1.

Identify situations where an advertiser would use in-house advertising

operations, full-service advertising agencies, and a la carte arrangements. Your
answer should include a discussion of the advantages and disadvantages of each
of the three alternatives.

- Message strategies and decisions most often are the joint enterprise of the companies
that advertising (the clients) and their advertising agencies. In general, advertisers have
three alternative ways to perform the advertising function:

 use an in-house operation, purchase advertising services on an ad- need basis

from specialized agencies, or select a full-service advertising agency. Maintaining
an in-house operation necessitates employing an advertising staff and absorbing
the overhead required to maintain the staff’s operations. This arrangement is
unjustifiable unless a company does a large and continuous amount of advertising.
Advertisers can purchase advertising services a la carte. That is, rather than
depending on a single
 full- service agency to perform all advertising and related functions, an advertiser
may recruit the services of a variety of firms with particular specialties in creative
work, media selection, production, advertising research, and so on. Advantages
include the ability to contract for services only when they are needed and potential
cost efficiencies. A disadvantage is that specialists (so-called boutiques)
sometimes lack financial stability and may be poor in terms of cost accountability.
 Full-service agencies perform at least four basic functions: (1) creative services,
(2) media services, (3) research services, and (4) account management.
Advantages include acquiring the services of specialists with in-depth knowledge
of advertising and obtaining negotiating leverage with the media. The major
disadvantage is the loss of control over the advertising function.

2. Describe the various forms of advertising agency compensation.

- There are three basic methods by which clients compensate agencies for services
rendered:
  Commissions from media.

Historically, U.S. advertising agencies charged a standard commission of 15% of the

gross amount of billings. The 15% compensation system has been a matter of some
controversy, and today only a fraction of advertisers still pays a 15% commission. Rather,
a reduced commission system has experienced increased usage.

 Labor-based fee system.

Agencies carefully monitor their time and bill clients an hourly fee based on time
commitment. It involves price negotiations between advertisers and agencies such that
the actual rate of compensation is based on mutual agreement concerning the worth of
the services rendered by the advertising agency.

 Outcome or Performance Based Programs.

The newest approach to agency compensation. For Example, Ford Motor Company uses
a compensation system whereby it negotiates a base fee with its agencies to cover the
cost of the service provided and additionally offers incentive payments that are tied to
brand performance goals such as targeted revenue levels. The success of outcome-
based programs will depend on demonstrating that advertising and other marketing
communications efforts initiated by agencies do indeed into enhanced brand
performance.

3. Explain the MECCAS model and discuss how it is used in advertising strategy
formulation.

- MECCAS stands for means-end conceptualization of components for advertising

strategy and provides a procedure for applying the concept of means-end chains to the
creation of advertising messages. A brand advertiser, armed with knowledge of segment-
level values, is in a position to know what brand attributes and consequences to
emphasize to a particular market segment as the means by which that brand can help
consumers achieve a valued end state. The components include a value orientation,
brand consequences and brand attributes, and creative strategy and leverage point that
provides the structure for presenting the advertising message and the means for tapping
into or activating the value orientation. The value orientation represents the consumer
value or end level on which the advertising strategy focuses and can be thought of as the
driving force behind the advertising execution. Every other component is geared toward
achieving the end level. Laddering is a research technique that has been developed to
identify linkages between attributions, consequences, and values and involves in- depth,
one-on-one interviews that typically last between 30 minutes to more than one hour. This
method attempts to get at the root, or deep, reasons for why individual consumers buy
certain products and brands.

4. Compare and contrast corporate image advertising and corporate issue

advertising, and provide an example of each.

- Both are forms of corporate advertising, which focuses not on specific brands but on a
corporation’s overall image or on economic or social issues relevant to the corporation’s
interests.

Corporate image advertising attempts to increase a firm’s name recognition, establish

goodwill for the company and its products, or identify itself with some meaningful and
socially acceptable activity.

Corporate issue advertising occurs when a company takes a position on a controversial

social issue of public importance with the intention of swaying public opinion.

5. Name and describe the three subcomponents of the general concept of

attractiveness and explain why each is important.

- The three subcomponents of the general concept of attractiveness are:

 Physical attractiveness - This is a key consideration in many endorsement

relationships. Research has supported the intuitive expectation that physically
 attractive endorsers produce more favorable evaluations of ads and advertised
brands than do less attractive communicators.
 Respect - This represents the quality of being admired or even esteemed due to
one’s personal qualities and accomplishments. Whereas a celebrity’s physical
attractiveness may be considered the “form” aspect of the overall attractiveness
attribute, respect is the “function” or substantive element. Celebrities are respected
for their acting ability, athletic prowess, appealing personalities, their stand on
important societal issues, and any number of other qualities. Individuals who are
respected also generally are liked, and it this factor that can serve to enhance a
brand’s equity when a respected/liked celebrity endorser enters into an
endorsement relationship with the brand.
 Similarity - This represents the degree to which an endorser matches an audience
in terms of characteristics pertinent to the endorsement relationship - age, gender,
ethnicity, etc. People tend to better like individuals who share with them common
features or traits. There is some evidence that a matchup between endorser and
audience similarity is especially important when the product or service is one
where audience members are heterogeneous in terms of their taste and attribute
preferences (i.e., restaurants, plays, movies, etc.). When preferences among
audience members are relatively homogeneous (i.e., plumbing, dry cleaning, etc.),
the matchup between spokesperson and audience similarity is not that important,
but rather the spokesperson’s experience or expertise appears to have the
greatest influence.