Unit 4: Advertising Agency

Q. What is Advertising Agency? Explain various types of advertising agency.       2014

Q. Explain the different roles and functions of an advertising agency.    2014, 2015, 2017, 2019, 2020, 2022

Q. Design an organization structure of an advertising agency and explain its functions.   2016

Q. Discuss the points that you will consider for selecting an advertising agency for marketing your product.    2015, 2016, 2019

Q. What service does advertisement agencies render to the clients? Explain the relationship between advertising agency and client.     2015, 2022

Q. Explain the need of advertising department. How would you access the effectiveness of an advertising department? Explain.      2014

Q. Discuss the various legal provisions of advertisement to be followed by an advertising agency. 2019

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The advertising agency is a profession organisation of specialists operating under a system created by advertising media, to which the advertiser entrusts drawing up and carrying out of his advertising plans. Advertising agency is a service organisation which has come to be accepted as a professional body that undertakes planning and preparation of advertising, it has emerged out as a highly specialized marketing institution. It is a firm specialized in advertising that provides counsel relating to advertising and allied operations of its clients and actually prepares, buys, space and time for and places a large part of advertising of its clients.

An ad agency has a vital role to play. It converts the goals of the client into creative work which is carried by the media so as to reach the target audience. There are hundreds of agencies in India. Most of them are located in the four metros, Mumbai, Chennai, Kolkata and Delhi. Mumbai is the main point of Indian advertising industry, where most of the bigger agencies are located. Advertising agencies have now spread to emerging metros like Bangalore, Hyderabad, Pune, Ahmadabad, etc.

Various Types of Advertising Agency

Various types of advertising agency are listed below:

1)      Media Buying Services Agency: These are independent agencies specializing in media buying services and have been experiencing strong growth. The advertising media buying has become complex with the increase in specialized media. Clients and ad agencies generally develop their own media strategies and contract media buying services to execute them. Agencies offering this service buy large chunks of space and time, receiving large discounts. And save money for clients and small ad agencies on media purchases. For the service rendered, they are paid a commission or fee buy agency or the advertiser.

2)      Creative Boutiques: Such an agency provides only creative services. These creative boutiques have grown in response to advertisers’ desire to use only the high quality creative talent of an outside service provider and rest of the functions are completed within the advertiser’s organization. Many full-service agencies too, subcontract work to creative boutiques when they want to avoid increasing full-time employees or are very busy. These boutiques usually work on an agreed fee basis. Creative department people leaving the agencies start such boutiques and carry with them some of the agency’s clients who want to retain their creative talent.

3)      Event: These service providers specialize in planning, organizing and managing events on behalf of marketers and brands.

4)      Public Relations Services Agency: Public relations agencies advise marketers about how to manage their relationships with various target groups and build company image and earn their trust in the company. They manage favorable publicity for creating visibility for a brand.

5)      Design Studios: These firms specialize in offering graphic design services for brands, corporate identity materials, and packaging etc.

6)      Website Design Services: These firms specialize in designing website and online advertising.

7)      Production Houses: These firms act as suppliers of artists, photographers, producers, film, directors, costume designers, and music producers to advertising agencies.

8)      Research Companies: These research firms conduct market and consumer research, test ad messages and advertising effectiveness.

An advertising agency often referred to as a creative agency is a business dedicated to creating, planning, and handling advertising and sometimes other forms to promotion and marketing for its clients. Objectives of Advertising Agency stated below:

1)      Consumer Satisfaction: It is a measure of how products and services supplied by a company meet of surpass customer expectation. Customer satisfaction is defined as the number of customer or percentage of total customers, who’s reported experience with a firm its productions or its services, exceeds specified satisfaction goals.

2)      Positive Image: Self-image is how you perceive yourself. This self-image can be very positive, giving a person confidence in their thoughts and actions, or negative, making a person doubtful of their capabilities and ideas.

3)      Social Responsibility: Social responsibility is the idea that business should balanced profit-making activities with activities with activities that benefit society. It involves developing business with a positive relationship to the society in which they operate.

4)      Continuous Improvement: A continual improvement process also often called a continuous improvement process is an ongoing effort to improve products services, or processes.

