Advertising Agencies Flashcards
What four main groups comprise the advertising industry
Advertisers
Ad agencies
Media
Miscellaneous suppliers
5 basic functions performed by advertisers and ad agencies
Planning Research Budgeting Coordination Ad creation
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
Advertising agency
Why hire an ad agency? (2)
Expertise
Objectivity
Ad agency functions (6)
Account management Account planning Research Creative development Ad production Media planning
Liaison between the agency and the client; manages the client/agency relationship
Account management
Integrated marketing communications planning
Account planning
To develop
To evaluate
(Ad agency functions)
Research
Two types of ad agencies
Full service agencies
Specialized service agencies
Full service agency examples
General consumer agency
Business to business agency
Specialized service agency examples (3)
Creative boutiques
Media-buying services
Interactive agencies
3 types of agency commissions
Media commission
Mark-ups
Fee-based systems
Media commission source
Media
Media commission payment
15%
$100 bulled to advertiser by agency (published commissionable price)
-$85 paid to media by ad agency
$15 commission to ad agency
Published commissionable price
What is billed to advertiser by agency (media commission)
Mark-ups source
Miscellaneous supplier
Mark-ups payment
17.65%
$85 is billed to agency by supplier (non-commissionable expense)
X1.1765 markup
$100 billed to advertiser by agency
Non-commissionable expense
What is billed to agency by supplier (mark-ups)
Fee commission/straight fee incentive plans
Risk reward
Fee-based systems
Bons if it performs well; compensation is based on actual ad performance
Incentive plans
Consequence if it doesn’t perform; reward if it does; compensation is based on actual ad performance
Risk-reward
Trend in advertising agency compensation is away from the traditional approach using media commissions and mark-ups, and toward
More fee-based and incentive-based plans
Commissions/mark-ups pros (2)
Simpler to administer
No negotiation needed
Commissions/mark-ups cons (3)
Ignores performance
Agency incentive to spend
Need to operate within 15% may result in substandard work
Straight-fee pros (2)
Removes agency incentive to spend
Increases advertiser control
Straight-fee cons (3)
Ignores performance
Difficult to negotiate
Agency incentive to reduce resources
Incentive/risk-reward plans pros (2)
Compensation is performance-based
Best in principle
Incentive/risk-reward plans cons (3)
How to measure performance?
Lag effects
Limited to situations where advertising is in the dominant promotion mix element
Agency organization (3)
Departmental systems
Group systems
In-house agency
Agency organized by function/expertise
Departmental systems
Agency organized by customer/client
Group systems
Agency in which advertiser builds and staffs their own ad agency to perform agency functions
In-house agency
In-house ad agency pros
Save commissions and mark-ups Align brand message Faster response Already understand the business No other clients Consistency from lack of turn over
In-house ad agency cons
Loss of objectivity
Loss of creativity
Difficult to attract the best creative talent
Staffing ($$$)
What two types of organizations can most readily overcome the disadvantages of using an in-house ad agency?
- Business to business
2. Creative organizations
How often to change ad agencies
The average length of relationships is shrinking
About 2-3 years on average
Why change ad agencies?
Performance
Personality
Differences in goals
Newer agencies
What’s the process
Fire existing one
Agency review
Agency review
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
Agency review: general
Does the agency have the resources to adequately serve the advertisers’ needs and requirements?
Agency review: marketing
What is the level of marketing expertise demonstrated by the agency?
Agency review: creative
Examination of the agency’s past work and past clients
Agency review: production
Latest prediction techniques? Track record for managing advertisers’ budgets
Agency review: media
Experience across all media (including non-traditional)? Agency buying leverage
Agency review: personality
What is the expected chemistry between key advertiser and agency personnel?
Agency review: references
Who are the agency’s other notable clients?
