Ad Agency-Structure,

Functions & Evaluation

Prof. Sita
Ramakrishnan

Topics to be covered
Advertising:

Meaning, Definition,
Features & Functions
Ad Agency: Meaning, Definition,
Features, Functions & Structure
Advertising Budget: Factors
determining ad budget, Methods
of budgeting.

Advertising
Meaning:

- Originated from Latin word advertere

which means to turn the mind towards.
- Advertiser tries to turn the mind of
consumers towards his brand through a
unique attribute with the help of ad
agency using various media available.
- Essential to increase sales and it
supplements salesmanship.

Definition:

- AMA: Advertising is any paid form of

non-personal presentation and promotion
of ideas, goods or services by an
identified sponsor.
- Webster: Advertising is to give public
notice or to announce publicity.
- Dunn & Barbon: Advertising is paid,
non-personal communication through
various media by business firms, nonprofit organisations and individuals who
are in some way identified in the

Features:

- Paid form of communication: Publicity is not paid

- Non-personal presentation: Salesmanship is
personal.
- Ideas, goods & services
- Identified sponsor
- Controlled: Sponsor decides the contents,
duration, etc of the ad campaign.
- Mass communication
- Element of promotion mix: along with personal
selling, publicity, direct mktg & PR. Most effective
method of promotion.

- Persuasive
- Provides information: about the ideas, products or
services. Guides consumers and helps them is decisionmaking.
- Target oriented: Aims at a particular TG. Wastage can
be avoided by clearly defining the TG and selection the
right methods to reach them.
- Builds image: Celebrities, creative ads, programs
sponsored etc build goodwill for the sponsor.
- Creates awareness
- Helps in consumer choice.
- Encourages creativity
- Art, science & profession: Art as creativity is involved,
science as research is reqd for TG selection, etc &
profession as code of conduct and professional bodies
governing them exist.

Functions:

Advtsg helps in creating and sustaining

demand for a product thereby increasing
sales & profit for the advertiser.

 Primary

Functions

Increases sales
volume
Persuades & assists
channel
intermediaries
Increases product
usage
Creates receptiveness
for a new product or
model
Builds confidence in
quality
Eliminates seasonal

Secondary

Functions:
Encourages salesmen
Furnishes information
Secures better
employees
Instills confidence in
various public groups
like customers,
channel
intermediaries,
media, etc.

Ad Agency
Meaning:

Specialised professional agency which

operates in the field of advertising and
which offers specialised services to its
clients by charging certain fees.
Keeps close contact with different advtsg
media.
Plans & executes comprehensive advtsg
campaigns for its clients.
Link between clients & media.

Definition:

- American Asso of Advtsg Agencies

(AAAA): An independent business
organisation, composed of creative and
business people, who develop, prepare
and place advertising in advertising
media for sellers seeking to find
customers for their goods and services.

Features:

- Specialised services offered

- Service organisation
- Commission
- Expert staff
- Link between client and media
- Better alternative to advertising
department
- Additional services like market
research, sales promotion etc.

Functions:

Depends upon the nature, size and

internal structure.
Broadly divided into:
1. Account Functions
2. Creative Functions
3. Marketing Functions
4. Management Functions
5. Bringing in new clients

1. Account Functions:
A client/advertiser is termed as an
account of an agency.
Each account will have an account
manager and numerous account
executives who act as a link between the
agency and client.
Functions performed are preparing
advtsg plan and allocating budget for the
plan.

2. Creative Functions:
Once advtsg plan & budget are approved, it is
passed on to the creative department.
Functions performed are:
Copywriting: A copywriter writes the wordings of
an ad and thereby structures the theme of the ad.
Artwork: Once copy is ready, the layout is made
and final artwork is completed by the chief
copywriter.
Production of ads: Ads are finally produced in a
studio.
Proofs are submitted to the client for approval and
once approved, are sent to the respective media.

3. Marketing Functions
Media planning: Selection of most suitable media
& preparing media schedule.
Research: Market research, copy research and
audience & media analysis are undertaken.
Sales promotion: Promotional material such as
POP material, window displays, etc are designed.
Product analysis functions: Product design and
styling, labelling & packaging, brand name etc.
Trade Promotion functions: Dealer promotion,
dealer contact, preparing catalogues & brochures
etc.

4. Management & Finance Functions

Generally top people like VP is in charge
of this.
Responsible for accounts management,
finance management and office
management.
5. Bringing in new clients
Most important as new clients will
improve the public image of the company
and thereby build confidence in the
existing clients and media.

Structure:

1. Contact department: Maintains existing clients

and contacts new clients. Headed by Accounts
Manager.
2. Media department: Selects media for the
client and allocates budget for the various media
chosen. Decides the channel through which the
ad shall reach consumers. Headed by the Media
Director.
3. Copy department: Designs ad copy, which
forms the heart of an ad campaign. Works in
coordination with accounts executive and
research departments. Headed by Copy Director.

4. Art & Visualisation department: Prepares the

ad visuals and layout for print. Headed by Art
Director. Composed of artists, layout men and
visualisers.
5. Production department: Produces the ad copy
as designed by the copy and art departments.
Headed by Production Manager who works with
type setters and photographers.
6. Finance department: Financial matters such
as collecting dues from clients, paying the
media bills, collecting commission, etc.
7. Research department: Studies the effect of ad
on sales. Headed by Research Director.

8. PR department: Link between agency

and all connected with the agency.
Creates good public image for the
agency by maintaining cordial relations
with the clients, media owners and
public. Headed by PRO.

Advertising Budget
Amount of money available for
advertising during a year.
Estimate of financial requirements
of advtsg plans so that advtsg
objectives can be achieved within a
specified time period.
May be arrived at arbitrarily or by
careful planning.
Is prepared in advance.
Responsibility of Advtsg Manager.

Factors determining Ad
Budget

Organisational objectives
Size of company
Finance availability
Type of product
Frequency of advtsg
Media used
Size of market
Importance of middlemen
Innovation used

Methods of Budgeting
3 types:
1.Fixed methods
2.Task method
3.Subjective methods

1.

Fixed Methods:
a. Percentage of sales method:
- Budget linked to sales of previous
year.
- Popularly used.
- Easy to calculate.
- Provides justification to ad
expenditure.
- Does not consider changes in the mkt.

b. Unit of sales method:

- Budget calculated on the basis of amount
per unit of product sold in the previous year.
- Lacks flexibility and is not scientific.
- Does not consider changes in the mkt.
c. Competitors Expenditure Method:
- Considers competitors budget.
- Justified as competitor is selling similar
product under available mkt conditions.
- A new manufacturer can use this method to
understand the advtsg levels to be used.
- Not scientific.

d. Market share method:

- Basis of mkt share.
- Fair and easy method.

2. Task Methods:
- Deciding advtsg objectives
- Determine amt reqd for meeting
objectives
- Determine whether amt is affordable
- Finalise the budget
- Budget execution
- Follow-up

3. Subjective methods:
a. Arbitrary method
b. All you can afford method
c. Share of Voice method: Dominant
brand will spend lower than its market
share & other brands will spend equal to
or more than their market share.

d. Quantitative method: Uses

Quantitative models like regression
analysis. Historical data like crosssectional data & time-series data are
used.