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:
The full service agencies may have various departments which specialize in their own fields.
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
Top Advertising Agencies in India 10 Years Back
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