taking risks. So, there is a
built-in set of conflicts over how much risk a client may take and how strong an advertising agency
may push a client to take a risk.
Obviously with such a diverse group of people and range of ages, mind-sets, and culture, there are
bound to be daily conflicts that require management attention.
It is then crucial that a manager have strong written and oral communication skills, not only to deal
with conflict but to set the tone and effectively communicate with a wide variety of people and
personalities. Seventy percent of an adult’s waking hours are spent communicating. So, the basics of
reading, speaking, and writing are paramount for a manager. However, the corresponding key skill for
any manager is to be able to effectively listen. An executive spends more than two-thirds of his or her
time just listening. Effective listening is a skill that sets one manager apart from another.
Applying these skill sets to daily advertising management requires patience and maturity. A
manager has power, and how he or she chooses to use that power is critical to the business. A
manager is involved in hiring, supervising, evaluating, promoting, and paying—all essential
personnel functions.
The manager must ensure that all employees understand what they should be doing and how they
will be evaluated. Evaluations can be an uncomfortable time for employees, so it is paramount that a
manager emphasizes how an evaluation can help develop an employee’s career, rather than making it
about rewards and punishments.
Managers must provide direction, encourage, motivate, and monitor the work of those who report
to them, much as a coach does. Coaching has been a metaphor for management. Managers who are
successful as coaches must believe in their people and recognize that employees want to contribute,
to work, to learn, to be recognized, and to succeed.
There are many theories about personnel management and management in general. However, there
is no single theory about how to manage an advertising agency or an advertising department. Since
advertising is an interdisciplinary endeavor, managers in the advertising field can pick and choose the
management techniques that fit their style or organization.
One classic management theory is MBO or Management by Objectives. This method is based on
setting realistic goals and then establishing action plans to meet them. It is a systematic approach to
management and can be effective for setting expectations for an employee. Another classic
management theory is TQM or Total Quality Management. TQM is usually associated with
manufacturing or production. However, it can be applied to any kind of process. Since advertising has
processes to start and complete work, TQM can help make these processes more productive.
These are two of many useful models in management. There are many more that an advertising
manager can choose from. It is important for an advertising manager to select what is relevant to his
or her situation and not just pick the “flavor of the day.” As managers read more on the topic of
management, they are sure to discover that some of the approaches actually contradict each other.
However, good managers should continue to be good students of management, striving to learn more
about how they can become strong leaders, more efficient managers, and more successful executives.
For more in-depth information regarding how to deal with people, please consult Chapters 11, 12,
and 13 in Jugenheimer and Kelley’s Advertising Management textbook.
Case
15
Iportal Media Company
ISSUE: Employee/Supervisor Review

Today is the day of a personnel review meeting between Melissa Olson and Billy Malan. Melissa is
Billy’s supervisor. In fact, Melissa had hired Billy in her group at Iportal Media Company two years
ago.
In this case, Melissa and Billy are entering the review with totally opposite viewpoints. The
following is each of their viewpoints of Billy’s performance.
MELISSA OLSON’S VIEWPOINT

I consider Billy Malan to be a very competent worker. His work, in general, is better than most of the
other workers at his level. I have given him appropriate raises and have done my best to reinforce his
good work.
In spite of his good work record, however, Billy has two very undesirable characteristics. I
haven’t said anything about them because I thought that they might be corrected naturally. I thought that
I could just live with them but now they seem to be getting worse. So, today, I plan to talk to Billy
about them.
The first thing I’m going to say to Billy is that he is terribly verbose. This affects not only his
writing, but also—particularly—his talking. It takes him twice as much time or space to say things as
it should. This is really aggravating because it takes up a lot of my time and it’s a reflection on me
when my superiors see his work. His coworkers have even begun to joke about his verbosity behind
his back. It is really getting out of hand and is having an impact on others’ perceptions of my
management.
The second item that I’m going to discuss is that Billy is very quick, and finishes his work typically
before anyone else. This in and of itself isn’t bad, but once he finishes a project, he usually starts
clowning around with other employees and many times tells “off-color” jokes. I have tolerated his
joking behavior because he does very good work but recently I have had some employees come to me
about his behavior. One of them asked, “Can’t you keep that clown busy?” Again, Billy’s image is
getting in the way of his work. And it is beginning to hurt my image as well.
BILLY MALAN’S VIEWPOINT

I have worked for Melissa Olson for the past two years. I like the work and do my job very well.
Melissa seems to appreciate my work because I have gotten good raises the past two years. I usually
finish my work before anyone else and I never have to redo any of it.
If there is one pet peeve that I have, it is that people don’t know how to communicate. For one
thing, people including Melissa, tend to give me insufficient information and details when they speak
and write. I pride myself in taking the extra time necessary to say what I mean clearly and precisely. I
don’t boil it down to a “sound bite” like everyone else. I know that most people don’t get it the first
time, so I like to reinforce my messages by carefully repeating my explanations. Although Melissa
hasn’t told me directly, I think that she appreciates and respects the quality of my work.
That being said, I do sense a change in the business climate. Melissa used to be open and relaxed
with me. She even liked my jokes. Now I sense some tension with her. She doesn’t take as much time
with our group as she had before. She tends to avoid us.
One of the things I really like about this job and the company is that the people do like one another.
We enjoy socializing as well as working. After all, it sure makes work a lot better when you can relax
and be yourself with everyone. I like to joke around with the other guys, and they seem to like my
sense of humor. With Melissa tensing up, I have gone out of my way to tell more jokes to loosen
everyone up.
I have aspirations to move up in the company and I hope that Melissa can help me. She is well
regarded in the company and I think that she can help me grow and develop. I am looking forward to
meeting with her today and discussing how I can take the next step.
THE MEETING

Billy came into Melissa’s office for the meeting with a real sense of accomplishment. He was ready
to take his career to the next level. Melissa greeted Billy with some sense of dread. How did she tell
Billy that he had a couple of serious flaws?
QUESTIONS

1. Who do you think has the best viewpoint, Melissa or Billy?

2. Why do you think that they are so far apart on their views?
3. What could each of them do to gain perspective?
4. Who’s responsible for making it right?
5. What should they have done before so that they wouldn’t be in this situation now?
6. How do you think that the meeting will go?
7. What do you feel will be the outcome of the meeting?
Case
16
Metropolitan Media Company
ISSUE: Managing Upward

Liz Melton was so excited when she joined Metropolitan Media corporation right out of college. This
was a dream come true for Liz. Liz had graduated with an advertising degree from a large state
university. Through her studies, she had become intrigued with the rapidly changing media landscape
and wanted to be a part of it.
Metropolitan Media was a New York-based media conglomerate that owned magazines, cable
properties, and online properties. It was one of the first media companies to recognize that there was
a digital revolution in the media world. As a result, they were migrating many of their offline media
properties to online properties.
Liz was an assistant in the magazine unit working for New Woman magazine, one of the largest
women’s service magazines in the country. Her boss was a 55-year-old woman, Donna Carbone. Ms.
Carbone had spent the past 30 years at Metropolitan Media where she rose from a secretarial
position to become a senior vice president and publisher of New Woman. Ms. Carbone prided herself
on the fact that she was the first woman in Metropolitan Media to become an officer of the company.
She was a hard-charging and very blunt woman, who got things done but didn’t make a lot of friends
along the way.
“She is a real old-school woman. Be careful in dealing with her. She is particularly hard on young
women starting out. She feels they should be toughened up,” said one of Liz’s coworkers.
Liz took it all in. She was anxious to set a good career course and get promoted within this exciting
company. Her first task was to understand how to best utilize blogs to extend the reach of the
magazine into the online world.
Liz threw herself into the project, working 12-hour days for four consecutive weeks. When she
wrote a report on her work, Ms. Carbone barely gave her any feedback. Later Liz learned that Ms.
Carbone took Liz’s report to her management claiming full credit for it.
Ms. Carbone appointed Liz to chair a project committee. This was a great honor. It was very rare
that an assistant be assigned to chair such a committee. Liz was thrilled. However, after the
committee’s work was completed, Liz learned that its recommendations and actions were not what
Ms. Carbone wanted. Ms. Carbone had failed to tell her or the committee about a management change
that would impact the project. As a result, the outcome was not meeting the new objectives. Not only
was the project a bust, but Ms. Carbone was heard making caustic remarks about her and the
committee.
“Maybe a few failures will take the wind out of her sails,” said Ms. Carbone to another publisher.
When Liz started her job, she was promised a six-month review where she would be considered
for a step up in her job responsibilities and a raise. She had approached Ms. Carbone about the
review for weeks with no response. Now, it was three months past the review period and Liz was
getting very frustrated.
Liz liked her coworkers and the work itself but she was continually frustrated by Ms. Carbone. Liz
wondered if others in the management knew of her good work since Ms. Carbone constantly took
credit for it. Conversely, Liz was concerned that anytime Ms. Carbone didn’t give proper direction,
she blamed Liz and others in the department. Finally, Liz felt that she was being treated unfairly
regarding her raise. She had been working sixty-hour workweeks since she got to Metropolitan Media
and was living on slave wages. She was ready for a bit more money so that she could take advantage
of the Manhattan nightlife.
Liz felt that she was at a crossroads with Ms. Carbone and Metropolitan Media. She had to take
some action but what?
QUESTIONS

1. Do you feel that Liz should confront her boss, Ms. Carbone?
2. Do you feel that Liz should seek counsel from the human resource group regarding Ms.
Carbone?
3. Do you feel that Liz should go around Ms. Carbone and discuss these issues with a high-
ranking officer in the company?
4. Should Liz just wait it out and give it three more months until she has been in the position
for a year?
Case
17
The Davis Group
ISSUE: Hiring

Jim Davis pondered the two résumés that he had before him. This was a crucial hire for his
advertising agency, The Davis Group. Two weeks ago, his top account director had left for another
job at a competing advertising agency. If that wasn’t enough, the largest account that he was working
on, Proctor and Bramble, had said that unless Jim filled the job with a very strong candidate, they
would put their account up for review.
Jim quickly hired a recruiter to get qualified candidates for the position. P&B was a tough account
and required someone with at least ten years of experience. Due to the nature of the account, Jim also
needed someone who had a wide range of experience from package goods to retail. While P&B was
a large package goods company, they did a lot of retail promotions. The brands that Jim’s agency
handled also required that the candidate have experience marketing to women as well as to kids.
The biggest challenge filling the account director position was the candidate’s character. The
Proctor and Bramble Company had a very formal culture that required you to be highly learned as
well as very conservative. It was always a challenge for his creative people to deal with the brand
managers of P&B. Jim’s creative folks were very liberal and quite artistic, which flew directly in the
face of the account’s culture. His prior account director was very good at bridging the cultural gap
between P&B and the creative group. He needed this candidate to have the same capabilities.
Jim needed to act quickly since P&B would not let much time pass before they made a decision to
review their account. Jim couldn’t risk that happening. He hoped that either Richard Putnam or
Samuel Anderson Cartwright had what it took to replace his account director. Plus he hoped that they
would not only fit with P&B but that they would fit his laid-back culture as well.
He had interviewed both of the men on the phone and Richard was by far the best interview. He
was glib and had a great sense of humor. Samuel on the other hand was much plainer spoken but
seemed like a nice guy.
Jim didn’t have a lot of time to make the decision so based on his phone interview and the résumés
at hand, he was ready to make the call. Which candidate do you think he should pick?

