ADVERTISING AGENCY

INRODUCTION

It is a unique type of business

organisation specialising in the
creative line of advertising providing
counsel relative to the advertising
and allied operations of its clients
and actually preparing, buying space
and time for placing a large part of
the advertising of its clients.

DEFINITION

According to American Advertising

Agencies Association (A.A.A.A) an
Advertising Agency is:

An independent business organisation

Composed of creative and business people
Who develop, prepare and place advertising
on advertising media
For sellers seeking to find customers for
their goods and services.

OUTSTANDING FEATURES

It is a Independent Organisation.
It is Composed of Creative and
Business People.
It Develops, Prepare and Places
Advertising.
It Works for Sellers.

ELEMENTS OF AGENCY
SERVICES

The A.A.A.A has defined agency services

as, it consists of interpreting to the public
or that part of it which is desired to reach,
the advertising of a product or service.
This interpretation is based on following
seven points:

A study of clients product or services in order

to determine the advantages and
disadvantages inherent in the product itself
and its relation to competition.

ELEMENTS OF AGENCY
SERVICES

An analysis of present and potential

market for which the product or service is
adapted to.
A knowledge of the factors of distribution
and sales and their methods of operation
A knowledge of all available media and
means which can profitably be used to
carry the interpretation of the product or
service to consumers.

ELEMENTS OF AGENCY
SERVICES

Formulation of a definite plan and

presentation of the plan to the client.
Execution of this plan.
Cooperation with the clients sales
work to insure the greatest effect
from advertising.

SERVICES RENDERED BY
AGENCY
Basic Services:
Planning
Copy writing
Layout
Media selection

Research Services:
Market research
Consumer research
Copy research
Media research

Trade Promotional Services:

Wholesale promotion
Dealer promotion
Booklets, pamphlets, broad-sides
Catalogues, catalogue sheets,
Speciation sheets
Exhibits

Sales Training Services:

Planning sales meetings
Salesmans manuals and
portfolios
Visual aids

Publicity and Public Relation Service

New product publicity
New stories
Company image building
Consumer relations
Employer employee relations

SERVICES RENDERED BY
AGENCY
Product Services:
New product development
Product design
Creation of brand names
Creation of trade marks
Complete packaging design

Direct Mail Services:

Letters, folders, booklets
Brochures
Sampling
Couponing

Merchandising Services:
Displays
Package inserts
Banners, streamers
Other points of purchase
material

Other Services:
Contests
Calendars
Pricing
Premiums
Instruction Booklets
Annual reports

FUNCTIONS OF ADVERTISING
AGENCIES

Functions of the agency can be divided

into two as it has to work both for the
client and as well as for the media
owner. Thus,
Functions of the Agency

Functions for the Clients

Functions for the Media Owners

FUNCTIONS FOR THE

CLIENT

Replaces the Advertising

Department.
Provides Expert View Point.
Brings in Economy and Excellence.
Shares its Rich Experience.

FUNCTIONS FOR THE MEDIA

OWNERS

Assures Risk Free Business.

Takes Away the Sales Job.
Undertakes the Advertising
Scheduling.
Slashes Down the Production Cost.

EXAMPLE

ADVERTISING AGENCY:

COMPANY:

Wieden+Kennedy

Nike

TBWA Chiat/Day

Apple

Leo Burnett Worldwide Inc.

Donalds

Mc Cann- Erickson

Mc

Microsoft

Organization Structure

1.
2.
3.
4.

The activities within an ad agency

are divided into 4 broad groups:
Account management
The creative department
Media buying
Research
Recently added: public relations,
direct marketing, and promotional

Structure of an advertising
agency

TYPES OF AD AGENCY

IN HOUSE AGENCY
FULL-SERVICES AGENCY
SPECIAL-SERVICES AGENCY
CREATIVE BOUTIQUES
SWEET SHOPS
La carte Ad Agency

SELECTION OF AN AD
AGENCY
Factors to be considered in selecting an Ad
Agency:-

Location

Size

Agency working for

competitors

Services offered by Ad
Agency

Rates charged

Creative skills & New

ideas

Past record of Agency

Image of agency

Quality & Caliber of Staff

Financially Sound

Agency Experience
So Ad-Agency should not be selected hurriedly. The
advertiser should first develop its Job description,
decide its needs, Ad-budget, & then look for a suitable
agency whose talent. Image, experience & record
matches closely with clients description, needs &
Budget.

ORGANIZATION OF ADAGENCY

On
Departme
ntal basis

On
Group
basis

Department based
organization structure

Client Liaison department

Research department

Copy Writing Department

Art Department

Media Department

Accounts Department

Audio-Visual Ad Production
Department

Marketing Service Department

Public Relations Department

Evaluation Department

Group Based organization

Structure

Planning of Advertising

Preparation of Advertisement

Placement & Execution of

Advertisement

Marketing Services

Advertising Agency
Board of Directors

General Manager

Manager
planning
department

Manager
Adpreparation
department

1. Clients
product
analysis
2. Market
analysis
3. Competition
analysis
4. Media
analysis

1. Message
contents
2. Copy Writing
3. Copy
Designing
4. Copy
developing
5. Message
appeals,

Manager
Adplacement
execution
department
1. Media selection
2. Media
scheduling
3. Ad execution
4. Evaluating Ad
effectiveness
5. Collecting &
Paying Dues

Manager
marketing
services
department
1. Product services
2. Direct mail
services
3. Sales training
services
4. Publicity & Public
Relations services
5. Tele-Marketing
6. Merchandising
Services

COMPENSATION OF ADAGENCY
FEES SYSTEM

COMMISSION
SYSTEM

SERVICE
CHARGES

COMMISSION SYSTEM

It is the traditional method of compensating Adagencies.

When the agency has sold space or time of media

to its client, then media owners pay a commission
on their sales to Ad agencies.

Usually ,this commission is 15% of the amount paid

by client to media.

This commission covers the expenses of services

rendered by agency to client & media.

Appraisal of commission
system

This system is easy to administer.

Fixed rate of commission.

It is beneficial for media as it procures large amount of

business for media.

This type of compensation method has promoted nonprice competition.

CRITICISM

Advertising agency is always tempted to recommend an expensive

media to draw a higher commission.

Fixed percentage of commission can not relate efforts made by

agency to rewards earned.

Media inflation would increase agencys remuneration which is not

fair.

This system has also resulted in offerings kick-backs by Ad-agency

to the directors of big-corporate concerns to procure business & to
earn huge commission from media.

SERVICE CHARGES

This is the second type of compensation method.

These service charges are added in the form of a

fixed percentage to the cost of material &
services purchased for the advertiser.

Normally this percentage is cost +15%.

FEES SYSTEM

Agency income is also derived from fees

charged by agency form its clients.

Types of Fees-arrangements:

Fixed- Fee Method

Speculative Method

APPRAISAL OF FEES
SYSTEM

This method is theoretically more

appropriate than commission system as
it is directly linked to services provided
by the agent.

It is difficult to operate service charges

method as it involves a lot of clerical
work to prepare separate cost accounts
for each client.