M1.

2 ADVERTISING AGENCIES

Meaning of Ad Agency

Advertising agency is a specialized or professional agency which operates in the

advertising field and offers specialized services to its clients (advertisers) by charging
certain fees/service charges. It is a business organization established to give advertising
services to its clients. An advertising agency keeps close contacts with different
advertising media and offers benefits of professional services to its clients. It plans and
executes a comprehensive advertising campaign of its clients. An advertiser prefers to
transfer the entire responsibility of advertising to such an agency rather than looking after
all details regarding the advertising work such as preparing advertising copy, booking
space for advertising, media planning etc. In short, an advertising agency is a service
organization specially established for giving expert services in the advertising field. It
maintains expert staff for managing various activities of advertising. Thus, an advertising
agency is a link between the clients (advertisers) and media owners.

An advertising agency is an independent business organization which undertakes the

work of planning, preparing and executing advertising campaigns for its clients.

The planning aspect involves the study of the client's product or service, to understand its
position in relation to the competitor's product or service, understanding the target
market, their changing needs as well as the other trends in the marketing environment
and, accordingly formulating the advertising campaign.

The preparing aspect involves writing, designing and production of an ad copy.

The execution phase involves contacting the right kind of media for time and space,
delivering the ads to media, checking and verifying the release of advertisement in media,
making payment to the media and billing the clients.

Advertising agencies are remunerated for the services that they render. Their
remuneration comes from commission given by the media, fees charged from the clients
and percentage service charges on purchase of advertising material for its clients.
Agencies sometimes provide many non- advertising services for which it charges extra
fee on agreement basis.

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Some of the top advertising agencies in India are Mudra, Lowe Lintas, Ogilvy & Matter
(O & M), JWT, Leo Burnett, FCB Ulka, McCann Erickson. Hindustan Thompson
Associates.

Definitions of Ad Agency

1. The American Association of Advertising Agencies (AAAA)

Advertising agency is "an independent business organistaion, composed of creative

and business people, who develop, prepare and place advertising in advertising
media for sellers seeking to find customers for their goods and services."

2. Philip Kotler

"Advertising agency is a marketing service firm that assists its clients in planning,
preparing, implementing and evaluating various activities of advertising
campaigns.”

FUNCTIONS OF AN ADVERTISING AGENCY

An Advertising agency perform the following functions:

1. Selection of prospects
It helps to contact people who want to advertise their products, services or anything
which they want to sell. The advertising agency should keep certain points in mind while
selecting the prospects like -
(a) The advertiser's financial position: It is the primary consideration because the
agency's credit relationship with its client is that of creditor and debtor.
(b) Avoid competition : The agency should not go after prospects who are directly
competing with the present clients.

2. Advertising planning
In a big concern, the responsibility of advertisement planning is with the advertising
department. However, a part of its responsibility may be delegated to the agency, if it is
used. In planning the advertising for a particular product, the agency analyzes the
marketing methods and distribution channels used in the past for the product and obtains

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specific information about the business environment in which advertising messages need
to be spread.

3. Media selection
The advertising agency must secure space in the media. The media may be press, radio,
television, billboards etc. depending upon advertising needs. In making a media choice,
several factors such as media cost circulation, population to which it serves, income and
other relevant information must be assessed. Agency has regular contacts with various
support systems required for the production of appropriate ad material. The major
advantage of an agency is its regular dealing with the media and the expertise in
developing advertisements to suit the requirements of its clients.

4. Creative Function
A proper layout must be selected if the work undertaken by the agency is to be fulfilled to
the client's satisfaction. For this reason, copy writers are employed whose job is that of
expressing in words the idea that makes up the advertisement. The artist is responsible for
the physical layout and interpretation of copy ideas. The broadcast and production must
be established depending upon the nature and size of the business.

5. Research
The advertiser wants the agency not only to buy space, but actually undertake the work of
advertising. This requires the services of the research workers. Field researchers deal
largely with statistics and people to obtain information from them about advertisement.
Ad agencies will take an objective view of the advertiser's plan and proposal and, thus,
venture to put forward its specialized opinions and comments. This will result in cost
efficiency.

