Advertising Agency

Introduction
An advertising agency or ad agency is a service business dedicated to creating, planning and handling advertising (and sometimes other forms of promotion) for its clients An ad agency is independent from the client and provides an outside point of view to the effort of selling the client's products or services An agency can also handle overall marketing and branding strategies and sales promotions for its clients.

Features of advertising Agency

Independent organization It works for advertiser Composed of creative people Develops,prepares and places ads in the media Service organization Commercial organization

Functions of advertising agency

Contacting clients Advertising planning creative function Developing and preparing ad copy Ad copy for print media Ad copy for broadcast media Approval of client Media selection and media secudling

Ad excecution Evaluation function Marketing function Research function Accounting function

Benefits of ad agency to its clients

Eliminating the need of advertising department Services of experts Reduction in media cost Helps to solve advertising problems Non advertising activities Effective advertising campaign Helps in allocating advertising budget more effectively Conducting market research

Benefits of ad agency for media

Business for media Collect dues for media Deliver the ad in appropriate form to media Helps in advertising scheduling

 Agencies may be hired to produce single ads or ongoing series of related ads called an advertising campaign

Types of advertising agencies

Full Service Agencies Modular agencies In House agencies Creative Boutiques Mega agencies

Full Service Agencies

A full service ad agency is one that provides a range of marketing services. A full services agency provides services that are directly related to advertising such as copywriting, artwork, production of ads, media planning etc.

Modular agencies
A modular agency is a full service agency that sells its services on a piece meal basis. Thus an advertiser may commission an agencys creative department to develop an ad campaign while obtaining other agency services elsewhere An advertiser may hire an agencies media department to plan and execute a program for advertising that another agency has developed

In House agencies
Those companies, which prefer to have closer control over advertising, have their own inhouse agency. Such in-house agency also benefits the owner as it can bring revenue through agency commission that are offered by the media and by way of fees that are collected from outside parties for undertaking their advertising work

Creative Boutiques
These are shop agencies that provides only creative functions and not full-service. The specialized creative functions include copy writing, artwork and production of ads, they charge a fee or percentage of full service agencies

Mega agencies
A significant of 1980s is the development of mega agency. Agencies worldwide merge with each other serve their clients in much better way It was in 1986, Saachi & Saachi, a London based agency who started the movement and at present it is the third largest agency network in the world.

Departments in Advertising Agency

Account Service Department Media Department Creative Department Production Department Finance and Accounting Department

Account service department

The account service, or the account management department, is the link between the ad agency and its clients The account executives job requires high degree of diplomacy and tact as misunderstanding may lead to loss of an account. The account executive is mainly responsible to gain knowledge about the clients business, profit goals, marketing problems and advertising objectives. The account executive is responsible for getting approved the media schedules, budgets and rough ads or story boards from the client. The next task is to make sure that the agency personnel produce the advertising to the clients satisfaction. The biggest role of the account executive is keeping the agency ahead of the client through follow-up and communications.

Media department
The responsibility of the agencys media department is to develop a media plan to reach the target audience effectively in a cost effective manner. The staff analyses, selects and contracts for media time or space that will be used to deliver the ad message. This is one of the most important decisions since a significantly large part of the clients money is spent on the media time and/or space. The media department has acquired increasing importance in an agencys business as large advertisers seem to be more inclined to consolidate media buying with one or few agencies thereby saving money and improving media efficiency.

Creative department
To a large extent, the success of an ad agency depends upon the creative department responsible for the creation and execution of the advertisements. The creative specialists are known as copywriters. They are the ones who conceive ideas for the ads and write the headlines, subheads and the body copy. They are also involved in deciding the basic theme of the advertising campaign, and often they do prepare the rough layout of the print ad or the commercial story board. Creation of an ad is the responsibility of the copywriters and the art department decides how the ad should look.

Production department
After the completion and approval of the copy and the illustrations the ad is sent to the production department. Generally agencies do not actually produce the finished ads; instead they hire printers, photographers, engravers, typographers and others to complete the finished ad For the production of the approved TV commercial, the production department may supervise the casting of actors to appear in the ad, the setting for scenes and selecting an independent production studio. The production department sometimes hires an outside director to transform the creative concept to a commercial.

Finance and accounting department

An advertising agency is in the business of providing services and must be managed that way. Thus, it has to perform various functions such as accounting, finance, human resources etc. It must also attempt to generate new business. Also this department is important since bulk of the agencys income approx. 65% goes as salary and benefits to the employees.

Selection of advertising agency

First and foremost, the agency must be known. Unknown agencies are not preferred Secondly the agency must have creativity Thirdly the agency must have a sound track record, good deal of experience Fourthly the accounts executives must have ability to understand the clients problems Fifthly you may look at the accounts they handle and the accounts they have gained and lost Sixthly the personal equation of the client with the agency matters. If you know them personally they are compatible with you

 Seventhly their ability and presentation may make you opt for them Lastly there are some unique considerations some prefer a small, some a medium some a large agency. Clients prefer to fragment their business giving different products to different agencies.

Compensation of Ad Agencies
There are three basic methods by which clients compensate agencies for services rendered: Receiving commissions from media Labour based fee system Earning compensation based on outcomes

Commission from media

Commissions from media for advertisements aired on behalf of the agencys clients provided the primary form of ad agency compensation in the past. U.S advertising agencies charges a standard commission of 15 % of the gross amount of billing 15 % compensation system has as one may suppose been a matter of some controversy between client and advertising agency. The primary area of disagreement is whether 15 % compensation is too much( the marketing executive perspective) or too little( the ad agencies perceptive). The disagreement has spurred the growth of alternative compensation systems.

Labour- Based fee system

The most common compensation method today is a labor based fee system by which advertising agencies are compensated much like lawyers, tax advisors. That is agencies carefully monitor their time and bill clients on hourly fee based on commitment. This system involves price negotiations between advertisers and agencies such that actual rate of compensation is based on mutual agreement concerning the worth of the services rendered by the advertising agency.

Outcome or performance based programs

It represents the newest approach to agency compensation. Procter and Gamble employs a sales based model whereby ad agencies are compensated based on percentage of sales that P& G obtains The agencys commission rises with sales gain and falls with declines. P&Gs best interest( growth in brand sales and market share) and the agencys best interest( increased compensation) are joined by this compensation system in a hand in glove fashion.

Client Turnover
When an advertiser leaves one ad agency and switches over to another it is known as client turnover. The various reasons for client- turnover are: The account is not profitable The advertiser is interested in new medium with which the present agency is not familiar The client and agency perceive the ad strategy in a drastically different manner. Lack of coordination between top executives of the client and the agency Change for the sake of change Staff change also lead to client turnover Loss of confidence When the client doesnt like the ad programme conceived by the agency Politics result in client turnover.