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Integrated Marketing

CommunicationsModule 2

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Topics to be covered

Advertising Agency: Types of

Agencies

Services offered by various agencies Criteria for selecting the agencies and

evaluation

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Participants in the Integrated

Marketing Communications

Process

Advertiser

(client)

Advertisin

g agency

Media

organi

zations

Marketing

communication

specialist

organizations

Direct marketing

agencies

Sales promotionagencies

Interactive

agencies

Public relations

firms

Collateral

services

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Advertising Agencies

The advertisers, or clients are the keyparticipants in the process. They have theproducts, services or causes to be

marketed, and they provide the funds thatpay for advertising and promotions.

Many organizations use an advertisingagency, an outside firm that specializes in

the creation, production and/or placement ofthe communications message and that mayprovide other services to facilitate themarketing and promotions process.

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Media organizations are another major participant in theadvertising and promotions process. The primary functionof most media is to provide information orentertainment to their subscribers, viewers, orreaders. But from the perspective of the promotionplanner, the purpose of media is to provide anenvironment for the firms marketing communicationsmessage.

Specialized marketing communications services provideservices in their areas of expertise.

Collateral services are the wide range of supportfunctions like marketing research used by advertisers,

agencies, media organizations and specialized marketingcommunications firms.

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Advertising AgenciesMany major companies use an advertising agency to assist them in

developing, preparing and executing their promotional programs.An ad agency is a service organization that specializes in planning

and executing advertising programs for its clients.

Top 12 Ad AgenciesOgilvy & Mather Brooke Bond Red Label, Bru, Limca, Lenovo

CADBURY DAIRY MILK SILK

Mudra Communications- Himani Navratan Lite, MagicBricks.com,

Nilon's PickleMcCann Erickson- NescafeJWT- Horlicks, 7Up Lemon BiteLowe Lintas- Tata TeaRediffusion Y&KLG, MTS, Rasna, Tanishq, Tata Ace, Tata Nano, INGVysya Life InsuranceLeoBurnett- Bajaj Fans, HDFC, McDonald's McSpicy, Reliance Mobile,

Tide, MaazaGrey Worldwide - Dinesh Suitings, Kiwi, Parle-G, Bharti AXA Life

Insurance

FCB-Ulka - 99acres.com, Mint-O Fresh, Tata Indicom, HCLSaatchi & SaatchiAriel, OLX, Pillsburry AttaR K Swamy BBDO- Sony hi-fiContract Advertising-Ashok Leyland,Asian Paints, Domino's, JaypeeGroup, Spice Jet, Whirlpool, HSBC