Exhibit 17.1
Résumé: Richard Putnam

OVERVIEW
Eighteen years of excellent experience as an account executive, account supervisor, and account
coordinator with several outstanding advertising agencies. Record of excellence and achievement in
advertising, public relations, and general business communication.

WORK EXPERIENCE
• Platen, Randell, and Plodkin advertising agency, New Rochelle, New York
Supervisor for all aspects of advertising campaigns, with primary responsibility for success of the
programs. Responsible for account supervision on numerous accounts in consumer packaged goods
and consumer services. Handled plans for several outstanding advertising and promotional
campaigns. Produced first annotated campaign planbook for the agency. Received accolades from
many clients for superior quality of work.

• Creative Advertising Consultants, Inc., Binghamton, New York

Directed a staff of more than a dozen people, including copywriters, artists, media planners,
merchandisers. Participated in all client meetings and planning sessions. Helped establish
experimental marketing effort for new product. Oversaw promotional effort for extraordinary new
automotive service firm. Selected personnel incentive programs. Organized original seasonal sales
program.

• Rivers, Simon, and Larson advertising, Milwaukee, Wisconsin

Planned and administered entire advertising program for many clients’ accounts. Worked with
outstanding regional marketers and advertisers. Created brochures and sales bulletins. Handled all
trade show arrangements and business meeting plans. Assisted top management with plans, strategies,
and tactics. Credited with “Best of Show” award.

• Hammacher, Herpel, Mangell, Dover Associates, Mankato, Minnesota

Section supervisor and account manager. Responsible for creative and media budget of more than half
a million dollars. Handled by important local manufacturer. Acted as liaison for staff coordination
group meetings. In charge of records for plans board.

• Wilson/Locke/Inc., advertising agency, Des Moines, Iowa

Wrote promotional releases. Worked closely with creative staff. Involved in fine client relationship.
Honored for outstanding effort.

EDUCATION
• Graduate of Coe College, Cedar Rapids, Iowa. Bachelor’s degree in liberal arts. 1978.
• Candidate for master’s degree in business, University of Wisconsin, Milwaukee. Writing a thesis on
“Advertising Management in Computer Age.”
• Honors: Iowa State scholarship, $1,500 awarded in competitive exam.
• Dean’s List.
• Kappa Mu honorary.

PROFESSIONAL EDUCATION
• Attended two-week training seminar, Glendale, California. Worked with distributors and
wholesalers in research and development program for new and improved products.
• Graphic training course.
• Management planning seminar, New York City.
• Dale Carnegie Institute.

PERSONAL INFORMATION
Born in Waterloo, Iowa. Attended Dubuque, Iowa, public schools.
Divorced; one daughter.
Hobbies: reading, travel, crafts.
Current address: 1414 Northern Avenue, Apt. 34C, New Rochelle, New York 14664. Telephone 914–
322–5588

REFERENCES
Best personal and business references are available.

Exhibit 17.2
Résumé: Samuel Anderson Cartwright

Business Address: Business Address: Gothan, Rainer Marketing Consultants, Inc.

147 Broadway, Suite 3314
New York, New York 10012
Telephone (212) 596–9383, ext. 21

Home Address: Apartment 433, Lewis Towers

1414 East 46th Street
New York, New York

Career Objective: Advertising managerial position, either as an advertising agency account

executive, or as a brand manager in the marketing or advertising department of
a major corporation.

Experience: • Marketing consultant with Gothan, Rainer Marketing Consultants, New

York City, March 2005-present.
Involved in the planning and execution of advertising and marketing pro
grams for Ideal Toy Company, Burlington Industries, and SCM
Corporation.
• Advertising manager, Butler Brothers discount store chain, Trenton, New
Jersey, February 2001-March 2005.
Responsible for budgeting, media selection, special promotion planning, and
marketing coordination for seventeen large discount stores in Pennsylvania,
New York, Maryland, Delaware, and New Jersey.
• Account coordinator, Blandell & Rupee advertising agency, Pittsburgh,
Pennsylvania, September 1990-February 2001.
Supervised accounts for small local retail store, for regional dog food
manufacturer, for fast-food chain operation and for agricultural custom
fertilizing service.
• Account trainee and copywriter, Blandell & Rupee advertising agency,
Pittsburgh, Pennsylvania, July 1989-September 1989.
Wrote copy and created promotional campaigns and advertisements for
various accounts, including a ski shop, a small automotive parts supplier,
and an industrial packaging distributor.

Education: B.S. degree in business, Indiana State University, Indiana, Pennsylvania, June
1989.
Personal: Born December 7, 1968, in Cleveland, Ohio. Reared in Akron, Ohio, and
Youngstown, Ohio. Attended public schools. Married: two children, wife
employed in own public relations firm in New York City. Hobbies include
boating, golf, tennis, bridge, antique collecting and refinishing. Member of New
York Advertising Club; regional vice president of United Way campaign, 1996-
present.

References: • Mr. William Rainer; executive vice president; Gothan, Rainer Marketing
Consultants (address above).
• Mr. Henderson Butler; Butler Brothers Stores, Inc., P.O. Box 14, Trenton,
New Jersey 08354.
• Additional references available on request.
QUESTIONS

1. Do you think that Jim Davis has enough information to make a decision?
2. Based on the resumes, which candidate appears the best qualified for the position?
3. What are the differences between the two candidates?
4. Is there anything about Richard Putnam’s resume that would raise any red flags in terms of
hiring?
5. Is there anything about Samuel Anderson Cartwright’s background that would raise any red
flags in terms of hiring?
Case
18
JPT Agency
ISSUE: Personnel Conflict

You knew that the general manager’s job in the Houston office of JPT was dangerous when you took
it. Phil Silverman was the creative director of the office. While he was one of the most creative guys
on the planet, he was also one of the most volatile.
For every great idea he had, he had many more that ignored the basic marketing strategies
established by the client. It seemed that the more off strategy he was, the more stubborn he became
about his ideas.
Yesterday, he clashed directly with the president and marketing director of one of your most
important clients. Today you’ve called him into your office to discuss it. You explain to him that you
were embarrassed about his performance, particularly in light of the fact that the creative was
completely off strategy.
Phil said that he didn’t appreciate you taking the client’s side in front of the entire agency account
group and creative team. Phil went on to say, “If you’re going to undercut me like that then my value is
nil.”
Phil went on to say that he thought that the client had the wrong strategy and that his creative would
be on strategy if they would listen to his reasoning.
“The next time we present creative, I don’t want any one else in the room with the client but me,”
said Phil dramatically.
He stormed out of your office saying, “If you don’t let me present the creative that I want, then I’m
through here.”
How do you handle this situation?
QUESTION

1. Should you have seen the creative prior to having it being shown to the client?
2. Should you have Phil resign?
3. Should you discuss Phil’s importance to the account with the client before you make a
decision?
4. Should you discuss Phil’s performance with others in the office?
5. If Phil leaves, how should you handle it with the rest of the staff or the clients?
PART VII
ADVERTISING MANAGEMENT DECISIONS

CASE 19 BARRANDS AGENCY

ISSUE: Advertising Spokesperson

CASE 20 ZELLER GROUP

ISSUE: Client Trade-off

CASE 21 BOSTON LIFE INSURANCE

ISSUE: Advertising Strategy

Advertising managers make decisions all the time. Some decisions can be reached after a period of
study—say, in long-range planning; others have to be made on the spot. However, whatever the
decision, some form of strategic thinking is involved.
In strategic thinking, one must consider both the implementation of the decision as well as of its
impact on future plans. In other words, you must make a decision that can be implemented and that
lies within the overall framework of what you are trying to do in the long run. This sounds rather
simple, but obstacles along the way can make it more difficult.
Sometimes decisions can be based on statistical data. But, more often than not, managers are asked
to make decisions with incomplete data. Since advertising is very fast paced, decisions must be made
quickly, and that may mean little or no data are available at the time.
Advertising management decisions can be made by an individual, but many times they are made in
a group setting. Group dynamics tend to make decisions that are more conservative than those made
by a single decision maker. However, group dynamics can be influenced by a dominant personality,
which may derail the best decision for one that best fits that person’s agenda.
There are four types of advertising decisions: optimal (the best decision), beneficial (better than
harm), neutral (no benefit and no harm, or equal benefits/equal harm), and harmful (more harm than
good).
Although it may seem intuitive to try to make the optimal decision, doing so often requires lots of
time and information. Most marketing and media decisions are made at only a .4 level of confidence.
That means, for every decision you make, there is about a 60 percent probability of its not being
optimal and only a 40 percent confidence that you are correct. So, how does business operate in such
a vague world?
One way of dealing with decisions is to set up a decision tree. Decision trees can become complex
algorithms. However, they can be as simple as answering the following questions:

1. What are the options? (Actions might we take)

2. What are the relevant uncertainties? (Events that might occur)
3. What are the possible outcomes? (Consequences or actions)
 4. What is important to the decision maker? (Criteria for the manager)

This type of input can form a statistical input if you apply various weights to the steps and the
outcomes. It can become as complex or as simple as you care to make it.
Practical decision making is no more complex than listing the advantages and disadvantages of the
decision on a piece of paper and assigning values to each one.
Advertising management decisions are a part of life. Involving a group in the decision-making
process has both pros and cons. There are a variety of decision techniques, such as decision trees and
statistical decision analysis that can help make sound decisions. All decisions must serve two
masters. They must be practical enough to be implemented and solid enough to fit within the overall
framework of the long-term strategic plan.
For more information on advertising management decisions, consult Chapters 14 and 15 of
Jugenheimer and Kelley’s Advertising Management textbook.
Case
19
Barrands Agency
ISSUE: Advertising Spokesperson

Advertising managers make decisions all the time. Some decisions can be reached after a period of
study—say, in long-range planning; others have to be made on the spot. However, whatever the
decision, some form of strategic thinking is involved.
In strategic thinking, one must consider both the implementation of the decision as well as of its
impact on future plans. In other words, you must make a decision that can be implemented and that
lies within the overall framework of what you are trying to do in the long run. This sounds rather
simple, but obstacles along the way can make it more difficult.
Sometimes decisions can be based on statistical data. But, more often than not, managers are asked
to make decisions with incomplete data. Since advertising is very fast paced, decisions must be made
quickly, and that may mean little or no data are available at the time.
Advertising management decisions can be made by an individual, but many times they are made in
a group setting. Group dynamics tend to make decisions that are more conservative than those made
by a single decision maker. However, group dynamics can be influenced by a dominant personality,
which may derail the best decision for one that best fits that person’s agenda.
There are four types of advertising decisions: optimal (the best decision), beneficial (better than
harm), neutral (no benefit and no harm, or equal benefits/equal harm), and harmful (more harm than
good).
Although it may seem intuitive to try to make the optimal decision, doing so often requires lots of
time and information. Most marketing and media decisions are made at only a .4 level of confidence.
That means, for every decision you make, there is about a 60 percent probability of its not being
optimal and only a 40 percent confidence that you are correct. So, how does business operate in such
a vague world?
One way of dealing with decisions is to set up a decision tree. Decision trees can become complex
algorithms. However, they can be as simple as answering the following questions:

• What are the options? (Actions might we take)

• What are the relevant uncertainties? (Events that might occur)
• What are the possible outcomes? (Consequences or actions)
• What is important to the decision maker? (Criteria for the manager)

This type of input can form a statistical input if you apply various weights to the steps and the
outcomes. It can become as complex or as simple as you care to make it.
Practical decision making is no more complex than listing the advantages and disadvantages of the
decision on a piece of paper and assigning values to each one.
Advertising management decisions are a part of life. Involving a group in the decision-making
process has both pros and cons. There are a variety of decision techniques, such as decision trees and
statistical decision analysis that can help make sound decisions. All decisions must serve two
masters. They must be practical enough to be implemented and solid enough to fit within the overall
framework of the long-term strategic plan.
For more information on advertising management decisions, consult Chapters 14 and 15 of
Jugenheimer and Kelley’s Advertising Management textbook.
Lisa Blunt, account director of the Barrands Agency, couldn’t believe her eyes when she surfed the
Internet for the news headlines this morning. She quickly turned on the television to see if she could
confirm it. Yes, it was true.
Britney Spice had been caught with a bag of marijuana in her car after she was stopped for erratic
driving at 3 o’clock that morning in Los Angeles. This wasn’t the first time that Britney had been in
trouble with the law. She was a known kleptomaniac and had taken a wig and four coats last month
from a dress shop in Beverly Hills. She even was caught shoplifting a cigarette lighter from a
convenience store just two weeks ago. But, she had never been caught with drugs.
Britney Spice was the spokesperson for one of the Barrands Agency clients, Glam Girl, a new
beauty product line-up, that was taking the teenage market by storm. Britney Spice was the perfect
spokesperson since she had a number one hit single record and was in a variety of television sitcoms
watched by teenage girls. Britney had cultivated that “clean-cut teen idol” image that fit with what
Glam Girl was all about.
Tim Barrands, founder and president of the Barrands Agency, came into Lisa’s office and said,
“Lisa, we need to call our lawyers and begin to cancel Britney’s contract with Glam Girl and alert the
media team to immediately cancel our ads. We need to be proactive on this issue before the client
calls.”
Just after Tim left her office, Bobbi Hazeltine, the creative director, came into Lisa’s office and
said, “Thank God that girl got caught with some pot. I hated working with her and her agent. Frankly, I
am the one that needed drugs to tolerate her.”
After hearing Tim and Bobbi, Lisa was figuring out how to break this to the client when Judi
Mitchell, the head of the company’s public relations division, strode into Lisa’s office and said,
“Lisa, this is the break we were looking for. Glam Girls needs to be a bit more ‘bad girl’ and this is
our break. And if we stay with Britney while she is down, we can be there as she rises out of rehab.
You know, they say that any publicity is good publicity. Well, we can get millions of dollars of
publicity for Glam Girls out this.”
Now Lisa’s head was reeling. She needed a clear strategy to deal with this situation and call the
client with a point of view, but it wasn’t clear what she should do.
“Lisa, Jim Walters of Glam Girl is on the phone and wants to talk to you as soon as possible,” said
Lisa’s assistant Beverly.
Beverly added, “Jim really sounds mad. You better call him now.”
Lisa picked up the phone and began to dial Jim’s number. “I hope that what I say is right,” she
thought.
QUESTIONS

1. What should Lisa counsel her client to do?

2. What is the most ethical course of action?
3. Is the ethical course of action the best business strategy?
4. Is this an advertising issue or a legal issue or both?
5. How would you change a spokesperson without damaging the brand?
Case
20
Zeller Group
ISSUE: Client Trade-off

Betsy Zeller, president of Zeller Group, sat in her office pondering the call she had just received from
an agency search consultant. The consultant had said that the client she represented, Universal
Healthcare Systems, was very interested in having her agency pitch their business. The client was
familiar with the agency’s work and thought that they would be a good fit. However, there was one
catch. Intrepid Healthcare, a small hospital chain that Betsy had handled for twenty years, would be a
conflict. If they proceeded with the review for Universal Healthcare Systems, they would have to
resign Intrepid Healthcare.
Intrepid Healthcare was the second account the Zeller Group had landed. In fact, Betsy had handled
the account personally for the initial eight years that Intrepid was at the agency. Intrepid was never
very large, but they did do nice work. The past two years, Zeller Group was awarded a Health Effie,
one of the highest awards for healthcare advertising. However, Intrepid was now one of the smallest
accounts at the agency and was never going to be big.
Universal Healthcare Systems, on the other hand, was one of the top three healthcare systems in the
country. They were in thirty states and had a huge advertising budget. Their entire account would
represent nearly 50 percent of the Zeller Group’s total revenue. They were a big-time client and
would represent a big step forward for the Zeller Group if the agency was fortunate enough to win the
account. However, Universal Healthcare Systems was not without its own baggage. They had a track
record of changing agencies every three years. They had also had a series of accounting scandals that
had greatly impacted their stock price. It was not known if their current CEO would survive this
scandal or if the board of directors would replace him with a new CEO. While the agency search
consultant told Betsy that all of this would have no impact on the Chief Marketing Officer and the
advertising budget, Betsy had to wonder if this was really true.
Betsy took out a pencil and on a big pad began to write the possible decisions that she would have
to make.

1. Pass on Universal Healthcare Systems and retain Intrepid. In fact, she could use this to
further cement the Intrepid relationship.
2. Resign Intrepid and pitch Universal in hopes of winning the account. Of course, if she lost,
then the agency would have lost both accounts.
3. Discuss the situation with Intrepid and ask permission to pitch the Universal account and
not resign Intrepid unless they won the account.
4. Don’t discuss this with Intrepid and pitch the account and then make the decision once she
learned if she won or lost.

All of these decisions had possible pros and cons. Pitching Universal Healthcare Systems was a
high-risk but high-reward situation. There weren’t many accounts this size that the Zeller Group had
pitched. Betsy knew that most agencies would jump at the chance to pitch such a large piece of
business. However, Betsy prided herself on her integrity as well as her business acumen. She thought,
“This decision is really a test of both of these. I hope that I make the right decision.”
QUESTIONS

1. What decision do you think that Betsy Zeller should make?

2. Are there any other decision alternatives that she should consider?
3. Is there other information that she needs to make this decision?
4. Should she consult with other members of the agency before making this decision?
5. Is this totally a business decision or are there any ethical issues to consider?
Case
21
Boston Life Insurance
ISSUE: Advertising Strategy

Boston Life Insurance was founded in 1890 as one of the first life insurance companies in the United
States. As with most insurance companies, Boston Life had diversified into a financial services
company through a variety of acquisitions. Boston Life had an extensive marketing sales force
throughout the United States.
Boston Life was the third largest life insurance company, offering traditional life insurance policies
as well as annuity products and other financial instruments. The top insurance company was Peoples
Insurance followed closely by Mutual Insurance. Metro Insurance was the fourth largest insurance
company in the category but they were far down the line from the top three in terms of market share.
BOSTON LIFE ADVERTISING STRATEGY

Boston Life management believed that the company had evolved over the years from one that
provided only life insurance to one that provided for the entire family’s financial foundation.
According to a recent study, Boston Life customers found the brand to be:

• Responsive to their needs.

• Good to do business with.
• A moral and ethical company.
• Solid and stable.

However, even though Boston Life had some positive attributes, Carl Morgan, the advertising
director of Boston Life, wanted to take it up a notch. His goals for the company and the agency were
for Boston Life to be positioned as the leader in the category and to increase its awareness among a
younger population of potential families. Carl was concerned that Boston Life was missing out on the
younger end of the market by not marketing to them effectively and by not aggressively using the sales
force to call on this audience.

Exhibit 21.1
Top-of-Mind Awareness (in %)
Company Wave 1 Wave 2 Wave 3 Wave 4
Boston 17 21 18 17
Mutual 8 11 13 15
Metro 13 12 11 11
Peoples 25 24 25 24
Source: Boston Life Insurance
Sample: 1,000 respondents per wave.

Exhibit 21.2
Top-of-Mind Awareness by Key Demographics
Demographics Boston Wave 4 (%)
Gender Men 24
Women 15
Age 18–34 9
35–54 19
55+ 26
Education Less than college 17
College + 19
HH Income Less than $50K 15
 $50K to $100K 18
$100K+ 20
Overall 17
Source: Boston Life Insurance
Sample = 1,000

Carl was also not convinced that the current advertising campaign, “Special Moments for Special
Families,” was hitting the mark. He felt that it was nice but that it wasn’t truly a breakthrough
campaign or that it really differentiated Boston Life from its competitors.
ADVERTISING TRACKING RESEARCH

Jim Walters, the account director of Peabody Agency, began to survey the recent results of the
advertising research for Boston Life. He had taken many calls from Carl Morgan regarding the Boston
Life campaign. Jim knew that Carl wanted more from the campaign.
However, Jim also knew that every time that Peabody Agency had suggested a change in strategy,
the CEO of Boston Life had turned it down. He was very conservative and wanted to stay the course
with the advertising.
As Jim looked over the advertising research, he saw things that did not make him happy. The first
thing that he reviewed was the top-of-mind awareness numbers from a national survey that Boston
Life did with over one thousand consumers. The study had surveyed both customers and noncustomers
to understand where they stood in the market in terms of overall awareness and advertising awareness
compared to the key competitors.

Exhibit 21.3
Boston Creative Testing
Diagnostics Boston Score Financial Services Norms
Recall of ad 20 21
Playback of key message 10 15
Likeability of ad 35 22
Positive image 31 28
Unique to advertiser 15 18

The top-of-mind awareness numbers for Boston Life continued to go down. They had peaked in
Wave 2 of the study but now they were actually back to where they had started in Wave 1. What was
even more disturbing was that Mutual Life Insurance was beginning to gain momentum. They were
closing in on Boston Life. The top brand, Peoples, continued to plug away as number one.
When Jim turned the page of the study to the demographic breakdown of the awareness numbers,
his heart dropped further. He started to see where the Boston Life advertising campaign was having
an impact and where it was sorely lacking.
It was obvious from this chart that Boston Life was being effective with older, more upscale men.
However, they were woefully underdeveloped with the younger end of the family set and with
women.
“No wonder Carl Morgan is concerned with our advertising campaign,” thought Jim.
CREATIVE TESTING RESEARCH

Jim Walters wasted no time in calling his team together after the tracking study research was in. He
said, “We must determine if our media plan or our message or both are on track.” Jim felt that this
was a critical time for the agency to do something on the account. So, he commissioned creative
testing research that the agency paid for at its own expense.
The creative testing research was done with Boston Life ads put into the advertising medium with
other ads. This was done for Boston Life with both television and print advertising. For the television
ads, they were placed within the context of a 30-minute television program and in commercial pods
with other ads. Consumers were then asked to recall ads in the program and then replayed the Boston
Life ad for specific feedback. A similar test was done with newspapers where a consumer was asked
to read the newspaper and then asked about the ads within it.
The scores of the consumer responses were then compared against other financial services
companies that had also done this type of creative testing. These were called normative values. Jim
Walters was anxious to understand if the Boston Life ads were better than the normative values.

