Unit 2:

Advertising Agency: Type of agencies, Services offered by various agencies, Criteria for
selecting the agencies and evaluation. Advertising objectives and Budgeting: Goal setting – DAGMAR
approach, various budgeting methods used

Advertising Agency: An advertising agency or ad agency or advert agency is a service based business
dedicated to creating, planning, and handling advertising (and sometimes other forms of promotion) for
its clients.

Types of Agencies

• IN HOUSE AGENCIES

• FULL SERVICE AGENCIES

• SPECIALISED AGENCIES

IN HOUSE AGENCIES:

• In large organization, there may be a separate whole department devoted to advertisement

headed by advertisement manager reporting to marketing manager, who in turn reports to top
management.
• In small firms, there may be a person looking after the advertisement tasks and reporting to the
top management. The advertiser has many advantage of in –house agency.
• They are the own personnel and their time can be and control in the advertisement process may
be efficiently utilized for better coordination
• They know the present marketing strategies and have control over distribution tactics.
• It also leads to cost saving in terms of commission saved by the advertiser to the external
agency.

Full-Services Agencies
• Full Range of Marketing, Communication and Promotion services.
• Planning, creating, producing advertising.
• Performing research.
• Selecting and purchasing media.
• Non-Advertising Services.
• Strategic market planning.
• Sales promotion.
• Internet and interactive ads.
• Public relations and publicity.
• Production of trade show materials.
• Package design.
Agency Services (Full service):
• Account service
– The link between agency and client.
– Managed by the account executive.
•  Marketing services
– Research department designs and executes research programs.
– Media department analyzes, selects and contracts media time and space.
•  Creative services
– Creation and execution of ads.
– Copywriters, artists, other specialists.

Specialized Service Agencies

• Many advertising agencies have come up that do not provide full range of services but specialize
in one or the other services only.
• They provide their expert services to either the advertiser or other ad agencies.
• The advertising agencies that restrict and specialize in niche areas like: consumer durable,
domestic market, local market or only regional languages are called specialized agencies.
• For example, Soubhagya advertising agency specializes in financial advertising only.
Types of Specialized service agencies:
1. Creative Boutiques.
2. Media Buying Services.
3. Interactive Agencies.
4. Direct Response Agencies.
5. Sales Promotion Agencies.
6. Public Relation Firms.
1. Creative Boutiques
• Agencies that specialize in the creative process of advertising
– Provide only creative services.
– Execution of services.
– Management and Finance
– Other functions provided by the internal client departments or outside agency such as
media buying service.
– They include few people ranging from two or three to a dozen or so and include artists,
designers, and copywriters.
– Message, how the ad looks, layout, story board, frame, panel.
– Production, print, photographers, casting of personalities, banners, boards, POP
displays.
2. Media Buying services
• They are the independent companies buying the media time and space on television, radio at
bulk against heavy discounts.
• Then they sell these media time and space at lower cost than what an agency or the companies
could have acquired.
• Media time and space is perishable.
• When an agency buys the time and space, on behalf of clients, and makes profit from such an
activity, it is referred to as media buying agencies.
• They are also responsible for providing market research and analysis and guiding them with
respect to ideal space and time for their advertisement.
3. Interactive Agencies
• The interactive agencies have come up with the growth of Internet technology and the need for
integrated marketing communications.
• Agency.com and Tribal DDB are some of the firms that have sprung up in the last few years for
providing specialized services of designing web pages, developing fun games and online
advertising.
4. Direct-Response Agencies
 Marketing through infomercials, home shopping networks, mail order, telemarketing and
others forms of direct response marketing is becoming popular.
 The direct response advertising agencies offer specialized services to the clients and help
them integrate advertising through various mediums like television, print, radio, online
etc.
 Three departments of Direct-response agencies are 1) Accounts management (works with
client, plan marketing program), 2) Creative (Artists, copywriters, developing the
message), 3) Media departments (selection of media, hire-apportioned media time).
5. Sales Promotion Agencies
 Providing services of designing sales promotional programs,
 Identifying suitable sales promotional tools,
 Carrying pre-sales promotion evaluation,
 Executing the sales promotion program,
 Performing post-test for evaluating effectiveness of sales promotional tools.
 Contests, premiums, sampling program, rebates etc.
6. Public Relations Firms

