Advertising Agency
Definitions Provided by Philip Kotler, Rozer, Borton and
American Association of Advertising Agency
• A firm engaged in providing services of
advertisement for clients to create awareness
and market for them is known as advertising
agency. These agencies involve people with
specialized skills and knowledge who are well
versed in marketing, advertising and
consumer behavior. These experts combine
their talent to create advertisement for their
clients. Therefore, an advertising agency is a
specialized organization helping its clients to
adopt advertising for marketing their goods
and services in most effective manner.
• Philip Kotler opines that “Advertising agency is
a marketing service firm that assists its clients
in planning, preparing, implementing and
evaluating various activities of advertising
campaign.”
• Another view expressed by Rozer and Borton
is that “Advertising agency is a group of
persons who have a specialization in
advertising. It includes ad copywriters, ad
designers, media selectors and advisors for
various advertising issues”.
The common features can be identified as:
• 1. Advertising agency is an independent business
organization.
• 2. Agency provides services to its clients who are
searching customers for their goods and services.
• 3. Agency employs the experts, researchers etc.
• 4. Agency performs the functions like planning,
implementation of campaign, research, follow up
advertisement, measuring effectiveness of
various media for its clients.
• 5. It charges fees, service charges and
commission from its clients.
What Advertising Agencies do?
• The work that advertising agencies do is described in
the “Agency Service Standards” of the American
Association of Advertising Agencies. These Service
Standards, a delineation of fundamentals of successful
agency operation, enable advertisers and media to
know what to demand and agencies to know what may
be expected of them in dealing with the problems of
advertising. Agency service, according to the “Agency
Service Standards,” consists of interpreting to the
public or to that part of it which it is desired to reach,
the advantages of a product or service.
This interpretation is based upon:
• (1) A study of the client’s product or service in order to
determine the advantages and disadvantages inherent
in the product itself, and in its relation to competition.
• (2) An analysis of the present and potential market for
which the product or service is adapted –
• (a) As to location.
• (b) As to extent of possible sale.
• (c) As to season.
• (3) A knowledge of the factors of distribution and sales
and their methods of operation.
• (4) A knowledge of all the available media and means
which can profitably be used to carry the
interpretation of the product or service to consumer,
wholesaler, dealer, contractor, or other factor.
Basic Principles of Client-Agency Relationship (Car):
• These principles are:
• (i) The agency avoids advertising a close substitute
competing product. The client, too, avoids engaging
the services of another competing agency.
• (ii) The agency receives the green signal from the client
for all the expenses incurred on its advertising.
• (iii) The agency keeps the media commission for itself
and the client undertakes to foot the bill promptly.
• (iv) If the media grants any cash discount, it is passed
on to the client.
• (v) The agency is not taken to task for media lapses in
terms of scheduling, positioning, etc.
Basic Principles of Agency-Media Relationship:
• These principles are:
• (i) The agency alone is responsible for payment to
the media.
• (ii) The agency does not allow any cut from the
commission received from the media to go to the
client.
• (iii) The media do not discriminate amongst the
agencies dealt with and follow a uniform policy
for all the agencies.
• (iv) The media do not alter the advertising
material without the prior consent of the agency.
2 Major Types: Full Service Agencies
and Specialized Agencies
Full Service Agencies
• These are the medium or large sized agencies
capable of conducting complete advertising
campaign. The main agency may be assisted
by many subsidiaries engaged in various other
related activities like market research, sales
promotion, advertising, public relation, media
buying, film production etc. Thus, these
agencies are capable of handling all the
various related activities of advertisement
from beginning to end.
Specialized Agencies
• These are the agencies which provide only one or selected
services out of the entire range services. Those agencies do
not have specialization in all services or not supported by
other specialized subsidiaries. The firms willing to get only a
part of whole range of services may go in for specialized
agencies. For instance, creative Boutiques and Media
Buying Agencies.
• These agencies get their charges in any form of – (i)
Commission – A fixed rate of commission (ii) Fees – In
addition to commission, it may insist for payment of fees,
(iii) Percentage charges – agency charges some percentages
of charges as mark up when agency buys some services
from outsiders, (iv) Incentives based system – The fees
here are based on how best the agency performs in
achieving the pre-determined goals.
Top 4 Functions:
Research, Creating Advertising, Media Buying
and Ad Placement and Providing Ad-On Service
Research
• Advertising agencies carry out various types of
researches to facilitate the advertising process. These
research activities relate to consumers, market and the
product. Through consumer research, agencies
determine consumers’ perceptions about the product’s
strength and weaknesses.
• Also, the way a product is positioned or a new product
to be positioned in consumers’ mind is being
determined on the basis of research inputs only. The
understanding of consumers’ level of awareness, their
attitudes, beliefs and knowledge about the product
helps agencies in determining communication
problem(s) and the formulation of appropriate
communication strategy relating to the product
concerned.
Creating Advertising
• It is the core competence of most of the agencies
whether large or small in size. The creation of
advertising function includes various activities relating
to its writing, designing and producing ads. The copy
writers develop the message copy, its headlines,
slogans, tag lines, and body copy.
• The art directors carry out the designing of an ad in
terms of its colour, contrast and pictures. The
production of the ad as per the specifications given in
the layout is done by the producers. Advertising
agencies provide the environment and facilities to
these people having specialized skills as it is through
their interactions and elaborative efforts that the
creation of advertising takes place.
Media Buying and Ad Placement
• In view of growth in media option/opportunities
causing media fragmentation, placing an ad with media
has become one of the important decision requiring
whole lot of data based discussions and deliberation.
Agencies role in placing ads with the media goes back
to its traditional association with the media.
