Ad Agency

CLIENT AND ADVERTISING AGENCY
SHH Kazmi, Satish K Batra 2007
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Advertising and Sales Promotion, S H H Kazmi, Satish K Batra
Excel Books
LEARNING OBJECTIVES
The role of advertisers in organizing advertising
The different types of advertising agencies

The typical full-service agency structure and its functions Agency compensation and evaluation
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Excel Books
IMPORTANT PLAYERS IN THE ADVERTISING SYSTEM

Clients or advertisers (Those who want to communicate with the target audience and provide the necessary funds for the ads and media purchase depending on their marketing programme)
Advertising agency (act as partners with clients for developing the marketing and promotional programmes) Media organizations (provide information regarding the right choice of media for purchase of space or time and reaching the target audience in a cost effective manner) Marketing communication specialists Collateral service providers
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ADVERTISING AGENCY DEFINED

Advertising agency is an independent business, composed of creative and business people who develop, prepare and place advertising in advertising media for sellers seeking to find customers for their goods or services. - (The American Association of Advertising Agencies or 4As)
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IMPORTANT PLAYERS IN ADVERTISING

ADVERTISER (Client Organization)
Advertising Agency
Media Organizations
Various service specialists & collateral services: Direct response, sales promotion, research, package design, video production, photographers, or printers, etc.
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CLIENT OR ADVERTISERS ROLE IN ORGANIZING FOR ADVERTISING

Organizing for advertising and promotion depends on several factors such as company size, number of products, role of advertising in the promotionmix, the budget, etc.
Some popular organizing systems are:
The centralised system

The decentralised system In-house advertising agency
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Excel Books
THE CENTRALISED SYSTEM

Marketing activities are divided along functional lines such as advertising, sales, marketing research, product planning, etc. The advertising manager looks after all promotional activities concerned with the companys products and services, excluding sales management. Following basic functions are performed by the advertising department
under the centralised system:

Planning and budgeting Administration and execution Coordination within the company Coordination with ad agencies and collateral service providers
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Place of Advertising Department under a Centralised System

COMPANY PRESIDENT
Production department
Finance department
Marketing department
Research department
Human resource department
Marketing research
Product planning
Advertising management
Sales management
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Excel Books
MORE ABOUT CENTRALISED SYSTEM
Used by such companies that do not have many divisions, products or service lines, or brands. The system makes it easier for the top management to participate in decision making. Better operational efficiency due to involvement of fewer people in decisions.
Often it gets difficult for the advertisement department to comprehend the overall strategy. Centralised advertisement department is unsuitable and impractical for large sized organizations.
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THE DECENTRALISED SYSTEM

Decentralised system is followed in large corporations with many product lines and brands, e.g. HLL The company has many strategic business units with separate manufacturing, R & D, marketing, sales, product or brand management department. Each brand manager is responsible for managing the assigned brand that includes planning, budgeting, sales and profits. All functions associated with advertising and other promotions are the responsibility of the brand manager.
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Brand Management under Decentralised System

Vice President Marketing
Sales management
Product management
Marketing services
Brand manager -1 Ad agency
Advertising department
Marketing research
Sales promotion Brand manager - 2 Package design Merchandising
Ad agency
Brand manager - 3 Ad agency
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Excel Books
THE DECENTRALISED SYSTEM

The disadvantage of this system is that often brand managers lack training and experience, hence develop brand strategy without a deeper understanding of what the promotions can accomplish. The pressure to show profits often results in short-term strategies. This system also leads to undesirable rivalries amongst brand managers, and disproportionate fund allocations. The authorities of brand managers are not matching their responsibilities. P&G considered these problems and switched to category management system.
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Category Management System

Vice President packaged soap and detergent division
Category General Manager, dishwashing products
Category General Manager, laundry products Advertising Managers
Category General Manager, specialty products
(Each category manager will have one or more advertising managers reporting to him or her for each specific brand, e.g. Ariel advertising manager)
Associate Advertising Managers Brand Managers Assistant Brand Managers

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IN-HOUSE ADVERTISING AGENCY

Some large companies own and operate in-house advertising agency, e.g. Calvin Klein, Benetton, etc. Major considerations for using in-house agency are: Decrease advertising and promotional costs Exercise greater control over advertising activities Bad experience with outside agencies The company has more knowledge and understanding of the market and they think that they can do a better job than outside agency.
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CRITICS OF IN-HOUSE AGENCY

Some critics of in-house agency say:
It cannot match the exposure, experience and objectivity of outside agencies.