Exhibit 21.4
Competitive Media Spending (millions of dollars)
Company Year 1 Year 2 Year 3
Boston 15.0 18.0 21.0
Mutual 6.0 8.0 9.0
Metro 8.0 8.0 8.0
Peoples 20.0 22.0 24.0

What Jim found was a mixed bag. The overall recall of the Boston Life ad was right on norm but
consumers didn’t play back the key message of the commercial. Consumers really liked the ads yet
they didn’t feel that they were unique to Boston Life.
Jim wasn’t sure what to do with the results. The campaign was a series of warm family moments so
he wasn’t surprised if consumers liked them. “Who doesn’t like cuddly kids and their pets,” he
thought. What bothered Jim was the diagnostics on uniqueness. That was what Carl Morgan of Boston
Life had been harping about. Yet the CEO of Boston Life loved the ads. “I feel so good when I see
them,” said the CEO.
MEDIA ANALYSIS

The bigger news in analyzing the advertising strategy for Boston Life was in the competitive media
analysis. Boston Life had steadily been increasing its advertising expenditures for the past three
years. It was closing in on the category leader, Peoples Insurance.
As Jim reviewed the media expenditure information, he also saw that Mutual Life had increased
their spending, yet they were still spending less than half of Boston Life’s total.
“We have been spending more, yet we seem to be getting nowhere in terms of top-of-mind
awareness,” thought Jim. Jim knew that this chart alone was a condemnation of an ineffective
advertising program. He mused, “I don’t think too many clients are willing to spend more and get the
same thing.”
As Jim dove deeper into the information, he began to see where differences emerged in the way the
media dollars were allocated by each of the brands. His media group had provided a breakdown of
the four insurance companies and the major media in which they invested their advertising dollars.
Boston Life had had the same media mix for years. They had been very print-focused. This was due
to the Boston Life’s CEO, who felt that a product like life insurance should have a medium that is
tangible.
“Print conveys that we are a real company. Plus it is great to send those ads to our sales force,”
commented the Boston Life CEO. The past few years, Boston Life had developed a series of
television ads that were placed in golf and tennis programming. Boston Life also sponsored a series
of yacht races that began in Boston Harbor. The Boston Life CEO was an avid sportsman and he
enjoyed being associated with yachting, golf, and tennis.

Exhibit 21.5
Media Mix Analysis (in %)
Medium Boston Mutual Metro Peoples
Network TV/Cable 30 10 70
National/Spot Radio 60
Magazine 30 40
Newspaper 30
Out-of-Home 30
Sponsorships 10 40 20
Online 10 10 10
Total 100 100 100 100

Jim found it interesting that Peoples Insurance spent the majority of their dollars on network
television and cable television. You expected that type of media plan from the category leader. Mutual
Insurance took a different tack. They have developed a funny character that had a recognizable voice.
As a result, they put their money into radio and did selective markets with outdoor.
ADVERTISING DECISIONS

Jim felt that he had all the information he needed to help craft a point of view on Boston Life. He
wondered how he should put it together and what he should actually reveal to the client. This was
going to be a difficult meeting, since much of the advertising strategy had been directed by the Boston
Life CEO. Yet, Jim knew that the agency was ultimately responsible for the advertising program.
Jim also knew that Carl Morgan wanted results and would not be satisfied unless something was
changed to make the program more effective. Jim saw issues with both the creative and the media—
but which one was really driving the lower awareness numbers? Jim wondered if wholesale changes
were needed or if he should just redirect some dollars into different media. He was particularly
troubled by the program in light of the lack of response of younger families.
Jim had a week to prepare for a meeting where he would address both Carl Morgan and the Boston
Life CEO with some answers. He started to work that afternoon on the agency point of view.
QUESTIONS

1. What do you think the agency point of view should be regarding the Boston Life
advertising?
2. What changes would you recommend to reach younger families?
3. Do you think that the media plan should be significantly changed? If so, what changes
would you make?
4. Do you think that the creative should be changed?
5. How do you think Jim Walters should handle the issue of creative testing with the client?
What should he tell him, if anything?
6. What should Carl Morgan, as a client, demand from the agency?
7. Knowing the Boston Life CEO’s involvement, how much should Carl Morgan hold the
agency responsible for the advertising results?
PART VIII
ADVERTISING MANAGEMENT
ENVIRONMENT

CASE 22 ZOOMRA MOTORCYCLES

ISSUE: Media Vendor Conflict

CASE 23 GLIB MEDIA

ISSUE: Sales Incentives Ethics

CASE 24 TEXSIZE OIL

ISSUE: SEC Code Violation
Advertising management decisions are made within a larger context. That environmental context
refers to both outside and personal influences. Outside influences are public policy that forms the
foundation for our legal principles and regulations. Personal influences include the ethics of both
yourself and your organization.
To be an effective manager, you must be aware of public policy. You must know which way the
government is leaning when it comes to regulation, and also have a thorough understanding of the
actual laws, rules, and regulations that are established by the federal, state, or local communities
where you may work.
Advertising is impacted by a variety of regulators on a federal, state, and sometimes local level.
The federal government regulates advertising through the media. The Federal Communications
Commission, or FCC, is the federal legislative body that oversees media and helps govern what can
be said in the media.
National media will demand that an advertiser have substantiation for any product claims that may
be made in advertising. These claims may need substantiation from other federal governing agencies,
such as the Federal Drug Administration for pharmaceutical advertising. Understanding what claims
can be made and what is deemed appropriate or not appropriate to communicate is a crucial part of
any advertising manager’s role.
There is nothing more frustrating or costly than developing an advertising campaign and not being
able to air it due to legal constraints. The majority of advertisers use legal counsel to vet their
messages prior to airing them to avoid these types of situations.
Any form of communication is subject to copyright, trademark, and logo protection. Again, gaining
copyright or trademark protection is an important part of any advertising campaign, since intellectual
property should be protected as a competitive advantage.
Advertising managers must deal with legal issues. But, they must also deal with moral issues as
well. There is always the joke that advertising ethics is an oxymoron. However, personal and
organizational ethics in advertising are central to the survival of your career and the reputation of
your company.
 As a manager, you will be faced with personnel issues that will be ethical problems. For example,
do you turn a blind eye when you know someone is taking more than his or her share of supplies? Or
do you turn in someone you know is freelancing on the side but using agency resources to do these
projects? Or what do you do when a client asks you to hire his son or daughter? All of these examples
are ethical situations.
As a manager, you will also be exposed to confidential information. If you work for an advertising
agency, you may be asked to sign a nondisclosure agreement, which means that you can be legally
liable for telling someone confidential information about that company. You may know if a company
is launching a new product, or if it is in trouble long before others know of this. This type of
information can be valuable to others. It can be tempting to use this information for personal gain.
You will also be in a position where you select vendors to work with. These can be production
companies, media outlets, consultants, and research companies, among others. Depending upon their
financial or ethical situation, companies may offer you incentives to do business with them. This
raises ethical issues for both you and your organization.
The organization has a number of ethical considerations. It must do what is right for the company,
the stockholders, the employees, and the clients and vendors. But, all organizations have a social
contract. That is, they have a social responsibility. Good businesses should have a social conscience.
They should want to enhance the community they live in and make the industry they operate in a better
one.
Due to the public influence that advertising can wield, advertisers, advertising agencies, and media
outlets give their time and money to promoting social causes. National advertising campaigns to
promote more responsible drinking and driving, and to stop drug use, are all examples of working for
the greater good of society.
In summary, advertising managers must understand the public policy environment and operate in a
manner that is not only legally correct but morally right. Business ethics rise from personal ethics.
Individuals and organizations have a social responsibility. The manager has a crucial role in
establishing a firm’s ethical and social responsibility standards.
For more information regarding advertising management environment, please consult Chapters 16
and 17 in Jugenheimer and Kelley’s Advertising Management textbook.
Case
22
Zoomra Motorcycles
ISSUE: Media Vendor Conflict

Jim Fuller is a media representative extraordinaire. He is knowledgeable about his product and your
client, plus he is persistent without being a pest. To some in your agency, he can be annoying. This is
particularly true of the account people and some of the junior media people. However, since you are
the media director, you understand that much of Jim’s compensation is based on how much he sells.
“You would be aggressive too if your income depended upon how much you sold,” you told one of
the media supervisors.
In recent weeks, your agency has been finalizing the coming year’s advertising program for your
key account, Zoomra Motorcycles. Zoomra had been positioned as a motorcycle for weekend
enthusiasts but now the company was making a big push into the youth market. This was based on the
success of their recent X-Games motocross wins.
This new target is a big departure from the past three years. However, Zoomra’s advertising
manager, his boss, the vice president of advertising, and the chief marketing officer are all on board
with the new strategy. This new strategy has required a new media plan and your Zoomra media team
have drafted a plan that consists of some teen publications as well as a strong online presence to
support the effort. Some of the prior year’s media were retained to maintain some baseline support to
the suburban audience but it was reduced by more than 50 percent to fund the new target effort.
One of the changes to the plan involved dropping the publications that Jim Fuller represented in
favor of new publications that offered better coverage of the new communications objective. Your
media team reviewed the changes to the media schedule but the media team did not go into detail over
the elimination of many of the prior year’s commitments. But, the client did review the schedule and
raised no objections in the meeting. You had also reviewed the plan and approved of the changes but
you were aware that Jim Fuller would fight for his publications to be on the schedule. When you
asked your media team about any issues with the client, they said that there were none.
In the preceding three years, Fuller’s publications had carried an intensive schedule of color
spreads for Zoomra. Your spending in his publications totaled nearly $1 million, which likely netted
him a commission well into the six figures.
When Fuller learned of the change from your media department, he came in to see you. He argued
that the proposed action was a mistake, and that other media should be substituted to fund the new
program and not his.
“My publications have been the backbone of this plan for years and now you are cutting them all
out. It just doesn’t make any sense,” Jim Fuller argued.
He went on to say that he didn’t believe that Zoomra’s advertising manager or CMO had grasped
the significance of the changes to the media plan. You listened to him patiently and explained the
reasons for the changes based on your media team’s thinking.
“Jim, I know that this means a lot of money to you but it is the right thing to do for the brand,” you
told him.
 Jim Fuller stormed out of your office and said that he did not intend to lose this business and that
you would hear from him soon.
A week later, Jim Fuller calls you and requests an appointment. When he arrives in your office, he
drops a bombshell on you.
“I’ve just come from a session with Zoomra management where I went over my publications story
and how it would be a mistake to kill our program. They agree with me that it would be a colossal
mistake to drop us from their media schedule next year. You will be getting a call from them to
reinstate us at last year’s levels and to rework the media plan to accommodate us.”
Jim Fuller added, “I told Zoomra that I wanted to let you know about the decision promptly and
they said that I could tell you it was a firm decision. Since we are in, I would be happy to help you
rebuild the media schedule so that the total dollars doesn’t exceed the budget.”
You looked at Jim Fuller with a stunned look on your face. You struggled to determine what you
should do. You needed to take some action but what?
QUESTIONS

1. What should you tell Jim Fuller?

2. What should you have done to prevent this situation from happening in the first
place?
3. Should you call in your media team to confront Jim?
4. Should you call the client and confirm Jim’s stance?
5. Should you ask the client to reconsider if he has added Jim’s publications to the
schedule?
Case
23
Glib Media
ISSUE: Sales Incentives Ethics

