THE ADVERTISING AGENCY AND AGENCY CONSIDERATIONS TO BE READ WITH JASONS SLIDES

Ad. P & P - Lesson 6

Learning Outcomes

Identify the various groups in the advertising business and explain their relationship with one another Describe the types of advertising agencies Account for the ranges of tasks people perform in an ad agency and in-house advertising department Discuss how agencies make money Debate the pros and cons of an in-house ad agency Describe the agency selection process

The Organizations in Advertising

Advertisers (or clients): The companies or institutions that sponsor advertising for themselves and their products Advertising Agencies: Helps the advertisers plan, create and prepare ad campaigns and other promotional materials Media: Sells time (on radio and TV) and space (in print, outdoor, or digital media) to carry the advertisers message to the

Suppliers: Includes the photographers, illustrators, printers, digital service bureaus, colour film separators, video production houses, web developers, and others who assist bother advertisers and agencies in preparing advertising materials Also includes consultants, research firms, and professional services that work with both advertiser and agencies

The advertiser is the person or organization that uses advertising to send out a message about its products. The advertiser becomes the agencys client. As the client, the advertiser is responsible for monitoring the work and paying the bills for the agencys work on its account. That use of the word account is the reason agency people refer to the advertiser as the account and the agency person in charge of that advertisers business as the account manager

How Large Companies Manage Their Advertising

Many people involved in their advertising: Company owners, top company executives, (sales & marketing):
Assist

in the creative process Help choose the ad agency Evaluate proposed ad programmes

Staff in ad dept report to advertising manager who reports to a marketing director or marketing services manager

One-Man-Businesses & IMC

Great product/service Tend to cash, accounts and customers Talk with customers Write and place ads Answer phone inquiries Talk to the media Successfully combine personal selling, media advertising, direct marketing, sales promotions and sales promotions One-man-business are often the consummate integrator of marketing communications

The Advertising Agency

An independent organisation of creative people and business-people who specialize in developing and preparing marketing and advertising plans, advertisements, and other promotional tools The agency also purchases advertising space and time in various media on behalf of different advertisers, or sellers, (its clients), to find customers for their goods and services

Why Choose an Ad Agency?

Independent: Brings objectivity Creates more effective ad and selects more effective media
Combines

business-people and creative people (administrators, accountants, marketing executives, researchers, market and media analyst, writers, artists) Researches, negotiates, arranges and contracts for commercial space and time with various print, electronic and digital media Exposure to a wide spectrum of marketing situations make agencies experts

Types of Agencies

Geographic Scope Range of services offered Type of business handled

Geographic
Local Agencies Regional and National agencies International Agencies Local Agencies: Small ad agencies that offer expert assistance to local advertisers

Analyze local advertisers business and products and services being sold Evaluate the advertisers competitive position and offer strategic options

Evaluate media alternatives and offer rational recommendations Devise an integrated communications plan and implement it with consistency and creativity Save the advertiser valuable time by taking over media interviewing, analysis, billing and booking Assist in other aspects of advertising and promotion by implementing sales contest, publicity, grand openings, etc

Full-Service Agency

In advertising, a full-service agency is one that includes the four major staff functions:
Account

management Creative services Media planning and buying Account planning, which is also known as research

A full-service advertising agency will also have Its own accounting department A traffic department to handle internal tracking on completion of projects, a department for broadcast and print production (usually organized within the creative department) A human resources department

Full Service Agencies

Supplies both advertising and nonadvertising services in all areas of communications and promotion Advertising services include: Planning, creating, and producing ads; performing research; and selecting media Non-Advertising services include:

packaging to public relations, to producing sales promotion materials, annual reports and trade show exhibits Now at the forefront of interactive marketing

Specialized Service Agencies

Creative Boutiques: Manned by talented artists such as graphic designers and copywriters Work for advertisers and occasionally subcontract to ad agencies Mission is to develop exciting creative concepts and produce fresh, distinctive advertising messages Although economical, usually dont provide research, marketing, sales expertise, or deep customer service

Media-Buying Services: Set up to purchase and package radio and TV time Radio and TV stations pre-sell as much time as possible and discount rates for large buyers Media-buying service negotiate special discounts and sells the time or space to agencies or advertisers

Interactive Agency: Specialize in designing Web pages and creating fun, involving, information rich, online advertising A la Carte: (French; meaning according to the menu, with a separate price for each item on the menu). Specialized agencies that deal with one or two ad functions

Functions of Ad Agencies

Account Management
Account

Executives liaise between agency and client Responsible for formulating and executing advertising plans Mustering the agencys services Represents clients point of view to the agency

Research and Account Planning: Account planning uses research to bridge the gap between account

Creative Concepts: Most ads rely on copy (headline and message), created by copywriters. Non-verbal communication is the purview of the art directors (graphic designers & production artist) who determine ads verbal and visual symbols fit together Advertising Production: Print and Broadcast: Once ad is designed, written and approved by client, it is turned over to agency's production manager or broadcast producers (others: direct

Media Planning & Buying: Media service include: research, negotiating, scheduling, buying and verifying No longer a simple task to due explosion of new media options Demands adherence to tight budget demands, ingenious thinking, tough negotiating and careful attention to details

Traffic Management: A coordination of all phases of production to ensure that everything is completed before client and/or media deadlines Often the entry-level roll for college graduates and an excellent place to learn about agency operations

Agency Remuneration

Media Commissions: Agencies retain 15 percent commission on space or time purchased on behalf of clients Mark-ups: Agency pre-pays all supplier charges and adds a mark-up of 15% percent of the invoice)

Agencies may increase their mark-up to 20 or 25 percent to cover their costs or lower their mark-up in competitive bids based on the size of the project

Fees: An amount of money paid for a particular piece of work

Becoming more common as clients expect agencies to solve communication problems rather than just place ads

Fee-commission combination: Agency charges basic monthly fee for all its services to the client and retains any media commissions earned Straight-fee or retainer method: Agencies charge for all their services either by hour or month and charge media

Incentive System: For accountability reasons, agency earns more money if campaign attains specific, agreed-upon goals

Comparing Fee and Commission

A commission is the amount an ad agency charges the client as a percentage of the media cost. Most advertisers now use a fee system either as the primary compensation tool or in combination with a commission system. The fee system is comparable to the means by which advertisers pay their lawyers and accountants. The client and agency agree on an hourly fee or rate. This fee can vary by department or it could be a flat hourly fee for all work regardless of the salary level of the person doing the work. Charges are also included for out-of-pocket expenses, travel, and other standard items. All charges are billed to the client, and no commission is added to the

The In-House Agency

Merits:
Saves

money Tighten control over advertising In-house staff sometimes know products and markets better

Demerit:
Loss

of objectivity

Choosing The Right Agency

Does the agency have a feel for the organisation and its brands? Has the agency got strong research capability? Does the agency have strong media capability? Does the agency have creative ability Is the agency full-service or does it subcontract portions to other agencies? In the agency international How much does the agency charge?

How does the agency measure effectiveness of its programmes? Will they accept an incentive system? Does the agency display cost consciousness? Is the agency too big or too small for the organisation? Does the agency have a good track record?

The Agency Selection Process

Define agency requirements Develop a pool list of attractive agencies Invite credential pitch from agencies Issue creative brief to shortlisted agencies Organize full agency presentation Analyze pitch Select winner Agree on contract terms Announce winner

The Creative Brief

A communicational document from the advertiser to the agency detailing what the client requires from the agency. Contains: Company situational analysis Advertising objectives Recommended strategy Target audience Personnel Budget Minutes Timeframes & deadlines Measurement monitoring, evaluation