Cannot have the range of activities provided by outside agencies. In-house personnel likely to have narrow perspective and may become stale working on the same product. Cost savings need to be viewed vs. the quality of advertising.
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Different Advertising Organization Systems

System Advantages
Disadvantages
Centralised
More efficient communications

Requires fewer personnel Continuity of staff
Less involvement & understanding of overall marketing goals
Longer response time
More involvement of top management possible Decentralised

Limited ability to handle many product lines

Concentrated, individual managers attention
Less effective decision making Unhealthy internal conflicts Misallocation of funds Managers lack sufficient authority Less experience Less objectivity Less flexibility
Rapid response to problems and emerging opportunities
Increased flexibility Cost savings More control on activities and costs Increased coordination
In-house ad agencies
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Excel Books
TYPES OF ADVERTISING AGENCIES

Full-service Agencies
Specialized Service Agencies

Marketing Research Agencies Media Buying Services
Creative Boutiques
Film production services
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FULL-SERVICE AGENCIES
These agencies offer full range of services to their clients in the area of marketing, communications and promotions. These services include marketing and advertising planning, creating and producing the ad, media selection, research, package design, sales training, sales promotion, event management, trade shows, publicity and PR.
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FULL-SERVICE AGENCY
It is composed of various departments responsible to serve the client by performing various inter-related functions. The agency generally has five functional areas: Account Management Creative
Media Services
Support Services Finance and Administration
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FUNCTIONAL AREAS OF A FULL-SERVICE AGENCY
Account Management (Account Services) Responsible for the relationship between the agency and the client.
Marketing / Support Services Research department to gather and interpret data for situation analysis and developing effective ads.
Media Services Responsible for developing a media plan and buy media that can reach the target audience in a cost effective manner.
Creative Services Responsible for creation and execution of the ads. Copywriters are creative specialists.
Management and Finance Responsible for internal administration, HR, Finance and accounting.
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Organisation Chart of a typical Full-service Board of directors Agency

President
VP, Creative services
VP, Account Services
VP, Marketing services
VP, Management & Finance
Copywriters/ Art directors
Print production Account Supervision
Media
Sales promotion
Office Management
Finance
TV production Research Traffic Account executive
Accounting Personnel
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AGENCY COMPENSATION
Three Methods of Compensation: Commission The agency is paid a fixed commission from the media on any advertising space or time purchased for the advertiser. Negotiated fee Agencies and their clients negotiate some type of fee system or cost-plus arrangement for compensation. Some also use an incentive-based system combining the fee. Percentage charges When various services are purchased from the agency, a mark-up of percentage charges is added to the bill to cover up for the administrative costs and for a reasonable profit.
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AGENCY EVALUATION
Financial assessment focuses on how the agency conducts its business vis--vis costs and expenses. Qualitative assessment explores the agencys efforts devoted to planning, developing and implementing the advertising campaign and its achievements. Both formal and informal methods of evaluation are used.
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HOW THE AGENCIES ACQUIRE NEW CLIENTS?
Referrals
Solicitations Presentations
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PRINCIPLES OF CLIENT-AGENCY RELATIONSHIP
Develop a spirit of real partnership based on mutual respect of intelligence and expertise The clients should be less concerned with what other advertisers are doing, or the trend in advertising industry. It is a great sin in advertising to imitate a trend. Great clients take time to really know the agency people as people and treat them as well as human beings. People work harder for their friends. Outstanding clients encourage risk-taking and experimentation and are willing to pay if experiments go wrong. Unless an account is profitable, it is less important to the agency and gets only as much attention.
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PRINCIPLES OF CLIENT-AGENCY RELATIONSHIP
Great clients encourage and make the agency totally absorbed in the companys product, personnel and corporate culture.
Great clients define or agree upon the precise purpose of advertising to help develop outstanding creative work.
Great clients make the agency responsible for the advertising and delegate the authority it needs.
Great clients are honest in their praise and polite in their disapproval. The agency must win the clients trust and give the best it can. The reputation an agency builds is sticky and word of mouth carries immense power.
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CLIENT AND ADVERTISING AGENCY

CLIENT AND ADVERTISING AGENCY

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

The different types of advertising agencies

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

IMPORTANT PLAYERS IN THE ADVERTISING SYSTEM

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

ADVERTISING AGENCY DEFINED

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

IMPORTANT PLAYERS IN ADVERTISING

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

CLIENT OR ADVERTISERS ROLE IN ORGANIZING FOR ADVERTISING

The centralised system

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

THE CENTRALISED SYSTEM

under the centralised system:

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

Place of Advertising Department under a Centralised System

Human resource department

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

MORE ABOUT CENTRALISED SYSTEM

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

THE DECENTRALISED SYSTEM

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

Brand Management under Decentralised System

Brand manager -1 Ad agency

Sales promotion Brand manager - 2 Package design Merchandising

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

THE DECENTRALISED SYSTEM

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

Category Management System

Category General Manager, dishwashing products

Category General Manager, laundry products Advertising Managers

Category General Manager, specialty products

Associate Advertising Managers Brand Managers Assistant Brand Managers

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

IN-HOUSE ADVERTISING AGENCY

SHH Kazmi, Satish K Batra 2007

Advertising and Sales Promotion, S H H Kazmi, Satish K Batra

CLIENT AND ADVERTISING AGENCY

CRITICS OF IN-HOUSE AGENCY