Types of Agencies - Advertising Management

Types of Agencies in Advertising

The types of agencies in advertising are explained below

Full Service Agencies
These agencies provide service in all areas of marketing. They plan, create and produce the advertisement. They also perform marketing research for the company. They can help the company in making Integrated Marketing Communication (IMC) programs. These include, sales promotion, personal selling, packing, design, publicity along with advertising. The IM Chas been discussed in the chapter on Marketing Communication. The full service agencies have a bigger staff and can have various departments dealing in different functional areas.
The diagram for the full service agency is given under:

full-service organisation chart
The full service agencies may have various departments which specialize in their own fields.

  1. Account Service Department: The other major department in ad agencies is account services or account management. Account service employees work directly with clients and potential clients,soliciting business for the ad agency and determining what clients need and want the agency to do for them. They are also charged with understanding the client’s business situation and representing those needs within the agency, so that ads can be brought to bear on the correct problem.
  2. Marketing Services: Under this heading we have a lot of services and accordingly departments are formed.
  3. Research Department: It gathers, analyses, tabulates and interprets information. All this is done by primary and secondary sources of information and also by information available through independent research firms. The research staff interprets this information and passes these reports to other departments. The research department also conducts researches to pretest the messages created and also to see how these messages will be interpreted by the audience.

Typical agency  work cycle

  1. Media Department: It decides a media or a media mix what will be useful and effective for the advertised products. It also chooses the media vehicles. As all firms are working with the constraints of budget available for promotion, the media selected must communicate to the right audience and be effective. The actual time to be purchased on T.V. and radio media. The space is purchased in news papers, magazines, hoardings,painting on the walls and others. The media department is becoming very important as most of the cost promotion is taken up by the media. Full service agencies also perform functions besides advertising. They give additional services in promotional areas and perform Integrated Marketing Function (IMC).
  2. Creative Services (Copy writing) Department: It is responsible for creating and execution of the advertisement. First the idea is conceived by individuals, then heading and sub headings are made and the body copy (message) is written down. This is known as copy writing. They also determine the basic theme and the appeal for the Ad and prepare a rough layout of the message with visual commercials. The art department gives it the form and the artistic touch for the T.V. commercial. The art director gives comments and approval for the improvement and acceptance of the Ad. The Ad is then sent to the production department where stories and commercials are produced. This is done by choosing people, celebrities, sportsmen or other prominent persons to appear in the commercial. Creating is a long and lengthy process. A traffic department coordinates all aspects of products and sees that it is released in time.
  3. Management and Finance: Like all other organizations, management and administration is a part of the Advertising Agency. All functions of planning, organizing, staffing, directing and control and the functional areas of accounting, H.R. and finance are looked after in a proper manner. The payment to the personnel is very important to keep them motivated and to ensure that they give off their best. Organization chart of the organization has been shown in the figure given earlier.
  4. Agency compensation: This can be done through a commission system which has been usually 15% of the media expenses. Payment can also be paid by percentage charges. If the agency books an Ad of Rs. 100,000/- for a back cover page, it also agrees to a 2%cash discount to them. The billing will be done as shown below:

Agency compensation

There is a criticism of the above system and many customers feel that they have to pay more to the agency as the media cost keeps increasing. This system also ignores the cost accounting system. It tempts the agencies to do undesirable things, like continuing the mass media advertising when other forms like promotion and publicity could be equally effective. Association of Natural Advertisers (ANA) have conducted researches and found that many firms do not want to pay the traditional 15% commission. Some clients prefer a negotiated commission system to compensate the agency. In this method, the commission is reduced to %age rates, variable commission rates and commission with minimum and maximum profit rate. Some resort to sliding rates that become lower as the expenditure increases. By doing this they end up with 8 to 10% commission for agencies when following the Integrated Marketing. Commission of expenditure gets divided into other promotional methods other than advertising. When the income from Media commission is reducing, then other methods are adopted.

Fee Arrangement: In this we have a fixed fee method and charges a basic monthly for its services and the agency commissions paid to the client.
Fee Commission Combination: In this the Media Commission received is adjusted against the fees. If the commission renewed is less then the client makes up the difference, if the agency works more in non-commission able media, the fee is charged over and above the commission from the client.
Cost plus Agreement: In this method the client pays all the costs incurred and some money agreed on profits (often a %age of total cost). The agency keeps the details of all expenses. Free agreements and cost plus system are generally preferred by the clients and they get to know the break-up and the detailed accounts.

Incentive-based Compensation System: For demanding accountability some clients want to tie agency compensation to performance through some incentive-based system. The idea is to see whether agency meets the predetermined goals. The objectives could be the sales or market share and also the creative work of the agency. The other parameters could be brand awareness, copy test results, performance review etc.
Percentage Charges: This method adds a mark up on various services purchased from outside providers. It includes market research work, art work, printing, photograph and other services or materials used. The mark up are usually up to 20% and are added to the client’s bill.
The agencies lose clients because of

  1. Poor performance of service
  2. Poor communication
  3. Unrealistic demand by client
  4. Personality conflicts
  5. Frequent changes
  6. Changes in size of the client or agency
  7. Conflict of interest—Corporate strategy/Market strategy
  8. Declining sales
  9. Changes in policies

Top Advertising Agencies in India 10 Years Back

  1. Hindustan Thomson Associate, Bombay.
  2. Ogilvy Benson and Mather, Bombay.
  3. Sobhagya Adv. Services, Bombay.
  4. Clarion Adv. and Marketing, Calcutta.
  5. Pressman Adv. and Marketing, Calcutta.
  6. Lintas India, Bombay.
  7. Rediffusion Adv., Bombay.
  8. Ulka Adv., Bombay.
  9. R.K. Swamy Adv. Ass., Madras.
  10. Everest Adv., Bombay.
  11. Chaitra Adv., Bombay.
  12. Sistas Adv., Bombay.
  13. Mudra Comm., Ahmedabad.

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