http://www.afaqs.com/advertising/storyboard/index.html?keyword=Ogilvy%20Indiahttp://www.afaqs.com/advertising/storyboard/index.html?b=MTShttp://www.afaqs.com/advertising/storyboard/index.html?b=Rasnahttp://www.afaqs.com/advertising/storyboard/index.html?b=Tanishqhttp://www.afaqs.com/advertising/storyboard/index.html?b=Tata_Acehttp://www.afaqs.com/advertising/storyboard/index.html?b=Tata_Nanohttp://www.afaqs.com/advertising/storyboard/index.html?b=ING_Vysya_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=ING_Vysya_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=Tidehttp://www.afaqs.com/advertising/storyboard/index.html?b=Maazahttp://www.afaqs.com/advertising/storyboard/index.html?b=Maazahttp://www.afaqs.com/advertising/storyboard/index.html?b=Bajaj_Fanshttp://www.afaqs.com/advertising/storyboard/index.html?b=HDFChttp://www.afaqs.com/advertising/storyboard/index.html?b=McDonald%27s_McSpicyhttp://www.afaqs.com/advertising/storyboard/index.html?b=Reliance_Mobilehttp://www.afaqs.com/advertising/storyboard/index.html?b=Tidehttp://www.afaqs.com/advertising/storyboard/index.html?b=Maazahttp://www.afaqs.com/advertising/storyboard/index.html?b=Bharti_AXA_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=Dinesh_Suitingshttp://www.afaqs.com/advertising/storyboard/index.html?b=Kiwihttp://www.afaqs.com/advertising/storyboard/index.html?b=Parle-Ghttp://www.afaqs.com/advertising/storyboard/index.html?b=Bharti_AXA_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=Bharti_AXA_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=99acres.comhttp://www.afaqs.com/advertising/storyboard/index.html?b=Mint-O_Freshhttp://www.afaqs.com/advertising/storyboard/index.html?b=Tata_Indicomhttp://www.afaqs.com/advertising/storyboard/index.html?b=HCLhttp://www.afaqs.com/advertising/storyboard/index.html?b=Arielhttp://www.afaqs.com/advertising/storyboard/index.html?b=OLXhttp://www.afaqs.com/advertising/storyboard/index.html?b=Pillsburry_Attahttp://www.afaqs.com/advertising/storyboard/index.html?b=Sony_hi-fihttp://www.afaqs.com/advertising/storyboard/index.html?b=Ashok_Leylandhttp://www.afaqs.com/advertising/storyboard/index.html?b=Asian_Paintshttp://www.afaqs.com/advertising/storyboard/index.html?b=Domino%27shttp://www.afaqs.com/advertising/storyboard/index.html?b=Jaypee_Grouphttp://www.afaqs.com/advertising/storyboard/index.html?b=Jaypee_Grouphttp://www.afaqs.com/advertising/storyboard/index.html?b=Spice_Jethttp://www.afaqs.com/advertising/storyboard/index.html?b=Whirlpoolhttp://www.afaqs.com/advertising/storyboard/index.html?b=HSBChttp://www.afaqs.com/advertising/storyboard/index.html?b=HSBChttp://www.afaqs.com/advertising/storyboard/index.html?b=Whirlpoolhttp://www.afaqs.com/advertising/storyboard/index.html?b=Spice_Jethttp://www.afaqs.com/advertising/storyboard/index.html?b=Jaypee_Grouphttp://www.afaqs.com/advertising/storyboard/index.html?b=Jaypee_Grouphttp://www.afaqs.com/advertising/storyboard/index.html?b=Jaypee_Grouphttp://www.afaqs.com/advertising/storyboard/index.html?b=Jaypee_Grouphttp://www.afaqs.com/advertising/storyboard/index.html?b=Domino%27shttp://www.afaqs.com/advertising/storyboard/index.html?b=Asian_Paintshttp://www.afaqs.com/advertising/storyboard/index.html?b=Ashok_Leylandhttp://www.afaqs.com/advertising/storyboard/index.html?b=Sony_hi-fihttp://www.afaqs.com/advertising/storyboard/index.html?b=Sony_hi-fihttp://www.afaqs.com/advertising/storyboard/index.html?b=Sony_hi-fihttp://www.afaqs.com/advertising/storyboard/index.html?b=Pillsburry_Attahttp://www.afaqs.com/advertising/storyboard/index.html?b=Pillsburry_Attahttp://www.afaqs.com/advertising/storyboard/index.html?b=Pillsburry_Attahttp://www.afaqs.com/advertising/storyboard/index.html?b=OLXhttp://www.afaqs.com/advertising/storyboard/index.html?b=Arielhttp://www.afaqs.com/advertising/storyboard/index.html?b=HCLhttp://www.afaqs.com/advertising/storyboard/index.html?b=Tata_Indicomhttp://www.afaqs.com/advertising/storyboard/index.html?b=Tata_Indicomhttp://www.afaqs.com/advertising/storyboard/index.html?b=Mint-O_Freshhttp://www.afaqs.com/advertising/storyboard/index.html?b=Mint-O_Freshhttp://www.afaqs.com/advertising/storyboard/index.html?b=Mint-O_Freshhttp://www.afaqs.com/advertising/storyboard/index.html?b=99acres.comhttp://www.afaqs.com/advertising/storyboard/index.html?b=Bharti_AXA_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=Bharti_AXA_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=Bharti_AXA_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=Bharti_AXA_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=Parle-Ghttp://www.afaqs.com/advertising/storyboard/index.html?b=Parle-Ghttp://www.afaqs.com/advertising/storyboard/index.html?b=Parle-Ghttp://www.afaqs.com/advertising/storyboard/index.html?b=Kiwihttp://www.afaqs.com/advertising/storyboard/index.html?b=Dinesh_Suitingshttp://www.afaqs.com/advertising/storyboard/index.html?b=Dinesh_Suitingshttp://www.afaqs.com/advertising/storyboard/index.html?b=Dinesh_Suitingshttp://www.afaqs.com/advertising/storyboard/index.html?b=Maazahttp://www.afaqs.com/advertising/storyboard/index.html?b=Tidehttp://www.afaqs.com/advertising/storyboard/index.html?b=Reliance_Mobilehttp://www.afaqs.com/advertising/storyboard/index.html?b=McDonald%27s_McSpicyhttp://www.afaqs.com/advertising/storyboard/index.html?b=McDonald%27s_McSpicyhttp://www.afaqs.com/advertising/storyboard/index.html?b=HDFChttp://www.afaqs.com/advertising/storyboard/index.html?b=Bajaj_Fanshttp://www.afaqs.com/advertising/storyboard/index.html?b=ING_Vysya_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=ING_Vysya_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=ING_Vysya_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=ING_Vysya_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=ING_Vysya_Life_Insurancehttp://www.afaqs.com/advertising/storyboard/index.html?b=Tata_Nanohttp://www.afaqs.com/advertising/storyboard/index.html?b=Tata_Nanohttp://www.afaqs.com/advertising/storyboard/index.html?b=Tata_Acehttp://www.afaqs.com/advertising/storyboard/index.html?b=Tanishqhttp://www.afaqs.com/advertising/storyboard/index.html?b=Rasnahttp://www.afaqs.com/advertising/storyboard/index.html?b=MTShttp://www.afaqs.com/advertising/storyboard/index.html?keyword=Ogilvy%20India