Bob Harrell was the national sales manager of Glib Media. Glib Media was a new medium built
around celebrity profiles and interviews. It began as an online chat room and now was a true medium
with over one million unique visitors every month. Glib had expanded beyond just online to also offer
a monthly magazine. It was now a multi-media company with a national audience that rivaled many
well-known media companies.
Bob Harrell started the sales effort by himself in a tiny office in a warehouse in San Francisco.
That was where the company was founded. Initially formed with only ten employees, Glib now
employed nearly one hundred people who worked on the Web site and the magazine. Bob was
challenged to quickly build a national sales team. He had a couple of choices. One was to hire and
train a sales force himself. The alternative was to hire established media rep firms to represent his
property to advertisers and agencies.
After much debate within the brick walls of Glib Media, Bob persuaded his management to
establish a commission deal with existing media rep companies as a means of quickly ramping up a
national sales arm. Bob said that this was the quickest way to set things into motion. Existing media
rep firms already had the advertising contacts that would take months for Glib Media to establish, and
they all had track records that were easy to check. It seemed like the right path for a rapidly growing
media company to expand their sales.
After interviewing and hiring media representatives in New York, Chicago, Atlanta, Dallas, and
Los Angeles, Bob had a national sales meeting with his new sales force team. He told them that Glib
Media was going to offer them a sliding scale commission based on how much they sold. The first
million of sales would be at 20 percent commission, the second million would be at 30 percent
commission, and anything above three million dollars would be at a 40 percent commission. The only
stipulation that Bob gave each of the sales teams was that he would discount his rates by only 20
percent.
“I have found that Glib Media has a good franchise and that we don’t need to deeply discount our
rates to attract advertisers. I am not going to play the deep discount game. That is why I have
developed the rate card to be competitive without deeply discounting our product,” said Bob to the
sales team.
Bob was satisfied with his decision to build his sales force through the use of media rep firms. He
immediately saw the results as his Chicago and Atlanta sales teams each pulled in more than a million
dollars worth of media sales within the first two weeks of being assigned the business.
In week three, Bob got a call from the president of the media rep firm in New York, Saul Libowitz.
Saul asked Bob for a special discount of 25 percent so that he could close a deal.
Saul said, “Look, everyone in New York discounts media at least 25 percent. I can have a $10
million deal with Mega Media, the largest media buying firm in the world, if you will give a bit on
the discount.”
Bob said that if he allowed Saul to discount by more than 20 percent, then he would have to let the
rest of the sales teams do it as well.
“I have already turned down deals in Dallas and Los Angeles that involved more than 20 percent
discounts. How can I let you do it and not let the other guys do it,” Bob asked Saul.
“Well, you don’t have to offer it to everybody. You can offer it just to us. We will sell more
advertising in New York than the rest of the country combined. So, let us do what we need to do,”
demanded Saul.
Saul added, “While you are at it, we need a higher commission rate than the rest of the firms since
we are probably going to be somewhere in the $40 million level of sales. Just let us know what you
want to do and let’s start making some money.”
Bob hung up the phone and sighed. So, this is what his management had warned him about
regarding the downside of not building his own sales force. He is too far in now to turn back. He
thought, “What should I do?”
QUESTIONS

1. Should Bob cut a special deal with Saul?

2. Is it ethical to have different deals with the various media rep firms?
3. Should Bob amend his stance on his media discount structure for all the firms?
4. Should Bob ask Saul if he can speak to the Mega Media agency and persuade them to
accept a lower discount structure on their media buy?
5. Should Bob look for other media rep firms to represent him in New York and fire Saul?
Case
24
Texsize Oil
ISSUE: SEC Code Violation

In your job as chief communications officer for Texsize Oil, you are constantly exposed to highly
confidential material. As a corporate officer, you are bound by a fiduciary duty to not disclose any
confidential information to anyone or to act on that information to better yourself.
The latest meeting involved a strategy discussion of how to get more deeply involved with the area
of green energy. With the national push to reduce America’s dependence on oil, plus the burgeoning
green movement, Texsize Oil had been on the hunt for companies to acquire to help it diversify its
revenue streams.
During that meeting, Jim Hand, the CEO, presented an acquisition opportunity that was mind-
boggling. Mr. Hand’s acquisition team had found a microbiology company, Green Steam, which had
developed a microbe that would turn water into an instant energy form.
“Why, this will not only revolutionize the oil business but it will impact all energy forms as we
know them today,” said Mr. Hand. Mr. Hand turned to you and said, “Talk about an advertising
campaign. This is better than Edison launching the first lightbulb.”
Everyone in the room was stunned by the huge effect this would have on the company. This was the
type of breakthrough that everyone in the world was looking for. The impact would be staggering—
not only on business but on a wide variety of social problems such as third world energy needs.
As you left the meeting, the CFO, Bob Freeman, took you aside and said, “I am going to call my
stockbroker and buy as much Teledyne stock along with our own Texsize stock that I can afford.” Mr.
Freeman went on to say that Teledyne was a company that made water filters. They were the only
company that Green Steam could use to get their microbes into the water system. Since Teledyne was
not the acquisition stock, Mr. Freeman said that it would not violate any SEC rules. “Plus,” he said,
“you should definitely buy our own stock.”
“Buying our stock and Teledyne is a real ‘no brainier,’” he added.
You thanked Bob for his advice and walked down the hall, thinking about what he had said. On the
one hand, you could really use the money. You had two children ready to go to college and the bills
were going to be high. On the other hand, you weren’t sure if this was legal or not. It just didn’t feel
right. However, Bob Freeman was the CFO, so surely he would know if something of this magnitude
was legal or not. All you did know was that if you did make a move to buy stock, it would have to be
now.
QUESTIONS

1. Should you buy the Texsize Oil stock and that of Teledyne?
2. Is it legal or ethical to buy either or both of these companies’ stocks?
3. Should you discuss this with an attorney?
4. Should you discuss Bob Freeman’s suggestion with legal counsel?
5. Does Mr. Freeman’s suggestion constitute “financial advice” or is it just a comment?
PART IX
MANAGING THE FUTURE OF
ADVERTISING

CASE 25 ARENDS AGENCY

Issue: Agency Structure

CASE 26 LAWRENCEVILLE DAILY NEWS

Issue: Forecasting

CASE 27 THOMSON MEDIA

Issue: FCC Media Ownership Impact

Nobody can predict the future with perfect accuracy. However, advertising is all about understanding
trends and getting aligned with them. In fact, the advertising function is one that most companies look
to for a better understanding of the future.
While nobody can predict the specifics of the future, there are key areas and trends that are
constantly changing. It is up to the advertising manager not only to stay abreast of these areas and
trends but to put them into practice.
The areas that are under constant change in the advertising business are as follows:

• Consumer trends and behaviors.

• Media alternatives.
• Creative techniques and units.
• Research methods.
• Management practices and organization.

Consumer trends and behaviors are constantly evolving. Knowing what they are and how to
research them is crucial to developing an advertising campaign. An advertising manager should
devote significant time and attention to understanding what his or her customers think now and what
trends might impact those beliefs in the future.
In the 1970s, the average media consideration set for a media plan was less than thirty outlets.
Today, a media planner has over six hundred considerations for a plan. The number and type of media
grow every day. This expansion of media also leads to new creative techniques and new creative
units. All of these media outlets and creative techniques and units require consideration and some
form of evaluation. Developing a solid grasp of media analysis and creative research is fundamental
to good advertising.
Research methods are constantly evolving to measure the effectiveness of advertising. With the
increase of behavioral data, advertisers are increasingly more able to provide specific return on
investment metrics to senior management. Research is also being developed to better measure the
emotional response to advertising through techniques like facial coding and neurological studies.
With new technologies coming of age, advertising organizations have greatly changed in how they
work and how they are organized. There has never been only one way to organize or work, and now
new theories and methods are constantly being explored.
From a high-level viewpoint, there are five broad trends impacting the advertising business.

1. Convergence: the digitalization of mass media into similar streams of data and information.
2. Interactivity: the ability of the audience to work with the media in a two-way dialogue.
3. Engagement: the involvement of a customer so that extended attention and responses can be
achieved.
4. Commoditization: the increased similarity of topics, products, and content.
5. Cadence: the increased pace of change in modern life.

These five trends are greatly impacting the key areas that we discussed above: media, creative,
research, management. The consumer is the one who drives all the trends. What this means is that the
rules of advertising are changing and changing quickly. This is both an opportunity and a threat for
managing advertising decisions.
Advertising is already a fast-paced industry. And every day the pace goes even faster. Managers
must handle more responsibilities, including new challenges and shifts away from past practices and
measurements. Those who can keep up will benefit as the advertising industry increases its demands
for capable management.
For more information regarding managing the future of advertising, please refer to Chapters 18 and
19 in Jugenheimer and Kelley’s Advertising Management text.
Case
25
Arends Agency
ISSUE: Agency Structure

John Arends was planning a company retreat to develop a long-range plan for his advertising agency.
As he looked out of his Chicago office onto Lake Michigan, he felt like a small boat on a great lake.
He was the second-generation owner of the agency. His father had passed it on to him a few years
earlier.
He fantasized about the days when his father was in charge of the agency and how much easier it
seemed. The world had traditional media. Clients were cultivated based on friendships and
employees were grateful to have a good job that was fun. Today, it just seemed that the world was in
an uproar.
He had never experienced as much change as he had within the past few years. It seemed that every
day a new medium or method of communication was developed. It made his head swim trying to keep
up with it all. Clients were fickle and very volatile. It used to be that the client side of the business
was very stable and that agencies were the ones that experienced a lot of turnover. Now, it seemed as
if clients turned over quicker than the agency. He had witnessed his largest account change CMO’s
three times within the past two years. Just when he got one relationship under his belt, he had to start
over again.
To get a handle on all of this, he told his senior leadership team that they would have a retreat and
reflect on the trends that were going on in the industry and how it might impact the agency.
ARENDS AGENCY

John’s father, Dale, started the Arends Agency in 1950, after coming home from World War II. He had
been a technical writer in the service and thought that there was a market for a company that
understood technical selling. In a city known for big league consumer brand expertise, Dale believed
that by going against the grain, he would stand out.
The agency, which began in a humble, abandoned warehouse, grew to be a strong business-to-
business (B to B) agency. At its peak in 1990, the agency billed $60 million and had eighty
employees. During the late 1990s and early 2000s, the Arends Agency began to fall on hard times.
The business that they had cultivated, traditional manufacturing and other industrial companies, was
on the wane. John’s father was reluctant to invest in other services and in technology to keep the
business relevant to today’s world. As a result, the agency held its current business but hadn’t won
any significant new business in the past few years.

