Advertising Management

Advertising Agency
3 main components of advertising
industry

1. Sponsor or advertiser
2. Media, and
3. The advertising agency
 Meaning
 Advertising agency is an independent
organization
 Renders specialized services in advertising
 Operational responsibilities:
1. Creative services
2. Account management
3. Research
4. Promotional services
 Functional departments of an advertising
agency

1. Contact department
2. Media department
3. Copy department
4. Art and visualization department
5. Production department
6. Finance department
7. Research department
8. Public relations department
 Services rendered by advertising
agency
 Timely and satisfactory work
 Boon to small and medium sized enterprises
 Sound appropriation of funds
 Conducting market research
 Non – advertising activities
1. Selecting target customers
2. Determining prices and discounts
3. Designing products and packages
4. Developing channel distribution strategies
 Remuneration

 The two popular methods for compensating

advertising agencies for their services are…
1. Commission method
2. Fee method or system
 Commission method

 An agency receives an amount equal to 15% of

the cost charged for media space or time as
commission from media owners
Process:
1. The media bills the agency for the rate less than
15%
2. The agency in turn bills the advertiser for the full
rate charged by the media before deducting the
commission
3. The difference amount is the agency's income
for services rendered
 Example
Rs 20,000(paid)

Rs 17,000

Agency Media Advertiser

Rs 17,000

Rs 20,000 (bill)

Commission for agency = Rs 3,000 ( 15% of 20,000)

 Fee system

 The agency payment consist exclusively of

service fees
 Computed on basis of cost plus system
 A certain fixed percentage on cost may be
charged as fee to be paid to agency along with
the bill