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1. Samsung Mobile

by Cheil Worldwide And by Cheil Communication

2. Appy Fizz

by Creativeland Asia

3. Fanta Apple

by O&M4. Horlicks

by JWT

5. Pepsi

by Taproot India

6. Pepsi

by JWT7. Tata Tea

by Lowe Lintas & Partner , India

8. Limca

by O&M

9. Acer

by BBH Communications India

10. Times of Indiaby Taproot India

11. Star Cricket

by Interactive Avenues

12. Radio Mirchi- McCann-Erickson

13. ENO

by Ogilivy

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Incredible India

by Saatchi & Saatchi

National Aids Control Organisation

by BBC World Service Trust

National Egg Coordination Committeeby Triton Communications , India

JK Tyres

by Contract Advertising India Pvt Ltd , India

Hyundai I10

by Innocean Worldwide

Ford Fiestaby JWT

Indica V2 Turbo

by FCB Ulka

IndusInd Bank

by RK Swamy BBDO , New Delhi, India

HelpAge Indiaby Bappa Pics

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1. Ogilvy and Mather (www.ogilvy.com) With its presence in

over100 countries, Ogilvy is one of the top advertising

agency in the world. Its Indian operations are headed by Mr.

Piyush Pandey. Ogilvy & Mather has given life to India's most

successful and renowned brands such as Hutch (Vodafone),

Cadbury, Asian Paints and Fevicol.

2. Mudra Communications (www.mudra.com) Headquatered inIndia, Mudra communications is one of the top advertising

agencies in India 2013. Giving tough competition to others, it

holds the account of renowned brands like McDonalds, Tourism

Australia, Colgate and PolicyBazaar.com.

3. JWT(www.jwt.com) With its six offices in various cities of india,JWT is next in the queue. It has bagged in many awards at

cannes india festival. It is behind many famous ad campaigns like

Listerine, Good night, and Teach for India.

http://www.matchboxindia.com/advertising.htmlhttp://www.matchboxindia.com/advertising.htmlhttp://www.matchboxindia.com/advertising.htmlhttp://www.matchboxindia.com/advertising.htmlhttp://www.matchboxindia.com/advertising.html

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4. McCann Erickson India (www.mccann.com) Headed by

Prasoon Joshi, a revered ad personality in India, McCann

Erickson is an award winning global advertising company. Its

holds the account of some famous brands like MasterCard,

Coca Cola, and Greenlam Laminates.

5. Lowe Lintas (www.lowelintas.in) Lowe Lintas is among the

most trusted brands in the country. Its headquarter is in Mumbai

along with various offices all over India. Lowe Lintas is

responsible for ad campaigns like Idea, ICICI Prudential and

Tata Tea.