6. Marketing Functions
Advertising agencies carry the non-advertising marketing functions also such as selecting
target customers, determining prices and discount, designing products and packages and
developing channels of distribution strategy etc.
The advertising agency's skills can also be useful in the preparation of campaigns, where
the risks involved are high, such as in the introduction of new products. The advertiser
may not take this risk at the introductory stage of his product.

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7. Coordination
The advertising agency coordinates with the clients sales force and its distribution
network to ensure long run success of the advertising programme. An ad agency enables
an advertiser to advertise his goods and services, comparatively at a much cheaper cost
than the advertiser himself can do.

8. Trained personnel
Creative, qualified and trained personnel are required for advertising the products. It may
not be possible for an advertiser to have on its panel, permanent staff, having the variety
of skills required to produce appropriate advertisements. These skills are possessed by
personnel of an ad agency.

TYPES OF ADVERTISING AGENCIES

1. In-house Agencies

An advertising agency owned and managed by the advertiser is known as an

in-house agency'. It is operated under the direct supervision and control of the advertiser.
It performs all the creative and media functions involved in advertising. But these
functions are performed mainly for the advertiser. Giant business firms establish an
in-house agency to look after its advertising needs. For example, Lintas and Mudra
communications, two of the top advertising agencies in India, began as in-house agencies
of Hindustan Unilever Ltd. and Reliance Industries respectively. Over a period of time,
an in-house agency may start doing work for outside firms with the permission of its
parent company.

An in-house agency saves the time and money of the advertiser. It can keep close liaison
and better understand the needs of the advertiser. It provides more control by the
advertiser over costs and time schedule. But some critics are of the view that an in-house
agency lacks full creativity because it gets ideas only from one company and no
brainstorming is done. The reasons for using in-house agency are as follows:

a) Savings: It saves the profit of an outside agency.

b) Specialization: In-house agency better understands the company's I advertising needs.
(c) Priority Service: The in-house agency works only for the client and is immediately
available. There are no conflicts with other clients

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(d) Minimum Staffing: In-house agency employs minimum staff and engages freelance
staff to handle peak workloads.

2. Direct Response Agencies

As opposed to advertising which involves mass communication, and where consumers

are identified in terms of broad groups, sharing common demographic profiles, direct
response involves communicating and getting a response from individuals who can be
identified by name, address and purchase behavior.

Direct response communication differs from advertising in many ways. Here the attempt
is to get the consumer to decide on purchase of the product as soon as he sees the
communication. One good form of direct response is direct mail. This is effectively used
by organizations such as Readers Digest, that attempt to get the potential consumer buy
the product either through a discount or some other attractive offer. Since the response
has to be immediate, the communication of a direct response usually provides a response
coupon, or a toll free number, so that the consumer can immediately contact the seller and
avail of the benefit.

3. Sales Promotion Agencies

Sales promotion comprises a wide variety of tactical promotion tools of short term nature,
designed to stimulate an earlier or a stronger market response. Sales promotions are
designed for consumers, trade, institutions and even the company's sales force.
Consumer promotions are designed essentially to tempt the consumer to purchase
immediately and are for a short period. They could be in the form of sampling, gifts,
coupons, prices off, contests etc.

Trade promotions are designed to get the trade to stock up more of the company's product
and thus preempt competitors. They could be in the form of free goods, dealer contests,
extended credit etc.

Sales promotion agencies should be capable of designing effective campaigns and

implementing them at the grass root level. Some advertising agencies have developed
separate divisions to cater to this requirement. Others such as Kidstuff have built
organizations from scratch and over a period of time have become competent in this area.

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4. Public Relations Firms

Public relations or PR as it is often called is confused to mean only press relations. This
really undermines the role of a PR firm and importance in the development of an
integrated marketing communications campaign for a client. Public relations actually
extend the entire gamut of the business chain. It includes employees, suppliers,
shareholders, regulatory bodies, the retail and the firm customers.