 They devise an appropriate blend of various PR tools like, publicity, lobbying, press
release, oral communication, conferences, speeches, special events, etc.
 Providing services that enhance the goodwill and image of the clients’ companies
amongst its publics, namely, employees, labor groups, suppliers, government and other
stakeholders
 Liaise with the government and prepare press releases etc.
Services offered by various agencies

[1] Account service

a) The link between agency and client.
b) Managed by the account executive.
[2]  Marketing services
a) Research department designs and executes research programs.
b) Media department analyzes, selects and contracts media time and space.
[3]  Creative services
a) Creation and execution of ads.
b) Copywriters, artists, other specialists.
[4] Media Buying Services
a) Specialize in analyzing and buying media, especially broadcast time.
b) Agencies and clients may develop media strategy
c) Media buying organizations implement the strategy and buy time and space.
Criteria for selecting the agencies and evaluation
• What rates they charge.
• What their previous track record is.
• Where their expertise lies.
• How big is the agency?
• How personal is the service.
• Well known agency.
• Creativity on pursuit.
• Ability to understand the client's problem.
• Ascertain number of clients gained and lost by proper scrutiny.
Agency Evaluation Process
Financial Audit –
• Focuses on how the agency conducts its business and includes verification of costs,
• Expenses,
• Number of personnel hours charged to an account and payments to suppliers and media.
Qualitative audit –
• Focuses on the agency’s efforts in planning,
• Developing, and implementing the client’s advertising and promotion program and the results
achieved.
Why Agencies Lose Clients
 Poor performance
 Poor communication
 Unrealistic demands
 Personality conflicts
 Personnel changes
 Changes in size
 Conflict of interests
 Changes in strategy
 Declining sales
 Payment conflicts, Policy changes.
How Agencies Gain Clients?
• Referrals (Through satisfied clients)
• Solicitations (Invitation from client through a formal letter, email or telephone)
• Presentations (Establish contact, make presentation, demo, etc)
• Public relations.
• Image and reputation.

Advertising Objectives
• Increasing customers.
• Increase total demand.
• Attracting non-users.
• Prevent switching.
• Generate interest in a product which has reached maturity stage.
• Approach former user.
• Wooing customers of competitor’s brand.
• Increasing the usage rate.
• Market mix objectives.
• Communication objectives.
• Positioning as an objective.
• Re-positioning as an objective.
Goal setting - DAGMAR Approach
DAGMAR Approach – Defining Advertising Goals for Measured Advertising Results.
DAGMAR emphasizes on communication task as opposed to marketing task.
Used for setting advertising goals and objectives.
The communication task is based on hierarchical model of communication.
Four stages of commercial communication are as follows:
1. Awareness : make consumer aware of the brand.
2. Interest: 'what the product will do to the consumer.'
3. Desire: Develop consumer liking to buy the product.
4. Action.: Get the consumer to purchase a product.
Second contribution of DAGMAR Approach:
• Specify the target audience.
• Indicate the benchmark.
• Mention the degree of changes sought.
• Specify the time period to accomplish the objective.
• Indicate the measurement procedure.
Criticism of Dagmar approach
• Problem with response hierarchy.
• Sales objective. (actually we measure communication effectiveness).
• Practicality and cost (lot of money).
• Inhibition of creativity (acts against creativity of people).
Various budgeting methods used

1. Top-down approach.
2. Bottom-up approach.

Top-down approach
 Top management sets the spending limit.
 The promotion budget is set to stay within the Spending limit.

1) Affordable method:
Followed by smaller firms usually.
After allocating funds for production, operations, left amount will be allocated for ad.

2) Arbitrary allocation.
Determined solely by the management on the basis of what was felt as necessary.
No logic with respect to the quantum of money spent.

3) Percentage of sales.
Most commonly used method.
Take the total sales, apply percentage of sales.
Find the unit cost and assign the promotion cost per unit.

Competitive parity method

• Firm matches the advertising levels of competitors.
• Lead to ad war.
• Firms monitors the amount spent by significant competitors on promotion and allocates
an equal amount.
Return on Investment (ROI).
• Promotion is an investment.
• Rarely used in practice.
• Difficult to say that increase in sales is the result of promotional effort.
Promotion is considered be a long-term phenomena.
Bottom-up Approach
• Specific objectives are set.
• Based on budget allocated.
1. Define communication objective.
2. Determine strategy.
3. Estimate the cost.