Advertising Agencies

Question 1

What four main groups comprise the advertising industry

Answer 1

Advertisers
Ad agencies
Media
Miscellaneous suppliers

Question 2

5 basic functions performed by advertisers and ad agencies

Answer 2

Planning
Research
Budgeting
Coordination
Ad creation

Question 3

Ah independent organization of creative and business people who specialize in developing and preparing advertising plans, advertisements, and other promotional tools who purchase advertising space and time in various media on behalf of their clients in support of specific marketing and advertising objectives

Answer 3

Advertising agency

Question 4

Why hire an ad agency? (2)

Answer 4

Expertise

Objectivity

Question 5

Ad agency functions (6)

Answer 5

Account management
Account planning
Research
Creative development
Ad production
Media planning

Question 6

Liaison between the agency and the client; manages the client/agency relationship

Answer 6

Account management

Question 7

Integrated marketing communications planning

Answer 7

Account planning

Question 8

To develop
To evaluate
(Ad agency functions)

Answer 8

Research

Question 9

Two types of ad agencies

Answer 9

Full service agencies

Specialized service agencies

Question 10

Full service agency examples

Answer 10

General consumer agency

Business to business agency

Question 11

Specialized service agency examples (3)

Answer 11

Creative boutiques
Media-buying services
Interactive agencies

Question 12

3 types of agency commissions

Answer 12

Media commission
Mark-ups
Fee-based systems

Question 13

Media commission source

Answer 13

Media

Question 14

Media commission payment

Answer 14

15%
$100 bulled to advertiser by agency (published commissionable price)
-$85 paid to media by ad agency
$15 commission to ad agency

Question 15

Published commissionable price

Answer 15

What is billed to advertiser by agency (media commission)

Question 16

Mark-ups source

Answer 16

Miscellaneous supplier

Question 17

Mark-ups payment

Answer 17

17.65%
$85 is billed to agency by supplier (non-commissionable expense)
X1.1765 markup
$100 billed to advertiser by agency

Question 18

Non-commissionable expense

Answer 18

What is billed to agency by supplier (mark-ups)

Question 19

Fee commission/straight fee incentive plans

Risk reward

Answer 19

Fee-based systems

Question 20

Bons if it performs well; compensation is based on actual ad performance

Answer 20

Incentive plans

Question 21

Consequence if it doesn’t perform; reward if it does; compensation is based on actual ad performance

Answer 21

Risk-reward

Question 22

Trend in advertising agency compensation is away from the traditional approach using media commissions and mark-ups, and toward

Answer 22

More fee-based and incentive-based plans

Question 23

Commissions/mark-ups pros (2)

Answer 23

Simpler to administer

No negotiation needed

Question 24

Commissions/mark-ups cons (3)

Answer 24

Ignores performance
Agency incentive to spend
Need to operate within 15% may result in substandard work

Question 25

Straight-fee pros (2)

Answer 25

Removes agency incentive to spend

Increases advertiser control

Question 26

Straight-fee cons (3)

Answer 26

Ignores performance
Difficult to negotiate
Agency incentive to reduce resources

Question 27

Incentive/risk-reward plans pros (2)

Answer 27

Compensation is performance-based

Best in principle

Question 28

Incentive/risk-reward plans cons (3)

Answer 28

How to measure performance?
Lag effects
Limited to situations where advertising is in the dominant promotion mix element

Question 29

Agency organization (3)

Answer 29

Departmental systems
Group systems
In-house agency

Question 30

Agency organized by function/expertise

Answer 30

Departmental systems

Question 31

Agency organized by customer/client

Answer 31

Group systems

Question 32

Agency in which advertiser builds and staffs their own ad agency to perform agency functions

Answer 32

In-house agency

Question 33

In-house ad agency pros

Answer 33

Save commissions and mark-ups
Align brand message
Faster response
Already understand the business
No other clients
Consistency from lack of turn over

Question 34

In-house ad agency cons

Answer 34

Loss of objectivity
Loss of creativity
Difficult to attract the best creative talent
Staffing ($$$)

Question 35

What two types of organizations can most readily overcome the disadvantages of using an in-house ad agency?

Answer 35

1. Business to business

2. Creative organizations

Question 36

How often to change ad agencies

Answer 36

The average length of relationships is shrinking

About 2-3 years on average

Question 37

Why change ad agencies?

Answer 37

Performance
Personality
Differences in goals
Newer agencies

Question 38

What’s the process

Answer 38

Fire existing one

Agency review

Question 39

Agency review

Answer 39

Approach a handful of agencies

“We are looking for an agency would you like to be part of the review?” (10-12); agency submits a package

Question 40

Agency review: general

Answer 40

Does the agency have the resources to adequately serve the advertisers’ needs and requirements?

Question 41

Agency review: marketing

Answer 41

What is the level of marketing expertise demonstrated by the agency?

Question 42

Agency review: creative

Answer 42

Examination of the agency’s past work and past clients

Question 43

Agency review: production

Answer 43

Latest prediction techniques? Track record for managing advertisers’ budgets

Question 44

Agency review: media

Answer 44

Experience across all media (including non-traditional)? Agency buying leverage

Question 45

Agency review: personality

Answer 45

What is the expected chemistry between key advertiser and agency personnel?

Question 46

Agency review: references

Answer 46

Who are the agency’s other notable clients?