Good PR essentially involves getting good coverage for the company and its brands
across the media. Hence many companies employ PR managers within the firm to look
after the PR requirements of the company.

The role of the PR manager in the company is :

a.To monitor the internal and external communication of the firm
b. To liaise with the PR agency and the media
c. To develop PR strategies for the company and execute them
d. To evaluate the company's PR programmes and provide feedback to the PR firm and
top management.

Public relations agencies need to employ people with good writing skills, not only in the
English language but also in the national language and the vernacular. In a vast and
diverse country like India with its manifold diversities in terms of religions, languages,
culture etc, the importance of such a capability within the agency cannot be
underestimated. This capability helps in drafting of good press releases which accurately
project and highlight the company's point of view.

Arranging for press conferences is another function of the PR firm. This involves
contacting the reporters of the various media, primarily the press and the TV channels
and ensuring their attendance, organizing the venue and all the logistics involved thereof,
giving proper guidelines to the client in terms of what to say and what not to say etc.,

5. Event Marketing Agencies

Event marketing is increasingly becoming an important marketing tool in the hands of

many companies. In India cricket and films attract the maximum audiences. Accordingly
most companies try to have their brand presence at events featuring cricketers or film
stars.

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Events can broadly be categorized into the following kinds:

a. Sports Events

b. Film Star Events

c. Industrial Exhibitions

d. Conferences

a. Sports Events: The most popular sport in the country being cricket, sponsorship of
such events has become big business today. Big companies bid for the sponsorship rights
and/or television rights for such events and then market the same to clients. Similarly
cricketers too employ professionals to negotiate on their behalf for the endorsement of
various brands. Agencies such as Nimbus and Madison are big players in this domain.

b. Film Star Events: Film stars are another big attraction in India. Accordingly film star
award functions are big events and many companies vie with each other to sponsor such
events. Beauty contests form another genre of glamorous events which attract good
sponsors. Agencies such as Wiz craft International are in the forefront of organizing and
managing such events.

c. Industrial Exhibitions: Also sometimes termed as trade fairs, these are organized to
get the trade under one umbrella. Such exhibitions also attract customers. Good examples
in the country are the India International Trade Fair organized in Delhi and the
Inside-Outside trade fair organized in different parts of the country.

d. Conferences: Conferences are becoming more and more popular particularly among
the intelligentsia of the country. Many publication groups such as the India Today Group,
The Times of India Group and the Dainik Jagran Group have developed capabilities in
organizing such events. These conferences typically attract speakers of repute from all
across the world and include businessmen, management gurus, religious god men,
politicians etc.

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While sponsorship of the event delivers to the sponsor a limited audience at the event
itself, major mileage is obtained through the telecasting of that event. Event management
agencies therefore have to have the capabilities of not only being able to manage the
event, but also the advertising and publicity that follows. It is for this reason that many
event management firms have developed PR capabilities and many PR firms, event
management capabilities.

Event management is a very labour intensive job. It involves managing the artistes, the
logistics of stage management and preparation of sets, lighting, sound, traffic control etc.
Event managers often experience Murphy's law in action, and things begin, to go wrong,
when they least expect it.

6. Interactive Agencies

The Internet is increasingly becoming an important media today and is growing in leaps
and bounds. While advertising agencies are extremely comfortable with dealing with the
offline media, most do not still understand this new medium. Therefore many agencies
are addressing the issue of understanding these mediums and developing capabilities of
communication through this medium.

7. Collateral Services

Many advertising agencies outsource some of their work, giving rise to formation of
collateral services. These are photographers, stock picture model coordinators, and film
production houses.

Some agencies have in-house capabilities for photography. However, many outsource this
to freelance photographers. The choice of the photographer depends on the nature of the
photograph required. Some photographers specialize in food photography, others in
fashion photography, yet others outdoors. The rates depend on the reputation of the
photographer. Typically it consists of a daily rate plus expenses.

Models are very often required by agencies for various campaigns. There are many
freelance coordinators in the market who maintain a database of models which they make
available for a fee.

