 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
 Factors to be considered in selecting an Ad
Agency:-
 Location  Servicesoffered by
Ad Agency
 Size
 Rates charged
 Agencyworking for
competitors  Creative skills & New
ideas
 Image of agency
 Past record of 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 On
Departme Group
ntal basis basis
 Client Liaison  Audio-Visual Ad
department Production Department

 Research department  Marketing Service

Department
 Copy Writing
Department  Public Relations
Department
 Art Department
 Evaluation Department
 Media Department

 Accounts Department
 Planning of Advertising

 Preparation of Advertisement

 Placement& Execution of
Advertisement

 Marketing Services
 Advertising Agency

Board of Directors

General Manager

Manager
Manager Manager
Manager Ad-
Ad- marketing
planning placement
preparation services
department execution
department department
department

1. Message 1. Product services

1. Client’s
contents 1. Media selection 2. Direct mail
product
2. Copy Writing 2. Media services
analysis
3. Copy scheduling 3. Sales training
2. Market services
Designing 3. Ad execution
analysis 4. Publicity & Public
4. Copy 4. Evaluating Ad
3. Competition Relations services
developing effectiveness
analysis 5. Tele-Marketing
5. Message 5. Collecting & 6. Merchandising
4. Media
appeals, Paying Dues Services
analysis
theme
COMMISSION FEES
SYSTEM SYSTEM

SERVICE
CHARGE
S
 Itis 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%.

 Ifthere 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 Cost of full page magazine Rs. 50,000
Ad Rs. 50,000 Ad

(-) 7500 Less 2% Cash Discount on Rs. 850

Rs. 42,500(passed on to
Less 15% Commission client)
Rs.42,500

Rs. 850
Less 2% cash Discount

Rs. 49,150
Rs. 41,650
Agency pays Media Agency charges from
Advertiser
 This system is easy to administer.

 Fixed rate of commission.

 Itis beneficial for media as it procures

large amount of business for media.

 Thistype 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.

 Theseservice 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.

 Itis difficult to operate service charges

method as it involves a lot of clerical work
to prepare separate cost accounts for
each client.