Exhibit 25.1
Arends Agency Profile, 1990 vs. Today
Key facts 1990 Today
Billings ($ millions) 60.0 45.0
# of employees 75 40
% B to B 100% 75%
Note: B to B = Business to Business

Exhibit 25.2
Key Accounts Today
Account Industry
Simon Industries Wire for cement
Canadian Lumber Pulp and paper products
Black & Decker Consumer tools
AZ Rock Floor tiles (industrial)
Berwanger Commercial glass

John took over the agency two years ago. He saw that there was a need to invest in new resources
as well as new technology. He also thought that it might be a good idea to expand the client base, and
grow from a strictly business-to-business agency to one that had some consumer goods that were
related to the businesses that the agency understood. For example, Arends worked for Simon
Industries, the largest maker of wire for construction projects, as well as Canadian Lumber, one of the
largest pulp and paper mills in the country. John used his building supply knowledge to pitch Black
and Decker tools and he landed a small woodworking assignment. He hoped to do more of this, but he
also knew that he needed to draft a course for the agency based on key trends in the industry.
INDUSTRY TRENDS

John began gathering information on industry trends that might help him and his team with their
planning session. He took at look at where the industry was in terms of revenue, where that revenue
was going, and which media outlets seemed to be benefiting from it.
The U.S. advertising market always seemed to go up. However, as he looked at the numbers from
the chart, he began to think that the days of double-digit growth were gone. “I imagine that the only
way to experience that double-digit growth is to move to a country like India or China,” he thought.
Even though the U.S. advertising market was growing at a modest rate, it was still a huge market and
represented nearly 50 percent of all the advertising spending in the world.

Exhibit 25.3
U.S. Advertising Forecasts Advertising Expenditures (millions $)
Year $
2002 149,756
E2007 180,695
E2008 188,027
E2009 193,687
Note: E = Estimated

Exhibit 25.4 Marketers Media Buying Expectations (three-year forecast)

He also read that the big agency networks were diversifying well beyond advertising. In fact, he
read that advertising spending accounts for less than half the $1 trillion marketing communications
industry. Advertising is just one of many components in the mix. He saw that most of the advertising
companies were focusing much attention on higher growth areas such as interactive media, media
planning and buying, public relations, direct marketing, and customer relations management.
The changing industry environment was very much evident in the makeup of the advertising media.
John was shocked to see that spending on the Internet was already larger than that for outdoor. In
fact, the Internet spending was scheduled to double from 2002 to 2009. By the year 2009, the Internet
spending on advertising would approach that of the consumer magazine industry. This was just
staggering to him.
He also saw that business-to-business magazine advertising was not growing at all. As a
percentage of the total advertising spending, it was actually decreasing in importance. The other
startling fact was that all these other media, such as mobile and alternative media, were gaining a lot
of steam. It was a lot to absorb. The proliferation of new technologies such as Internet, mobile
phones, wireless games, iPods, and digital video recorders was making it a challenge to keep abreast
of the industry.
DECISIONS FOR THE ARENDS AGENCY

As John prepared for his off-site meeting, his head was swimming with thoughts. He had a lot of
decisions to make on where to take the agency. He began to write out the key discussion items for the
meeting. This is what he sketched out as an agenda for discussion.
1. Should we continue to be a B to B agency or should we broaden our scope?
2. What services should we consider adding to the agency to strengthen the offering?
3. If we change, how should we do it so that we don’t implode?
These were difficult decisions. He also knew that there would be more questions as he went
through his notes. He hoped that the retreat would result in clear direction for the agency. “What a
changing world,” he thought and then turned out the light.
QUESTIONS

1. Do you think that John has enough information to make these decisions? If not, what else do
you think that he needs to consider?
2. How would you analyze the Arends agency? What seems to be its strengths and
weaknesses?
3. Based on the information in the case, what do you feel are the opportunities and threats
facing the agency?
4. What would you like to know about the personnel of the Arends agency?
5. What would you like to know about their clients?
Case
26
Lawrenceville Daily News
ISSUE: Forecasting

Dale Greendale is the advertising director for the Lawrenceville Daily News. Lawrenceville is a
Midwestern college town located more than two hundred miles from any major metropolitan area. As
a result, Lawrenceville has been a bit isolated from many large metropolitan pressures.
The Lawrenceville Daily News is a 43,000-circulation newspaper published seven days a week. It
continues to be a thriving newspaper despite the challenges to the industry from the Internet. In fact,
the Lawrenceville Daily News has added circulation in each of the past five years, while the industry
has been steadily losing ground.
Despite its stellar record, there are signs of trouble on the horizon. About ten years ago, advertising
contributed 82 percent of the newspaper’s total revenue. This has steadily eroded and now represents
only 68 percent of total revenue.
Newspaper advertising revenue has been increasing but not as fast as other income sources. The
Internet version of the paper has been successful as well and is drawing support, particularly for
those advertisers who are targeting the university student population. The subscription costs for both
the paper and the online product have increased so this has also added revenue to the company. In
fact, during the past fiscal year, newspaper advertising revenue was up slightly at 3 percent,
circulation revenue was up by 6 percent, and online revenue was up 16 percent. All of this was good
news and well ahead of the industry.
However, even though revenue has been increasing, it has not kept pace with operating expenses.
There are a number of issues that were very perplexing for Dale and his management.
• The actual cost for newsprint and ink was going up tremendously. Due to a paper shortage,
newsprint had nearly doubled over the past six years. Every time they printed the paper, it cost
them more and more.
• The Lawrenceville Daily News had developed a staff for the newspaper and a staff for the
online version of the newspaper. They had separate advertising departments and editorial and
production departments. It seemed that neither the newspaper staff nor the online staff wanted
to mix with each other. Not only were they separated by delivery method, they were miles apart
in terms of philosophy.
• Healthcare coverage was a big expense. Lawrenceville Daily News was a family-owned
business. In fact, Dale’s uncle, Earl Greendale, was the publisher. Dale knew from
conversations with Earl that they had one of the best healthcare programs in the country but the
costs were going through the roof. Earl had told Dale that he was very concerned that he would
have to cut employee benefits to continue to fund the operation.

Exhibit 26.1
Lawrenceville Daily News Revenue Sources
Item Total $(000) % Total % Increase vs. Year Ago
Newspaper Advertising 34,000 68 3
Online Advertising 8,500 17 16
Circulation (both online and print) 7,500 15 6
Total 50,000 100 6

Exhibit 26.2
Lawrenceville Daily News Operating Expenses, Cost vs. Year Ago (in %)
Item % Increase vs. Year Ago
Operational
Newsprint/Ink 16
Press Room 7
Composing 6
IT Bandwidth 10
IT General Expenses 12
Circulation Expenses 10
Marketing Expenses 10
Building 3
Personnel
Advertising Sales 11
Editorial 20
Interactive Production 18
Employee Benefits 15
Note: IT = Information Technology

The last subscription rate increase took effect about fourteen months ago. The single-copy price
was raised as was the online subscription price. Dale began to see that they were reaching a ceiling
on pricing of both the newspaper and online products. Circulation was growing but only because
Lawrenceville’s population was growing at a rate of 6 percent a year. However, once the rate
increase had taken effect, Dale saw that circulation was growing at only 2 percent a year. The online
product, which had been growing at a double-digit rate, was now growing only about 5 percent.
Not only did they increase the subscription rate to the consumer, they increased the rates for the
advertisers as well within the same time frame. A rate increase of 6 percent was passed on to the
advertisers for both the print and the online products. It accounted for a lot of the growth in total
revenue but Dale was worried that all they were doing was increasing costs for their current
customers. All of these rate hikes are not attracting new customers to our product even though we are
in a growth market.
Dale was asked by his uncle Earl to develop a plan to meet this challenge. As Earl told him, “You
can either raise the bridge or lower the water.” That was Earl’s way of saying that you either had to
bring in more revenue or cut some costs. Dale replied, “It sounds simple when you put it like that.”
But, Dale knew that it wasn’t so simple. Every area was very complex and by impacting one of the
areas, there was a ripple effect throughout the organization.
Time was of the essence, so Dale began to draft a plan for the future.
QUESTIONS

1. What should Dale’s plan contain?

2. Do you think that Dale should tackle costs first and then growth or do it the other way
around?
3. What changes do you think would have the greatest long-term impact on the business?
4. Should Dale consult with other companies before he does his plan?
5. What other items should Dale consider before he does his plan?
Case
27
Thomson Media
ISSUE: FCC Media Ownership Impact

Jim Thomson, CEO of Thomson Media, felt that he had got the ball rolling. His family was the
majority owner of Thomson Media, now one of the top media conglomerates in the United States.
Mr. Thomson had been pressured to consider the sale of Thomson Media to a real-estate mogul,
Herbert Zellman. However, Mr. Zellman was not interested in the company unless the Federal
Communications Commission (FCC) showed some signs of loosening its restrictions on market-level
ownership of multiple media properties.
In the past six months, Mr. Thomson had lobbied the FCC to ease its restrictions so that they could
sell their company to Mr. Zellman. Mr. Thomson felt that he was pushing the FCC to make some
significant changes. He had personally established a rapport with the head of the FCC, Kevin Brown.
He had made countless trips to Washington, D.C., to lobby on behalf of loosening the restrictions.
The announcement in the local paper’s business section that day was as follows: “After years of
debate, the head of the Federal Communications Commission proposed a relatively modest change in
media-ownership rules that appeared tailored to ensure the completion of the Thomson Media deal
with real-estate magnate, Herbert Zellman.”
The article went on to say that Kevin Brown, the head of the FCC, wants to allow a company to
own both one newspaper and a radio or television station in the top 20 media markets—subject to
certain conditions. The proposal fell short of scrapping the thirty-two-year-old ban on cross-media
ownership. Plus even this small change was sure to trigger further discussion within the five-member
commission.
The proposal was welcome news for Thomson Media, which owns newspapers and television
stations in four markets and has waivers from the ban. The four markets of Chicago, Los Angeles,
Miami, and New York are among the largest in the country. If the commission approves Mr. Brown’s
plan, a major obstacle would be removed to the multibillion deal with Mr. Zellman, who would
otherwise have to get the waivers renewed. This was not a likely scenario.
Only in Roanoke, Virginia, where Thomson Media owns the Roanoke Gazette newspaper and two
television stations, is there a potential problem. If Mr. Brown’s proposal is adopted, Thomson Media
would have to apply for a waiver or sell assets in that market.
Under Mr. Brown’s proposal, there would have to be at least eight other “media voices” in that
market, including newspapers and major commercial television stations, and the television station
couldn’t be one of the four largest channels in the market.
The Thomson Media Company met all of these criteria in the four large markets where it owns both
newspapers and television stations. Unfortunately, the television stations in Roanoke were the top two
in the market so they didn’t meet the criteria in this smaller market.
While Mr. Thomson was pleased that some action had been taken by the FCC, he wasn’t totally
satisfied with the outcome. He wanted to put more pressure on the FCC to totally expand the
ownership so that he would have no roadblocks in selling the company. He released a statement to the
press saying, “Thomson Media would seek an expansion of cross-ownership relief within the next
few weeks.”
A spokesperson for Mr. Zellman declined to comment on the FCC proceedings but a person close
to him said that Mr. Zellman was eager to get the Thomson Media deal done by the end of the year
and would be pleased if the FCC gave in on the top Thomson Media markets. Also, if the deal isn’t
closed by the end of the year, Mr. Zellman would have to pay a fee to help Thomson Media with their
taxes.
Mr. Brown’s plan didn’t go exactly as many people expected, but Mr. Brown felt that it was
necessary to begin with some progress rather than try for significant reforms that may or may not be
approved by the committee. Even with this reform, he knew that he was being scrutinized due to the
Thomson Media situation.
Mr. Brown released a statement saying that his plan wasn’t “directly related to any particular
sale.” He went on to say that the rule changes that he proposed would preserve the vitality of
newspapers by allowing them to share their operational costs across multiple media platforms.
Still, certain members of Congress were not ready for these reforms. They felt that they hurt the
public by consolidating media voices. One public interest group, Freedom of the Press, indicated that
his group and others would challenge the ruling in court if it passed.
Mr. Thomson knew that there was some pressure on Mr. Zellman to close out the deal, but he also
knew that unless Mr. Zellman felt certain that the FCC would deliver Brown’s plan that there would
be no deal.
Mr. Thomson called a meeting of the board. He said, “We have got Kevin Brown on our side even
though he didn’t go all the way for us. Now we need to make sure that the rest of the committee votes
for this and that we don’t have outside congressional or political distractions. Let’s develop a plan to
get it done now.”
QUESTIONS