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Most agencies prefer to work with film production houses to produce their commercials.
The agencies develop the creative product up to a point and then engage a film
production house to produce the commercial. These production houses have their own
film directors, set developers. Cameraman, studio coordinators, film editors etc. They
charge depending upon the kind of inputs that will be required to produce a given
commercial.

ADVERTISING AGENCY STRUCTURE /Organisation Structure of an Ad Agency

An advertising agency usually has the following departments:

1. Contact departments

This department gets business for the agency by maintaining existing clients and
contacting new clients. It is headed by the Accounts Executive who bridges the gap
between the agency and the clients.

2. Media department

This department selects the advertising media for its clients and allocates the budget for
the media chosen. It decides the channel through which information shall reach the
consumers. It is headed by the_media analyst, who decides the kind and number of
consumers to reach and the medium through which they can be reached.

3. Copy department

This department designs the advertisement copy in which the advertisement is to be

framed. Advertising copy is the heart of the advertising programme and must be designed
properly. The department is headed by the copy director, who designs the advertisement
copy with the e of copy-chief and copy-writers. This department works in coordination
with the accounts executive and the research department.

4.Art and Visualisation Department.

The department prepares the advertisement visuals and layout for the essay posters,
calendars etc. It is headed by the art director, who works with the help of artists, layout
men and visualisers.

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5.Production Department

This department produces the advertisement copy, as designed by copy and art
departments. It is headed by the production manager who gets the pe-setters to set the
copy in type and photographers to get the pictures and illustrations. Some agencies get
this work done through outside units

6.Finance Department

This department looks after the financial matters related to the advertisement like
maintaining accounts, billing and collecting dues from clients, checking invoices against
orders, paying the bills to the media owners, getting their commission from the media,
etc.

7. Research Department

This department studies the effects of advertisements on sales. It is headed by the

research director, who carries out the research work with the help of analysts, marketing
assistants and statistical clerks.

8. Public Relations Department

Advertising creates and maintains long term relationships between the Company and its
customers. The public relations department of the advertising agency takes care of this
and maintains mutual relationships between its clients and the public.

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SELECTION OF AN ADVERTISING AGENCY (AGENCY SELECTION)

While selecting an advertising agency, the following factors should be kept in mind:

1. Size and Competence of Staff: First of all a good advertising agency must have an
adequate and experienced team of specialists in different areas of advertising
management. The agency team must consist of researchers, copy writers, artists, media
experts, etc. The attitudes, thinking and skills of the team should be adequate for the
needs of the advertiser.
2. Compatibility: The advertising agency needs to be compatible with the task entrusted
to it. The needs and expectations of the advertiser determine the suitability of the agency.
The advertiser wants that the agency's methods of handling accounts and using the
available opportunities should be satisfactory. Personal equation of the client with the
agency is also relevant.

3. Roster of Present Accounts: The list of present clients of the is another important
consideration. The agency is deemed to be fit if its clients are well-known business firms
and these are happy with the agency's services. agency

4. General Reputation: The overall goodwill and prestige of the agency in the field of
advertising need to be taken into consideration. The agency must be well known and its
track record should be sound.

5. Facilities and Services: The infrastructure and facilities available with the agency are
important. Its contacts and reach with different media and other concerned institutions
should be considered. The range of services offered by the agency is also significant in
making the choice.

6. Financial Soundness: Only a financially healthy agency can render efficient and quick
services to its clients. Its average billing on accounts indicates revenue generating
capacity.

7. Stability: An agency which has been long in the field can perform more efficiently and
effectively. The investment in the agency and its management are examined before
selecting a suitable advertising agency.

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8. Requirements: The advertiser has to decide whether he needs a full service agency or
a specialized agency. The chosen agency must understand the clients' requirements and
problems.

9. Creativity: The style, clarity, memorability and impact of the agency Eire to be taken
into account. A good agency has a problem-solving approach.

10. Cost: The fee and commission quoted by the agency is an important factor
influencing the selection. The charges need to be reasonable in the light of the work to be
done.

Clients change agencies when they feel that another agency will do a better Job for them.
The agency may become the scapegoat when the client's sales volume falls.

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