6. Leo Burnett (leoburnett.co.in) The creative team of LeoBurnett India Pvt. Ltd. has, successfully offered consumers with

powerful brand experiences using ads like McDonald's, Heinz,

Complan, Bajaj, HDFC and samsung to name a few.Its Indian

operations are headed by Arvind Sharma and the company has

offices in Gurgaon.

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7. Matchboxindia(www.matchboxindia.com) Matchboxindia is growing

to be the top advertising agency in India 2013. It is headed by J. B.

Sahu. It is well known for its Event Management, Printing - Services,

Digital Advertising, and Creative ad creation, Ad promotion in central

India. it deals with well known brands.

8. Dentsu India (www.dentsu.in) Dentsu is a Tokyo based advertising

agency. It has a number of wholly owned subsidiaries in India, including

Dentsu Marcom, Dentsu Creative Impact, Dentsu Media and Dentsu

Communications. Its subsidiary also include one of the budding

advertising agency i. e. Taproot India.

9. Contract (www.contractindia.co.in)Contract Advertising India Ltd. is

successful in delivering great results to its high-profile clientele including

Tata Indicom, Religare, Asian Paints, Domino's Pizza, SpiceJet,

Samonsite and American Tourister. It is headed by Jagdip Bakshi.

10. Rediffusion DY & R (www.rediffusiondyandr.com) Rediffusion is

India's 5th largest advertising company. It focuses primarily onintegrated PR services and media relations. Its has set a benchmark in

the field of creativity.

http://www.matchboxindia.com/printing.htmlhttp://www.matchboxindia.com/printing.htmlhttp://www.matchboxindia.com/printing.htmlhttp://www.matchboxindia.com/printing.htmlhttp://www.matchboxindia.com/printing.htmlhttp://www.matchboxindia.com/printing.html

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Reasons for using an

AgencyThe main reason outside agencies are used

is that they provide the client with the

services of highly skilled individuals

who are specialists in their chosenfields. An advertising agency staff may

include artists, writers, media analysts,

researchers and others with specific

skills, knowledge and experience who

can help market the clients products or

services.

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Types of Ad Agencies

Full-Service Agencies (MCP-PCAd-R & D) Creative Boutiques Media Specialist CompaniesFull-Service AgenciesOffers its clients a full

range of marketing, communications andpromotions services, including planning,creating and producing the advertising;performing research; and selecting media

A full-service agency may also offer nonadvertising services such as strategic marketplanning, sales promotions, directmarketing and interactive capabilities;package design; and public relations andpublicity.

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Creative BoutiquesThese are small ad agenciesthat provide only creative services.

These specialized agencies have creativepersonnel such as writers and artists on staff butdo not have media, research or account planningcapabilities.

Creative boutiques have developed in response to

some companies desires to use only the creativeservices of an outside agency while maintainingcontrol of other marketing communicationfunctions internally.

An example of a successful creative boutique in

India is Vyas Gianneti Creative, which is aMumbai based agency whose clients includeAditya Birla Group, TATA Group, Taj Hotels etc.

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Boutique agencies do not focus on developing campaigns and

studying demographics; their work is creative in nature. They usually have

small staffs and may work with contract workers and free lancers to get a specific

look and feel for particular projects. Clients approach them when they want highquality creative work. Larger advertising agencies may refer clients to these

smaller, creation-focused agencies when it comes to developing the look of

advertisements and campaigns.

These agencies can develop print and video advertising, along

with copywriting for ad campaigns, and the end result is highly individualizedand personalized.

Some of the small creative boutique agencies are

1. Kayees

2. Escape

3. Jennifer picards4. R3 mg

5. Crb group

Indian creative agencies

1. The shop , a delhi based company

2. CREATIVE INC. (CI)

3. Eggfirst

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Media Specialist Companies Companiesthat specialize in the buying of media,particularly radio and television time.

Media buying services have found a niche byspecialising in the analysis and purchase ofadvertising time and space.

Agencies and clients usually develop their

own media strategies and hire the buyingservice to execute them.

Some media buying services do helpadvertisers plan their media strategies.

Eg. Initiative is one of the largest mediaspecialist companies.

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Functions performed by Ad

Agencies1. Account Services The advertising agency exists for the

purpose of advertising for its clients, termed as accounts. The

success of any agency depends on the number of advertising

accounts it handles. The agency has to identify, locate, maintain

and expand the client base for survival and growth. Soliciting

new accounts, renewing and expanding the old accounts, isvery important for the advertising agency.

