Advertising Agency – Functions, Structure, Compensation, Selection, Why Agency loose clients

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

1. Planning, creating and producing the advertisements

2. Media selection

3. Research

4. Strategic marketing planning

5. Sales promotion

6. Events, trade shows

7. Package design

8. Public relationship

Tasks performed 

1. Complete market analysis

2. Develop an advertising plan

3. Prepare a creative strategy

4. Create advertising executions

5. Handling billing and payments

6. 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

1. The Creative Department is responsible for creation and execution of advertisements

2. Copy writers are creative specialist responsible for creation of ideas, headlines, body

3. Art department –  Decides how the advertisement should look and prepare a layout or story board.

4. Production department – Responsible for production of the advertisement

5. Traffic department – Responsible for coordination of all the phases of production and ensuring that they meet media deadlines

Account Services

1. An account executive acts as liaison between client and company.

2. He is responsible for strategy development

3. He is responsible for understanding client’s business and needs

4. He represent clients point of view to the agency and vice versa

Marketing Services

1. Research department – To gather, interpret and analyse data for a situation.

2. Media department – To develop a media plan to reach the target audience in a cost effective manner

Management and Finance

Perform Functions of :

1. Finance

2. Accounting

3. Human resources

4. 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

1. Suitability – Type, Location, Connections, Policies

2. Facilities and Services provided

3. Past Record and Clientele

4. Reputation – Popularity and Promptness of service

5. Management – Conservative or Dynamic

6. Size of the Agency and Fees charged

How do Agencies get Clients 

1. Competition – Unsatisfied clients of competitors

2. Referrals – Word of mouth

3. Presentations – Good presentations from creative team

4. Solicitations

5. Client Agency Relationship

Reasons Why Agency lose Clients

1. Dissatisfaction

2. Poor communication

3. Unrealistic client demands

4. New managers

5. Conflict of interest due to mergers

6. Change in client`s strategy

7. Decline in sales of a client company

8. Compensation Disagreements

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