1. What should Mr. Thomson plan be?

2. What methods do you think that Mr. Thomson should take to ensure that the FCC approves
Mr. Brown’s plan?
3. Do you feel that Mr. Brown was acting on the best interest of the country with his proposal?
4. If you were Mr. Zellman, would you commit to buying Thomson Media based on the current
FCC proposal?
PART X
MANAGING YOURSELF

CASE 28 STATE UNIVERSITY

Issue: Advertising Instruction Ethics

CASE 29 KMF AGENCY

ISSUE: Ethical Issue of When to Change Jobs

CASE 30 GOTHAM MEDIA

Issue: New Job Responsibilities

Most advertising managers are so busy managing either people, processes, or the advertising product
that they rarely stop to think about how best they should work and what they are working toward. You
are only as good as you make yourself. There are keys to becoming successful in the advertising
business.
The largest key to success is to properly manage time. Time is your most important asset. We all
have the same amount of time: 168 hours a week. But some persons get much more accomplished than
others during this time.
Time management is especially important in advertising, because time is all you have to sell. We
know that you are really selling ideas, plans, campaigns, and counsel, but they all involve time. How
you use your time determines the success or failure of the organization and the advertising product.
Most people waste as much as 80 percent of their time. The top five timewasters for mangers are:

1. Doing work beneath your capabilities.

2. Tolerating too many interruptions.
3. Handling trivial assignments while delaying the big project.
4. Working without a plan.
5. Saying “yes” too much.

The key to gaining control over your time is to have a plan, properly delegate responsibility,
schedule meetings and also quiet time, and constantly take in feedback on what works and what
doesn’t.
There are many time management systems and techniques used in management today. Explore what
works for you. You will need to learn to multitask. The advertising business demands that you work
quickly and on multiple projects at once. This may seem daunting at first, but advertising managers all
develop personal systems to cope with the steady steam of decisions that need to be made.
If you can manage an advertising campaign or an advertising department or an advertising agency,
you should also be able to manage your own career. Think of yourself as a brand or a product. Are
you gaining position in the marketplace or just holding your own? What is your vision for your brand?
Does the reality of what you are doing right now help you achieve that vision?
Your career is like a product. You need to promise a benefit and have some unique characteristics
that make people think of you and prefer you. Hopefully, you will build enough brand assets that
people will be willing to pay a premium price for your service. After all, you don’t want to be the
Wal-Mart of the advertising business, do you?
While an employer may help train you to do specific tasks, do not expect anyone else to help
manage your career. You may find mentors along the way that take an interest in you but at the end of
the day, where you go is largely up to you. So, plot a course and constantly revisit your goals to see if
you are making progress.
Most of us have specific criteria for success. It may be to make a certain salary, buy a new house,
travel extensively, or retire when you are forty. Most goals revolve around money. However, we
caution you to not measure your career success solely on money.
Sure, money is important. However, many things in life are not material. Managing your career is
just one part of managing to live a successful life. So, when you evaluate your own career success,
take into account such things as work ethic, your habits, and your influence on other people. And don’t
forget your personal life, your relationships, and how other people think of you.
For more information on managing yourself, please refer to Chapters 20 and 21 in the Jugenheimer
and Kelley’s Advertising Management textbook.
Case
28
State University
ISSUE: Advertising Instruction Ethics

Dr. Edward Johnson had never resolved his personal dilemma about teaching advertising. Dr.
Johnson was the head of the advertising program at a large state university. He had grown the
program from a few courses in the School of Communications to an entire Department of Advertising.
Throughout his teaching, he had always told a story that was very positive about the role of
advertising in the economy, how much fun it was as a profession, and how there were career
opportunities in it for those who wanted to pursue it aggressively.
Students flocked to the advertising program. They found it to be a fascinating area. They enjoyed
hearing about the strategies behind familiar advertising campaigns and debated the virtues of
advertising to children and other societal issues concerning paid communications. For the most part,
students left the initial class in advertising, “Survey of Advertising,” with most of their stereotypes in
tact. These included the ideas that advertising was a glamorous field and that it had a positive impact
on society as a general rule.
Dr. Johnson was a great teacher and had such a positive attitude that he attracted many students to
the “Survey of Advertising” class. It was one of the most popular classes on campus. The latest
figures showed that this class (split into three sections) alone attracted over six hundred students.
More than 90 percent of these students went on to declare themselves advertising majors. More
advertising majors led to more interdepartmental budget clout since student credit hours translated to
revenue for the school. This then led to better faculty salaries and more resources for the Advertising
Department. All of this was a positive for Dr. Johnson and the School of Communications itself.
However, Dr. Johnson knew that there were other aspects of advertising that he didn’t play up. It
wasn’t that he ignored them; it was just that he didn’t emphasize them.
The first was that there was a lot of criticism of advertising and the role it played in our society.
One critic said, “National advertising serves primarily to artificially differentiate parity products
and actually inhibits existing and potential competition.”
Another critic said that advertising has too much sway in media and cited a number of cases where
advertisers helped to shape editorial policies at various media companies.
Dr. Johnson did touch upon some of this material in passing but it was more in the vein of “look at
what some of the critics have to say about advertising.” Usually, he dismissed it with the saying:
“Advertising encourages—not discourages—competition.”
The second area was that advertising did not provide a working environment of positive growth.
Many advertising professionals said that advertising is a business and that it was not a place for the
meek.
Justin Marks, an agency principal said, “The only real reason to go into advertising is that you
enjoy solving problems and making money. We aren’t serving humanity here; we are trying to help
clients sell their goods.”
 Anthropologist Bobbi Freeman, who had spent ten years in an agency as an account planner said,
“If you are kind, gentle, ethical, or religious then advertising is not the place for you. Advertising
requires strong defenses, toughness, nerves of steel, and the willingness to exploit oneself and
others.”
Jennifer Stevens, a former copywriter said, “This is not a game about developing witty and catchy
headlines. The advertising business is about cold, hard-nosed businessmen who happen to have your
number.”
Dr. Johnson wanted to present a fair and balanced viewpoint of the advertising business but he also
knew that if he presented all this material on the ups and downs of the business that he couldn’t get to
other material that the students found fun and exciting. Plus the tone of the class would become more
somber and Dr. Johnson thought that the more negative the viewpoint, the more likely it was that
students would not pursue advertising as a major.
The final item that Dr. Johnson didn’t bring up was the statistics on where advertising majors went
after college. Dr. Johnson did have some star former students who had made their mark in the creative
departments of large New York and Chicago advertising agencies. In fact, Dr. Johnson brought in
many of his former pupils to sing the praises of advertising and to foster the dream of a creative
career.
Most students who came into advertising had dreams of being the next great copywriter or creative
director at a Madison Avenue agency. However, the truth was that less than 10 percent of advertising
majors went on to be copywriters in any agency or company. Less than 2 percent went on to be
copywriters at top 100 agencies in the country. The majority of advertising majors went into other
areas of advertising such as media or account management. However, the majority of advertising
majors eventually ended up in areas outside of advertising such as retail management or sales.
Dr. Johnson never shared these statistics with the students. He did not hide that it was difficult to
make it in the advertising business but he did not publish any statistics on the success rate even though
he kept a good database of former advertising students.
So, Dr. Johnson felt conflicted. On the one hand, he knew that enrollment was the key to academic
success and the well-being of his colleagues. On the other hand, he did have an obligation to the
students to tell them the truth about the field.
Of course, he knew that students would get other views of advertising in other courses outside of
the department, so he didn’t feel that it was totally his responsibility to tell all sides of the story. His
role was to build a strong department.
“So, perhaps it’s best not to mess with success,” Dr. Johnson thought. He did say to himself that he
would try to add more controversial material to the “Survey of Advertising” course if he could find
the time to fit it in.
QUESTIONS

1. Should Dr. Johnson change the way he is teaching the “Survey of Advertising” class?
2. What obligations does the Department of Advertising have regarding the sharing of
information with students?
3. Should Dr. Johnson’s priority be to build the largest and strongest Department of
Advertising?
4. Should Dr. Johnson always provide both pros and cons of each situation?
5. Do you think that the negatives would impact students from studying advertising?
Case
29
KMF Agency
ISSUE: Ethical Issue of When to Change Jobs