Often managed by account executives, account supervisors,

the account services department of an agency is the vital link

between the clients and the agency. Such officers represent the

agency to the client and in turn, represent the client within the

agency. The account services department should therefore,have a thorough knowledge of their clients business and all

operations within the agency.

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2. Marketing ServicesThe activities of media, research and sales promotionof an advertising agency are broadly grouped under marketing services

The media section is staffed with analysts, planners and buyers. The analysts

keep an account of media coverage, media cost-and advertising spending of

competing advertisers. They try to identify the best and appropriate mediafor each of their clients. The planners, along with the accounts department,

plan the scheduling of the advertisement of the clients. Thebuyersexecute

the plans.

Most full service agencies maintain a research departmentwhose function is

to gather, analyze and interpret information that will be useful indeveloping advertising for their clients. This can be done through primaryresearch-where a study is designed, executed and interpreted by theresearch department or through the use of secondary sources ofinformation.

The sales promotion section usually appoints specialists for planning and

managing sales promotion of the clients like sampling, couponing,premium, contest and sweepstakes. Trade promotions include tradeallowances, cooperative advertising and point of purchase displays.

.

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3. Media buying services- The media department of anagency analyzes, selects and contracts for space ortime in the media that will be used to deliver the clientsadvertising message. Media specialists must know whataudiences the media reach, their rates and how wellthey match the clients target market. They identify thelead TV channels, lead telecast programs, and providereadership for newspaper and magazines.

4. Creative Services The creative services department

is responsible for the creation and execution ofadvertisements. The individuals who conceive the ideasfor the ads and write the headlines, subheadsand bodycopy are known as copywriters. They may also beinvolved in determining the basic appeal or theme of thead campaign and often prepare a rough initial visual

layout of the print ad or television commercial.

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While copywriters are responsible for what

the message says, the art department is

responsible for how the ad looks.For

print ads, the art director and graphic

designers prepare layouts,which are

drawings that show what the ad will look

like and from which the final artwork willbe produced. Most agencies do not

actually produce finished ads; they hire

printers, engravers, photographers,

typographers and other suppliers to

complete the finished product.

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5. Management and Finance An advertising agency mustbe managed and perform basic operating andadministrative functions such as accounting, finance andhuman resources. The bulk of an agencysincome goes tosalary and benefits for its employees. Thus, an agencymust manage its personnel carefully and get maximum

productivity from them.

6. Agency Organization and Structure Full-functionadvertising agencies must develop an organizationalstructure that will meet their clientsneeds and serve theirown internal requirements. Most medium size and largeagencies are structured under either a departmental or agroup system. Under the departmental system, each of theagency functions is set up as a separate department and iscalled on as needed to perform its specialty and serve allof the agencys clients. Ad layout, writing and productionare done by the creative department, marketing services isresponsible for any research or media selection andpurchases, and the account services department handlesclient contact.Many large agencies use the group system, in whichindividuals from each department work together in groupsto service particular accounts.

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OTHER FUNCTIONS PERFORMED BY AD AGENCIES

1. Attracting clients

Advertising agency needs clients (advertisers). Without them, it cannotsurvive.

Ad agency always tries to attract clients usually by giving ads in trade

journals. It also seeks their attention by offering them various services.

It offers expert, cheap and quick services. It maintains good relations

with them. It tries to give them full satisfaction. It strives harder to attain

their goodwill and customer-loyalty.2. Research function

Advertising agency gathers information related to the client's product.

It collects following information about a product under its research

function:

Features, quality, advantages and limitations of a product,

Present and futuremarketpossibilities,Competition in the market,

Ad agency analyses (studies) all this collected information properly and

draws conclusions for its research. It helps in planning an advertising

campaign, selecting proper media and creation function.

3 Ad ti i l i

http://kalyan-city.blogspot.com/2010/11/what-is-market-types-and-classification.htmlhttp://kalyan-city.blogspot.com/2010/11/what-is-market-types-and-classification.html

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3. Advertising planning

Advertising agency plans the entire ad campaign of its client.

Advertising planning is a primary function of an ad agency. It is

done when its research function is completed. That is, after

analyzing the client's product, its competitors, market conditions,

etc. It is done by experts who use their professional experience tomake a result-oriented advertising-plan.

