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Advertising agencies are outside companies
that provide for the marketing and advertising
needs of other businesses and organizations.

Advertising agencies offer a full range of

advertising services and advice based on
market studies, popular culture and advanced
sales techniques
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 Factors to be considered in selecting an Ad Agency:-

R Location R Services offered by Ad

Agency
R Size
R Rates charged
R Agency working for
competitors R Creative skills & New ideas

R Image of agency R Past record of Agency

V 4 ality & Caliber of Staff

V Financially So nd

V 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. jmage, experience & record matches closely with
clients description, needs & Budget.
 On
Departmental
On Gro p
basis basis
R Client Liaison department R A dio-Vis al Ad Prod ction
Department
R Research department
R Marketing Service Department
R Copy Writing Department
R P blic Relations Department
R Art Department
R Eval ation Department
R Media Department

R Acco nts Department

R Planning of Advertising

R Preparation of Advertisement

R Placement & Exec tion of Advertisement

R Marketing Services
 Advertising Agency

Board of Directors

General Manager

Manager Ad- Manager

Manager Manager Ad-
placement marketing
planning preparation
exec tion services
department department
department department

1. Media selection 1. Product services

1. Clientǯs product 1. Message contents
2. Media scheduling 2. Direct mail services
analysis 2. Copy Writing
3. Ad execution 3. Sales training services
2. Market analysis 3. Copy Designing 4. Publicity & Public
4. Evaluating Ad
3. Competition 4. Copy developing Relations services
effectiveness
analysis 5. Message appeals, 5. Tele-Marketing
5. Collecting & Paying
4. Media analysis theme 6. Merchandising Services
Dues
COMMISSION
FEES SYSTEM
SYSTEM

SERVICE
CHARGES
R jt is the traditional method of compensating Ad-agencies.

R 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.

R Usually ,this commission is 15% of the amount paid by

client to media.

R This commission covers the expenses of services rendered

by agency to client & media.
R S ppose an Ad agency prepares a f ll page magazine
advertisement for its client.

R The card rate for this page is Rest. 50000/- and the agency
is entitled to commission of 15%.

R If there is cash disco nt of 2% on amo nt d e then cash

disco nt is comp ted on the amo nt agency owes to the
media i.e. 42,500(not f ll card rate).

R This cash disco nt is passed on to the client( advertiser) by

Ad-agency.
Media bills agency Agency bills advertiser

Cost of f ll page magazine Ad Cost of f ll page magazine Ad Rs. 50,000

Rs. 50,000
Less 2% Cash Disco nt on
(-) 7500 Rs. 42,500(passed on to client) Rs. 850
Less 15% Commission

Rs.42,500

Less 2% cash Disco nt Rs. 850

Agency charges from Rs. 49,150

Agency pays Media Rs. 41,650 Advertiser
R This system is easy to administer.

R Fixed rate of commission.

R It is beneficial for media as it proc res large

amo nt of b siness for media.

R This type of compensation method has promoted

non-price competition.
R Advertising agency is always tempted to recommend an expensive
media to draw a higher commission.

R Fixed percentage of commission can not relate efforts made by

agency to rewards earned.

R Media inflation wo ld increase agencyǯs rem neration which is not

fair.

R This system has also res lted in offerings kick-backs by Ad-agency

to the directors of big-corporate concerns to proc re b siness & to
earn h ge commission from media.
R This is the second type of compensation method.

R These service charges are added in the form of a

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

R Normally this percentage is cost +15%.

R Agency income is also derived from fees
charged by agency form its clients.

Types of Fees-arrangements:-

R Fixed- Fee Method

R Spec lative Method

R This method is theoretically more appropriate than
commission system as it is directly linked to services
provided by the agent.

R It is diffic lt to operate service charges method as it

involves a lot of clerical work to prepare separate
cost acco nts for each client.