An Advertising Agency or ad agency is a service provider that works for clients to create an effective and goal oriented advertising campaign aimed at representing the Company positively in the eyes of its target customers.
“ An Advertising Agency is an independent organization of Creative people and business people who specialize in developing and preparing marketing plans, advertisements,
and other promotional tools.’’
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
To advertise their products, brands and services to present and prospective customers.
For planning and creating an effective advertising campaign.
To take over the process of brand building, strategizing and pushing sales through other promotion techniques like sales promotions etc.
IN HOUSE AGENCY
Agency working for competitors
Image of agency
Services offered by Ad Agency
Creative skills & New ideas
Past record of Agency
Factors to be considered in selecting an Ad Agency:-
Quality & Caliber of Staff
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.
On Departmental basis On Group basis
Client Liaison department
Copy Writing Department
Audio-Visual Ad Production Department
Marketing Service Department
Public Relations Department
Planning of Advertising
Preparation of Advertisement
Placement & Execution of Advertisement
Advertising Agency General Manager Board of Directors Manager planning department Manager marketing services department Manager Ad-placement execution department Manager Ad-preparation department
Client’s product analysis
Message appeals, theme
Evaluating Ad effectiveness
Collecting & Paying Dues
Direct mail services
Sales training services
Publicity & Public Relations services
COMMISSION SYSTEM FEES SYSTEM SERVICE CHARGES
It is the traditional method of compensating Ad-agencies.
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.
Suppose an Ad agency prepares a full page magazine advertisement for its client.
The card rate for this page is Rest. 50000/- and the agency is entitled to commission of 15%.
If there is cash discount of 2% on amount due then cash discount is computed on the amount agency owes to the media i.e. 42,500(not full card rate).
This cash discount is passed on to the client( advertiser) by Ad-agency.
Media bills agency Agency bills advertiser Cost of full page magazine Ad Less 15% Commission Less 2% cash Discount Agency pays Media Rs. 50,000 (-) 7500 Rs.42,500 Rs. 850 Rs. 41,650 Cost of full page magazine Ad Less 2% Cash Discount on Rs. 42,500(passed on to client) Agency charges from Advertiser Rs. 50,000 Rs. 850 Rs. 49,150
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 non-price competition.
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 agency’s 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.
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%.
Agency income is also derived from fees charged by agency form its clients.
Types of Fees-arrangements:-
Fixed- Fee Method
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.