After making the advertising plan, it is shown to the client. If the

client likes and approves it, then the plan is executed (put into

action).

4. Creative function

Advertising agency put the advertising-plan into action under itscreative function.

Creation of ads is the most important function of an ad agency.

Generally, it involves activities like:

Copy writing,

Drawing photographs,

Making illustrations, layouts, an effective ad message, etc.These jobs are done by experts like copy writers, artists, designers,

etc. These people are highly skilled and creative. They make an

advertisement more appealing. Attractive ads help to increase the

sales of the product.The ad agency must always use fresh ideas

for creating ads. It must neither use old tactics nor copy the ad-

campaign of other products.

5 Media selection

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5. Media selection

Advertising agency helps an advertiser to select a proper media

(ad platform) to promote his advertisement effectively.

Media selection is a highly specialized function of an ad agency. It

must select the most suitable media for its client's ad. It must

choose media, which has a potential to give best results for thelowest cost. It must select more than one media for the ad. For

example, an advertisement can be put on television, the Internet,

newspapers, magazines, etc. After selecting the media, the ad

agency must maintain goods contacts with the media.

6. Advertising budget

Advertising agency helps an advertiser to prepare his ad budget. Ithelps him to use his budget economically and make the best use

of it. Without a proper advertising budget, there is a risk of client's

funds getting wasted or lost. If an advertiser suffers a loss, he may

not bring new projects. As a result, there is a possibility of losing a

potential client that can bring more business to an ad agency.

7. CoordinationAdvertising agency brings a good coordination between the

advertiser, itself, media and distributors. This is a very important

function. If coordination is proper, it will increase the sales of the

product.

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8. Sales promotion

Advertising agency performs sales promotion. It helps an

advertiser to introduce sales promotion measures for the dealers

and consumers. This helps to increase the sales of the product.

9. Marketing researchAdvertising agency helps its clients to solve their marketing

problems. It does so by conducting a marketing research for

them.

10. Non-advertising functions

Advertising agency also performs many non-advertising

functions:It fixes the prices of the product,

It determines the discounts,

It designs the product,

It also designs its package, trade marks, labels, etc.

These non-advertising services help an advertiser to increase its

sales.

11. Public relations

Advertising agency does the public relations (PR) work for its

clients. It increases the goodwill between its clients and other

parties like consumers, employees, middlemen, shareholders,

etc. It also maintains good relations between the client and

media owner.

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Agency Compensation Commissions from MediaThe

agency receives a specified commission(usually 15 percent) from the media on

any advertising time or space it

purchases for its client.

Eg. Of Commission System Payment

Media Bills Agency Agency Bills Advertiser

Costs for magazine space Rs 100000 Costs for magazine space Rs100,000

Less 15% commission - 15000 Less 2% cash discount - 1700

Cost of media space Rs 85000 Advertiser pays agency 98,300

Less 2% cash discount - 1700

Agency pays media Rs 83,300 Agency Income Rs15000

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The commission system had many advantage, including:

1. Traditional and well understood.

2. Simple and easy to operate.

3. Inspite of its conceptual imperfections it

The commission system was thought to have the following

disadvantage:

1. The efforts required by the Agency may bear no relationship to the 15

percent commission.

2. Big account subsidies smaller account.

3. Profitable accounts subsidies less profitable accounts.

4. The need to operate within 15 percent commission may result insubstandard work worked well in most cases

5. Agencies are encouraged to pad the work load in order to appear to

be earning their keep.

6. There is temptation for an Agency to recommend an increase in

advertising budget in order to boost Agency income.

7. The commission system leads to a lack of objectivity in Agency mediarecommendations and to discriminate against recommending below the-

line activity.

8. Agencies on the 15 percent commission tend to expand their services

as their revenue increases whether or not their clients want extra

services, the final result being that many clients are paying for services

they do not want.

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Fee, Cost and Incentive-Based Systems Manyagencies and their clients have developed sometype of fee arrangement or cost-plus agreement foragency compensation. Some are using incentive-

based compensation, which is a combination of acommission and a fee system.

Fee ArrangementThere are two basic types of feearrangement systems.

In the straight or fixed fee method, the agencycharges a basic monthly fee for all of its servicesand credits to the client any media commissionsearned. Agency and client agree on the specificwork to be done and the amount the agency will

be paid for it. Sometimes agencies arecompensated through a fee-commissioncombination, in which the media commissionsreceived by the agency are credited against thefee.