• Being sellers of space in media, overtime agencies have
evolved into buyers of space and buy media time and
space on behalf of the advertiser. Being in the business
of creating advertising, agencies are generally more
close to media and hold more information and
knowledge about media scenario. Because of
specialized skills, agencies are also better equipped to
negotiate while buying media time and space.
Providing Ad-On-Services
• Clients now expect from their agencies to provide
additional services and not just advertising. This
is another functional area of advertising agencies
which includes the provision of services
concerning preparation for printing of sale
material, publicity campaigns, other sales
materials, sales meetings, etc.
• Since clients expect a package solution to their
varied communication needs, more and more
agencies, especially large agencies, are getting
into the business of providing one-stop-shop
offer to their clients. They either acquire or hire
the specialists divisions having competencies in
regard to various additional services.
• The advertising agency co-ordinates between
various specialist divisions and, thus, provides
integrated solution to the communication needs
of the client. Overtime, agencies have become
the provider of total communication solutions
and not just advertising as a solution to
communication needs of the client.
• Depending upon the functions performed by the
agencies and the services rendered to the client,
these agencies are grouped either as large or
small size agencies. The large size agencies are
usually the full service agencies providing the
entire breadth of services to the client. Small
agencies, on the other hand, are the specialized
kind of agencies which offer only one or few of
the services to their clients.
Factors Affecting the Selection of Advertising Agency:
Agency Team, Range of Services Rendered, Research
Activities, Success Rate and a Few Others
• 1. Agency Team – An agency has to possess
management experts, market researchers, production
managers, art directors, copy writers, media experts
and others. The quality and expertise of these
specialists team is considered while finalising the
agency.
• 2. Range of Services Rendered – An agency may be full
services agency or specialized agency. An advertiser
should keep in mind the type of services required to be
hired.
• 3. Research Activities – Advertising agency should
consider the type of research activities conducted by
companies. Because there are market research
companies or advertising research companies or both.
• 4. Success Rate – The advertisers may look at the
various accounts already handled by an agency and the
success rate.
• 5. Need of Marketing Plans – It is necessary to see
whether the assistance in preparing the marketing
plans can be provided by the agency. In case of clients
with new products, it is necessary to consider this
factor.
• 6. Compatibility – It means the personal equation of
the advertiser with the client. There can be perfect
harmony and cordial relation between client and
agency when there is compatibility.
• 7. Stability of Agency – The selection of agency
depends upon the regular and stable services provided
in that line. Its commitment in fulfilling the accepted
tasks is noteworthy. The known agencies are preferred
to the new ones.
• 8. Creativity – Advertising needs creativity. An agency
having good team of creative persons is selected.
Because, it is main factor in making advertisements
different and attractive.
Role of Advertising Agencies
• Since 1841 when the concept of advertising agency
took its birth, the agencies have evolved for their role
in advertising process. To begin with, agencies were
merely the space sellers, selling space to advertisers
and were paid by the space owners, i.e. media houses
like newspaper publishers.
• With the change in scenario on demand and supply of
media space and time, these agencies started working
as agents for advertisers and became space buyers
instead of space sellers. Advertisers pay the agencies
for their services by way of fixed percentage usually 15
per cent commission on media bills.
• While representing advertisers, the agencies try to negotiate the
lowest possible rates with the media houses. Primarily, the
functions of agency include planning, preparing and placing ads
with media.
• However, overtime there has been a realization among both the
advertisers and the agencies that although advertising has its
significance in communicating with target market, yet ad agencies
and their media advertising constitutes only one part of client’s
total communication and marketing mix.
• The other parts include sales promotion, public relation, direct
marketing and so on. As a consequence, there has been a shift in
marketing expenditure away from advertising and into sales
promotion and direct marketing, etc. At the same time, there is an
intense desire on the part of the client for integrating various
marketing communication tools to have singularity in their
communication with target market. These changes certainly have
their fallout on agency’s role in marketing and advertising process.
• With the growing idea of integrated marketing
communication, agencies are changing in terms
of their perspective and, are offering not simply
their media advertising capabilities, but their
other capabilities as well. The idea is to better
serve client’s total communication needs.
Agencies adapted themselves by floating special
divisions offering specialized services and
branded themselves as one-stop-shop offer.
• To further tune themselves to the changes, the
specialized agencies are also acquired through
merger and acquisition. Since clients themselves
are globalizing, the large scale mergers and
acquisitions in the advertising industry are
necessitated by the growing demand for
networking capabilities of large agencies to serve
the communication needs of global brands.
• In a nutshell, agencies align themselves with specialized people to provide
a complete orchestration in serving clients’ varied communication needs.
From merely an agent providing only certain creative services to the client,
advertising agencies have evolved into providers of communication
services and are more appropriately referred to as ‘communication
agencies’ instead of advertising agencies.
• Thus, the re-invented agencies provide an entire range of services that go
under the name of communication. And, in the process of evolution into
communication agencies, these agencies have assumed the role of being
strategic partners providing multiple services. No longer are agencies now
thought of as amalgamation of certain functions or services.
• It is like other business organizations focused on serving its customer’s
needs – which is to add value to a client’s marketing functions. As such
agencies participate in the broader exercise of brand building entailing full
suite of activities like formulating strategy for finding new customers,
preparing marketing mix, helping in understanding the customers, getting
them to try the brand, keeping existing customers, developing a long-term
relationship with them, and even guiding the client in the new emerging
areas in the market space like internet.
• In fact, agencies are now exercising to become brand managers
integrating their whole lot of services to build the brand with one voice.
But how far agencies remain successful in their new role of integration is a
matter of curiosity for market analysts, as the emerging trend now
involves unbundling of advertising agency into creative and media
specialists.
