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

FULL-SERVICES AGENCY

SPECIAL-SERVICES AGENCY

CREATIVE BOUTIQUES

SWEAT SHOPS

Location

Size

Agency working for competitors

Image of agency

Services offered by Ad Agency

Rates charged

Creative skills & New ideas

Past record of Agency

Factors to be considered in selecting an Ad 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.

On Departmental basis

On Departmental basis

On Group basis

On Group basis

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

Planning of Advertising

Preparation of Advertisement

Placement & Execution of Advertisement

Marketing Services

Advertising Agency

General Manager

Board of Directors

Manager planning

department

Manager marketing services

department

Manager Ad-

placement execution

department

Manager Ad-

preparationdepartment

1. Client’s product analysis

2. Market analysis

3. Competition analysis

4. Media analysis

1. Message contents

2. Copy Writing3. Copy

Designing4. Copy

developing5. Message

appeals, theme

1. Media selection2. Media

scheduling3. Ad execution4. Evaluating Ad

effectiveness5. Collecting &

Paying Dues

1. Product services2. Direct mail

services3. Sales training

services4. Publicity & Public

Relations services5. Tele-Marketing6. Merchandising

Services

COMMISSION SYSTEM

FEES SYSTEM

SERVICE CHARGE

S

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 onRs. 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

Speculative 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.