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Cost-Plus Agreement Under a cost-plus system, theclient agrees to pay the agency a fee based on thecosts of its work plus some agreed-on profit margin(often a percentage of total costs). This system requiresthat the agency keep detailed records of the costs itincurs in working on the clientsaccount. This happensmost often with industrial products, new productintroductions etc. that require disproportionateamount of agency help in preparing brochures,catalogues and other non- commissionable

marketing activities.Incentive-Based Compensation Many clients these

days are demanding more accountability from theiragencies and tying agency compensation toperformance through some type of incentive-basedsystem.While there are many variations, the basic idea

is that the agencys ultimate compensation level willdepend on how well it meets predeterminedperformance goals. These goals often include objectivemeasures such as sales or market share as well asmore subjective measures such as evaluations of thequality of the agencyscreative work.

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Percentage charges Adding a mark-up

of percentage charges to various

services the agency purchases fromoutside providers. These may include

market research, artwork, printing,

photography and other services or

materials. Markups usually range from17.65 to 20 percent and are added to the

clientsoverall bill.

P f S l ti f Ad A i

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Process of Selection of Ad Agencies

Client needs AssessmentPrepare Scope of Work(SOW) outlining the work you expect your agencies toperform. SOW is prepared based on past experience

and it mentions no. of TV commercials to produce, no ofwebsites to develop, and no of media plans to develop.

Agency Screening- List of agencies that fit yourcriteria.

Agency EvaluationRequest for information (RFI) isbeing sent to the agency asking for their credentials and

capabilities. Agency SelectionPersonal visit to agencys office

and check their skills, resources and capabilities.

ContractContract is being signed and thecompensation mode is being decided, whether it would

be performance based fixed or percentage of salesincentive.

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Client needsAssessment

Agency Screening

Agency Evaluation

Agency Selection

Contract

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Criteria of selection of Ad

AgenciesCompatibility

The selection of an advertising agencydepends on the compatibility of theagency. The needs of the companydetermine the fitness of the agency.The advertiser visits several agenciesand chooses the best agency on the

basis of its merits, demerits,accreditation, its methods of handlingthe accounts and using the availableopportunities.

A T

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Agency Team

This includes management specialists, marketresearchers, copywriters, media experts,production managers and art directors. Their

attitude, thinking, experience and personalities ofthe team members have positive effects on theselection process.

Agency Stability

An agency, which has been long in existencegenerally, performs efficiently and effectively. Thegreater the investment in the agency, the more vitalthe contribution of the agency to the advertisingactivities. The personnel, finance, management

and credit are examined before selecting a suitableadvertising agency.

Services

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The services rendered by the agency are evaluated with aview to choosing the best advertising agency. The greaterthe range of an agencys services, the more fully it canserve the clients needs. The agency can serve the clientsby its potential capacity for advertising, sales promotion,media placement, public relations, market research, salestraining and distribution channels.

Creativity

Creativity is the main element in advertising. If the advertising

agency is capable of great creative efforts, it is selected forthe purpose. Style, clarity, impact, memorability and action-these are taken into account while evaluating creativity.

Problem-solving approach

The agency which has a problem solving approach isconsidered to be superior and useful. Caliber,

compatibility, balanced services, responsiveness, talent anequitable compensation-these are important factors inselecting an advertising agency.

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An innovative approach

It is developed in Hong Kong, the StrategicThinking And Response (STAR) technique,

involves using a business scenario thatseveral agencies must analyze and respondto. The approach is designed to assess thestrategic planning and management

capabilities of a few agencies, rather thanthe creative and research capabilities ofseveral.

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Criteria for evaluation of Ad AgenciesThe agency evaluation process usually involves two types

of assessments :

Financial auditFocuses on how the agency conductsits business. It is designed to verify costs and expenses,the number of personnel hours charged to an account,and payments to media and outside suppliers.

Qualitative auditFocuses on the agencys efforts inplanning, developing and implementing the clients

advertising programs and considers the resultsachieved.

The agency evaluation is often done on a subjective,informal basis, particularly in smaller companies wheread budgets are low or advertising is not seen as themost critical factor in the firms marketing performance.