Advertising and Sales Promotion

MODULE 3

Advertising Agency

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 Introduction
Advertising Agency is just like a tailor. It creates the
ads, plans how, when and where it should be delivered
and hands it over to the client. Advertising agencies are
mostly not dependent on any organizations.
These agencies take all the efforts for selling the
product of the clients. They have a group of people
expert in their particular fields, thus helping the
companies or organizations to reach their target
customer in an easy and simple way.
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 Advertising Agency
Advertising agency is an independent organization
that provides one or more specialized advertising and
promotion related services to assist companies
(advertisers) in developing, preparing, and executing
their advertising and other promotional programs.
Most large and medium sized companies usually use an
advertising agency.

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 Types of Advertising Agency
Full Service Agency - are usually large in size and they
offer their clients a full range of services in the area of
marketing, communications, and promotions. These
include planning, creating, and producing the
advertising; media selection; and research.

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Typical organizational structure of a full-service agency

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 Departments under of a Full-Service Agency
Account services - Account services or account
management is responsible for the relationship
between the agency and the client. One or more
account executives are assigned to serve as liaison,
depending on the client’s size and the advertising
budget.

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 Departments under of a Full-Service Agency
Research department - research has gained
considerable attention because agencies are most
concerned about the need to communicate effectively
with the target audience of the client. The research
department is maintained by a full-service agency to
gather and interpret data for situational analysis,
which is useful in developing advertising for their
clients.
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 Departments under of a Full-Service Agency
Media department: - the responsibility of agency’s
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.

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 Departments under of a Full-Service Agency
Sales promotion department: - some fullservice
agencies offer additional marketing services and have
departments, such as sales promotion department
that specializes in contests, premiums, and POP
materials, etc. and PR/publicity department,
interactive media departments to create web-sites for
clients. The agency may have specialists in the area of
direct marketing and package design.
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 Departments under of a Full-Service Agency
Creative Service department - responsible for the
creation and execution of the advertisements. The
creative specialists are known as copywriters. They
are the ones who conceive (formulate) the ideas for
the advertisements and write the headlines,
subheads, and body copy. They are also involved in
determining the theme or basic appeal of the
advertising campaign.
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 Departments under of a Full-Service Agency
Management & Finance department - an advertising
agency is in the business of providing services and
must be managed that way. There is an
administrative head and takes charge of functions
such as, finance, accounting, human resource, and
office management.

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 Types of Advertising Agency
Creative boutiques: (small shop, esp. fashionable
cloths.) Such an agency provides only creative services.
These creative boutiques have grown in response to
advertisers’ desire to use only the high quality creative
talent of an outside service provider and rest of the
functions are completed within the advertisers’
organizations.

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 Types of Advertising Agency
Sales promotion services : Such agencies design and
manage sales promotion programme, such as contests,
sweepstakes, lucky draws, scratch cards, premium
offers, displays and in-house merchandising materials
etc.
Event management services: These service providers
specialize in planning, organizing and managing events
on behalf of marketers and brands.
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 Types of Advertising Agency
Public relations services: - Public relation agencies
advice marketers about how to manage their
relationship with various target groups and build
company image and earn their trust in the company.
They manage favorable publicity for creating visibility
for a brand.

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 Types of Advertising Agency
Design studios: These firms specialize in offering
graphic design services for brands, corporate identity
materials, and packaging etc.
Website design services : These firms specialize in
designing website and online advertising.
Production houses: These firms act as suppliers of
artists, photographers, producers, film directors,
costume designers, and music producers to advertising
agencies.
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 Types of Advertising Agency
Media buying services : These are independent
agencies specializing in media buying services and have
been experiencing strong growth. The advertising
media buying has become complex with the increase in
specialized media.
Research companies: These research firms conduct
market and consumer research, test ad message and
advertising effectiveness.
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 Advertising Agency Compensation
Commission from Media - the traditional method of
compensating agencies is through a commission
system, where the agency receives a specified
commission (usually 15 percent) from the media on any
advertising time or space it purchase for its clients.

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 Advertising Agency Compensation
Fee Agreement - under the fee structure, the client and
the ad agency negotiate a flat sum to be paid to the
agency for all work done. The agency estimates the cost
(including out of pocket expenses) of servicing the
client who either accepts or negotiates for a lesser
amount. Negotiations continue until an agreement is
reached.

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 Advertising Agency Compensation
Cost Plus Agreement - The cost-plus system is
generally used when the media billings are relatively
low and a great deal of agency service is required by the
client. Under a cost-plus system, the client agrees to
pay the agency a fee based on the costs of its work plus
some agreed-on profit margin

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 Advertising Agency Compensation
Incentive-Based Compensation - Many clients these
days are demanding more accountability from their
agencies and tying agency compensation to
performance through some type of incentive-based
system. While there are many variations, the basic idea
is that the agency’s ultimate compensation level will
depend on how well it meets predetermined
performance goals.
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 Advertising Agency Compensation
Percentage Charges - Another way to compensate an
agency is by adding a markup of percentage charges to
various services the agency purchases from outside
providers. These may include market research, artwork,
printing, photography, and other services or material.
Markups usually range from 17.65 to 20 percent and are
added to the clients overall bill.

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