Sarah Rasmussen felt like she had it made. Her hard work in school was paying off. Sarah was a
recent graduate of a top-tier advertising program. She had maintained a 3.5 GPA and she was actively
involved in all the advertising clubs in her school. She had been the Account Director of her AAF
Campaigns class competition. She was proud that their school finished in the top two in their district
and had the opportunity to go to nationals. While they didn’t place at the national competition, the
experience was great.
Her professor had encouraged her to apply for a scholarship that was awarded by a large
advertising agency in Dallas. The scholarship not only helped defray her school costs but it came
with a paid internship at the advertising agency. The agency, KMF, was a large independent agency in
the Southwest. KMF was a venerable old agency that was in the midst of retooling itself to meet the
new digital age. KMF management hoped that this scholarship would not only be a good thing to do
but that it would also help the agency attract new talent to meet the new age of advertising.
Sarah won the scholarship, beating out twenty other candidates from around the Southwest. She and
her professor were flown to Dallas, where the agency awarded the scholarship at an Advertising
Club function. KMF also paid for her parents to be there; flying them in from Odessa, Texas. Sarah’s
parents and her professor were very proud of Sarah. They were also very impressed with the first-
class way that KMF had treated them and her.
Sarah was allowed to participate in one of KMF’s largest accounts: a large computer manufacturer.
Sarah got to meet the client and sat in on strategy sessions. KMF also trained her in the way the
agency operated. The last week of her internship, KMF offered Sarah a full-time position with the
agency, working in the same account group that she had interned with.
“Sarah, this is a great opportunity for you to contribute to the agency. We are excited about having
you as one of the new generation of KMF associates to help us in this new digital age,” said the KMF
account director, Alice Woods.
Sarah really liked KMF. They were very professional yet very family oriented. It fit her strong
family background. The agency’s advertising accounts reflected the agency’s personality. They
handled a number of large corporations and did very professional yet very conservative work. The
only downside of KMF was that it didn’t have a lot of people her age in the agency. Most of the KMF
associates had been with the company for a long time. As a result, most of them were at least ten
years older than she was and many were her parents’ age. She missed having people to socialize with
after work. But, she did have friends from school who had relocated to Dallas; so it wasn’t that hard
to find people to do things with. Plus, if she wanted to go home and see her parents; it was only a
five-hour drive or, better yet, a quick thirty-minute plane trip.
Sarah had been at her job for six months when she got a call from Debbie Tippen, one of her
teammates on the AAF competition team. Debbie had graduated before Sarah and was working for a
very hot creative agency in Miami, The Hot House. Sarah had visited Debbie in Miami over spring
break. While in Miami, Debbie arranged for Sarah to have a courtesy interview with Keith Manheim,
one of the founders of The Hot House. Keith told her that The Hot House was all about creativity and
that digital media would be the center of the new advertising universe.
Keith showed Sarah around the agency. It was set up like a youth hostel. There were beanbag
chairs everywhere and even bunk beds. They had rooms with big-screen televisions that were playing
music videos. Everyone in the agency had laptop computers so that they could work anywhere and
everywhere that they wanted. Sarah thought it was really cool. The Hot House was doing some
cutting-edge work. Most of their accounts were youth-oriented brands such as shoes, soft drinks, beer
and wine, and ski equipment.
A week later, Debbie called Sarah: “Keith Manheim wanted me to tell you that he has a job for you
at The Hot House. It’s on Silver, the new fashion company that is coming to the U.S. from France.”
Debbie went on to tell Sarah that she would have to go to Paris every other month to meet with the
client’s foreign marketing director.
“Keith remembered that you can speak French and told me to call you right away. I have a place for
you on the beach. We can be a team again just like we were in college. The work here is awesome
and the people are just too cool,” said Debbie.
Sarah said, “But Debbie, I have a good job and have only been on it for six months. It sounds great
but I don’t know that it would be right to leave.”
Debbie replied, “Sarah, are you nuts! The Hot House is up for creative agency of the year. You get
to go to Paris for free and live on the beach. Isn’t that a lot better than doing that stodgy agency thing
in Dallas? Plus, I haven’t seen many beaches too close to Dallas.” Debbie then said that Sarah should
at least call Keith and discuss the job with him.
“It never hurts to talk,” said Debbie.
Sarah reluctantly did call Keith Manheim. Keith quickly began to convince Sarah that this was a
job of a lifetime.
“Look, Sarah, you were meant for this job and for this agency. Your background is perfect for this
account. I think that it will be the next great cosmetics company in the U.S. The client is awesome and
wants to do work that will win Clios. Plus, I will pay you 20 percent more than you are making now.
Let me know by Friday and let’s make it happen,” said Keith.
Sarah hung up the phone and looked at her computer screen. “What should I do,” she thought.
QUESTIONS

1. Should Sarah take the job at The Hot House?

2. Should Sarah discuss the job offer with KMF?
3. If Sarah decides to leave, should she give back the scholarship money?
4. If Sarah stays, should she ask for a 20 percent raise?
5. How long should you stay at your first job?
Case
30
Gotham Media
ISSUE: New Job Responsibilities

Kyle Bennett had very high standards. Kyle was a rising star in the media department of Gotham
Media, one of the top media planning and buying companies in the United States.
Kyle had joined the firm just two years ago, out of college. Within that time, he had been promoted
twice from an assistant to a media planner and most recently to a media supervisor. The last transition
had been the hardest for Kyle. Kyle was used to doing everything himself. As an assistant, he took on
work that no one else wanted to do. He plowed through paperwork and became known in the
company as one of the few assistants who actually cared about his work.
Kyle knew if he worked hard, he would get ahead. He was right. His promotion to media planner
happened within the first six months on the job. As a media planner, he was responsible for helping
his supervisor develop media plans and then coordinate the execution of those plans. Within three
months, his supervisor had basically turned over the smaller accounts to Kyle to run with. This suited
Kyle’s style and he periodically checked in with his supervisor but did the work himself. He loved
making it happen and really enjoyed seeing the project through.
His only frustration was in executing the media plans. There he lost some control since he basically
developed the media buying specifications and then turned it over to other buying teams to execute the
plan. Gotham Media was set up with specialists who purchased each medium from network
television to print to online media. Kyle’s job was to give them the purchase parameters and then to
follow up to make sure they did their job.
Kyle had a few run-ins with some of the buying supervisors, since he rejected some of the media
buys as not meeting his purchase specifications. In fact, for one outdoor purchase, he asked the out-of-
home buying supervisor if he could do it himself. She gave him the “go ahead” and Kyle did the
outdoor buy himself.
While the senior management of Gotham Media thought Kyle was a bit headstrong, they also
thought that he was a rapidly rising media star.
“There just aren’t too many young adults who throw themselves into a job with such passion as
Kyle,” said one of the senior Gotham managers.
Kyle’s immediate supervisor agreed and said, “Kyle is a quick study. He gets it done and done
right. He is quite a perfectionist—which can be a good thing and a bad thing.”
Based on Kyle’s stellar performance as a media planner, he was promoted to a media supervisor.
While others in the company recognized that Kyle was a rising star, it did rankle some veterans that
he was being promoted so fast.
“It is one thing to be a great media planner and another to be a supervisor of people,” said one of
the older associate media directors.
Kyle was in charge of a group of twelve accounts, three media planners, and two assistant
planners. Two of the media planners were roughly Kyle’s age and one was ten years older. They were
assigned to work on four accounts apiece and the assistants were there to support the entire group.
 Kyle knew that the planners weren’t as good as he was and he was concerned that the quality of
work would suffer as a result. He decided that he should take a hand in every media plan that came
out of his group. He began to work with each planner on plans but soon found himself doing the plans
on his own. He found that it was easier to write them the way he felt was best, as opposed to letting
the planners work them and then have them continually rewrite them the way he wanted.
However, by taking on twelve accounts compared to the four he had as a planner was proving to be
a difficult task. He was working fourteen-hour days and still had trouble getting his work done. He
also saw that the media execution was slipping. This was due to the fact that the media planners
didn’t know what the plans were about, since Kyle was doing them all and not involving them in the
process.
Julie Jones, one of the media planners around Kyle’s age said, “Kyle, I want to help you but if you
don’t tell me what is going on, it is impossible for me to help the buying groups execute the plans.”
Kyle was struggling and he was particularly frustrated with Mary Redmond, a thirty-four-year-old
planner who had been in the same position for ten years. He found it incredible that someone had
stayed in the same position for that long, and had disdain for her.
However, Mary handled a tedious job of coordinating a multimarket retailer who had nearly daily
changes in their newspaper schedule. Mary liked the account and knew that she made a good
contribution to the company. She had been offered promotions but said that she preferred to be a
planner on this account since she could have some flexibility to pick up her kids from school. “If I
was a supervisor, I would have to deal with a lot more issues and it wouldn’t be fair to my family,”
she said.
Kyle had tried to change things on this retail account to no avail. He thought that the retailer was
missing an opportunity by not using media other than print. But, in meeting after meeting, the retail
client said that he was happy with print. It was working and until he felt that it didn’t work; he was
going to continue on this course.
Kyle was really frustrated with his group’s performance and with his lack of time to make it all
happen. He felt that the group wasn’t pushing clients ahead fast enough and he was frustrated that he
couldn’t ensure that everything was done his way.
“I just don’t have time to train this group so I guess I will have to work harder to make it happen,”
thought Kyle. He also wondered how long he could keep working at Case 30: Gotham Media this
pace. The long hours were taking its toll on him and everyone else around him.
Finally, one day, his associate media director called Kyle into his office. “Kyle, we need to talk,”
he said.
QUESTIONS

1. What advice do you think that Kyle’s associate media director gave him?
2. How can Kyle get more control of his time?
3. What sacrifices will Kyle have to make to become a better supervisor?
4. How do you deal with people like Mary, who have career goals that are very different from
your own?
5. What would you say to Kyle if you had been a media planner in his group?
6. Have you ever been on a team where the star tries to do too much? What happened?
About the Authors

Larry Kelley is Executive Vice President, Chief Planning Officer for FKM, the sixtieth largest
advertising agency in the United States, where he is also an agency principal. Since joining Fogarty
Klein Monroe, now FKM, in 1990, Kelley has held senior roles in media, account planning, and
interactive. Prior to joining Fogarty Klein Monroe in 1990, Mr. Kelley served in senior media and
research positions with BBD&O, Bozell & Jacobs, and the Bloom Agency.
Mr. Kelley has worked on a wide variety of clients and categories for both domestic and
international companies. He has worked with such firms as American Airlines, ConAgra Foods,
Conoco/Phillips, Dell, Georgia-Pacific, Kroger, Minute Maid, Southwestern Bell, Yum Brands, and
Zales.
He has also written or cowritten six books on advertising as well as a popular culture book. He
has been awarded with four EFFIES for advertising effectiveness and has won ADDY awards. Mr.
Kelley is also a Professor of Advertising at the University of Houston, where he heads the advertising
sequence in the Jack J. Valenti School of Communications. He also serves on numerous boards for
private industry as well as the 4A’s media council.
Mr. Kelley holds a B.S. in journalism from the University of Kansas and a Master’s Degree in
Advertising from the University of Texas at Austin.

Dr. Donald W. Jugenheimer is an author, researcher, consultant, and educator. His specialties are
advertising and media management, media economics, and advertising media.
As a consultant, Dr. Jugenheimer has worked with such firms as American Airlines, IBM, Century
21 real estate, Aetna Insurance, Pacific Telesis, and the U.S. Army Recruiting Command, and he
currently consults on a variety of research and advisory projects in advertising and marketing,
including advertising media plans for classaction lawsuits. He has also conducted research for a
variety of enterprises including for the U.S. Department of Health, Education and Welfare, for the
International Association of Business Communicators, and for National Liberty Life Insurance.
Dr. Jugenheimer is author or coauthor of eighteen books and many articles and papers. He has
spoken before a variety of academic and professional organizations, including the World Advertising
Congress in Tokyo. He also served as President and as Executive Director of the American Academy
of Advertising and as Advertising Division Head of the Association for Education in Journalism and
Mass Communication. He also was Business Manager for the founding of the Journal of Advertising.
He has testified about advertising before the U.S. House of Representatives Armed Forces Committee
as well as in federal and state court proceedings.
Since earning his PhD in Communications from the University of Illinois with a specialization in
advertising and a minor in marketing, Dr. Jugenheimer has been a tenured member of the faculties at
the University of Kansas, Louisiana State University (where he was the first person to hold the
Manship Distinguished Professorship in Journalism), Fairleigh Dickinson University, Southern
Illinois University, and Texas Tech University. At most of those universities, he also served as an
administrator. His bachelor’s degree was in advertising with a minor in economics and his master’s
degree was also in advertising with a minor in marketing. All three degrees are from the University of
Illinois at Urbana-Champaign. He worked at several adverting agencies in Chicago and downstate
Illinois. He also served in the U.S. Air Force, first in aeromedical evacuation and later as a medical
administrative officer.
Dr. Jugenheimer has lectured and conducted workshops in several countries and served on the
guest faculty of the Executive Media MBA program for the Turku School of Economics and Business
Administration in Finland. In addition, he has held a Kellogg National Fellowship. He is listed in
Who’s Who in America, Who’s Who in Advertising, Who’s Who in Education, and several other
biographical references.
Dr. Jugenheimer is currently a partner and principal in the research, writing, and consulting firm In-
Telligence.