Advertising Agency – Functions,

Structure, Compensation and

Selection
• An Advertising Agency is an independent organisation
that provides
• one or more specialized advertising and promotion
related services to
• assist companies in developing, preparing and
executing their
• advertising and other promotion programme.
• Goal of an Advertising agency
• “Clients advertising leads to greater profits in the long
run than without the
• agency”
Functions of an Advertising agency
Primary Services
• Planning, creating and producing the
advertisements
• Media selection
• Research
• Strategic marketing planning
• Sales promotion
• Events, trade shows
• Package design
• Public relationship
 Tasks performed

• Complete market analysis

• Develop an advertising plan
• Prepare a creative strategy
• Create advertising executions
• Handling billing and payments
• Integrate other marketing communications
 Advertising Agency Structure
• (i) Departmental system – Departments are grouped
around functions and as per the need, specific
department is called upon to serve the client. It
provides employees the opportunity to develop
expertise in servicing difference types of clients.
• (ii) Group system – Individuals are drawn from
different functional areas and work as a group to serve
a particular client. Each group is headed by an account
executive. Employees become knowledgeable about a
particular client which facilitates continuity in servicing
 Full Service Advertising Agencies
• They are large size agencies which offer their clients a full range of
services in the area of marketing, communication and promotion
A Full Service Agency provides the following facilities to a client :

Creative Services
• The Creative Department is responsible for creation and execution
of advertisements
• Copy writers are creative specialist responsible for creation of
ideas,
headlines, body
• Art department – Decides how the advertisement should look and
prepare a layout or story board.
• Production department – Responsible for production of the
advertisement
• Traffic department – Responsible for coordination of all the phases
of production and ensuring that they meet media deadlines
Account Services
• An account executive acts as liaison between client
and company.
• He is responsible for strategy development
• He is responsible for understanding client’s business
and needs
• He represent clients point of view to the agency and
vice versa

Marketing Services
• Research department – To gather, interpret and
analyse data for a situation.
• Media department – To develop a media plan to reach
the target audience in a cost effective manner
Management and Finance
Perform Functions of :
• Finance
• Accounting
• Human resources
• Office management
Advertising Agency Compensation
The Compensation System of an advertising
agency may take the following three forms –
• (i) Commission – The agency is paid fixed
commission from the media on any
advertising space or time purchased for the
advertiser (15%) outdoor media (16.66%).
(ii) Negotiated Fee – The agency and client
negotiate some type of fee system or cost plus
arrangement. It may be :
• (a) Fixed fee method – Monthly fee based on
the work being done
• (b)Cost plus system – A Fee based on cost of
work + mutual agreed margin or profit
• (C)Incentive based system – The agency gets
compensated on the basis of their
performance criteria may be sales/market
share/quality as agreed by the advertiser. Get
compensated through media commission,
fees, bonus etc.
• (iii) Percentage charges – A mark up of
percentage charges for various services from
outside providers. Range – (17.65% – 20%)
Factors Affecting Agency Selection
• Suitability – Type, Location, Connections,
Policies
• Facilities and Services provided
• Past Record and Clientele
• Reputation – Popularity and Promptness of
service
• Management – Conservative or Dynamic
• Size of the Agency and Fees charged
How do Agencies get Clients
• Competition – Unsatisfied clients of
competitors
• Referrals – Word of mouth
• Presentations – Good presentations from
creative team
• Solicitations
• Client Agency Relationship
 Reasons Why Agency lose Clients
• Dissatisfaction
• Poor communication
• Unrealistic client demands
• New managers
• Conflict of interest due to mergers
• Change in client`s strategy
• Decline in sales of a client company
• Compensation Disagreements