5)      Expansion: Expansion is the process of becoming greater in size, number or amount. OR An increasing, in size, volume or quality, usually due to heating. When substances are heated, the molecular bonds between their particles are weekend, and the particles move faster, causing the substance to expand.

Role & Functions of Advertising Agency

Advertising agency performs following functions

1)      Contacting Clients: Advertising agency first of all identifies and contact firms which are desirous of advertising their product or services. Ad-agency selects those firms which are financially sound, makes quality products or services, and have efficient management.

2)      Planning Advertisement: Advertising agency’s next function is to plan ad for its client. For ad planning following tasks are required to be performed by ad-agency:

a)      Study of client’s product to identify its inherent qualities in relation to competitor’s product.

b)      Analysis of present and potential market for the product.

c)       Study of trade and economic conditions in the market.

d)      Study of seasonal demand of the product

e)      Study of competition and competitor’s spending on advertising.

f)       Knowledge of channels of distribution, their sales, operations, etc.

g)      Finally, formulation of advertising plan

3)      Creative Function: Creative people like – the copywriters, artists, art-directors, graphic-specialists have to perform the creative function which is most important part of all advertising function.

4)      Developing Ad-Copy: Ad-agency with the help of their writers, artists, designers, animators, graphic-designers, and film-directors prepares and develops Ad-copy.

5)      Approval of Client: Ad-copy is shown to the client for his approval.

6)      Media Selection and scheduling: It is very important function of ad-agency to select appropriate media for its clients. Ad agency has to consider various factors like- media cost, media coverage, ad-budget, nature of product, client’s needs, targeted customer, and etc while selecting media.

7)      Ad-Execution: After approval, verification, and required changes, the ad-copy is handed to the media for ad-execution.

8)      Evaluation Function: After execution, it is the responsibility of ad-agency to evaluate the effectiveness of ad to know how beneficial the ad is for its client.

9)      Marketing Function: The advertising agency also performs various marketing function like- selecting target audience, designing products, designing packages, determining prices, study of channel of distribution, market research, sales promotion, publicity, etc.

10)   Research Function: Ad-agency performs various research functions like- research of different media, media cost, media reach, circulation, entry of new media, information regarding ratings, and TRP’s of TV programmes, serials.

1. The marketer gains a number of benefits by employing agencies. An agency generally has an invaluable experience in dealing with various advertising and marketing issues.

2. The lessons which agency learned in working with other clients are useful inputs for the marketer. 

3. An agency may employ specialists in the various areas of preparation and implementation of advertising plans and strategies. 

4. The personnel are not members of the marketer’s management team. They bring objective and unbiased viewpoints to the solution of advertising and other marketing problems. 

5. The discounts that the media offer to agencies are also available to advertisers. This is a strong stimulus to them to use an agency, for the media cost is not much affected thereby.

6. The company normally does not have as many types of specialists as a large or medium-sized advertising agency has because an agency can spread the costs or its staff over many clients. It can do more for the same amount of money.

7. The company can also get an objective, outside viewpoint from an agency, assuming that the agency representatives are not acting as “Yes man” in order to keep the advertiser’s account. 

8. A related point is that the company can benefit from the agency’s experience with many other products and clients.

9. Another advantage is that agency feels a greater pressure than the company’s own department to produce effective results. The relations between an agency and a client are very easy to terminate; but it is difficult to get rid of an ineffective advertising department. 

10. The manner in which agencies are compensated, the use of an agency may not cost the advertiser a single paisa. Making

The entire planning, executing and assessing of an advertising campaign could be in the hands of the advertiser (i.e. the client) or at the other extreme, the advertising agency could carry the total responsibility. In between, they also have independent consultants and a wide variety of suppliers of various production’s research and other relevant services and the services of these consultants may be used either by the company itself or by the advertising agencies. Following pages explain their structure:

1. The advertising department within the Organisation. The advertising department is a part of marketing division. The size and the scope of the advertising department varies with the scope and philosophy of the company. For example, if a company has an outside full service advertising agency to work with, then the advertising department within the company may have less people and operations. Advertising being a part of the marketing function, is placed within the organisation’s structure as follows:

The advertising manager must work with the marketing director as well as with any outside advertising agency whose services are being used. The overall responsibility of the advertising manager includes decisions like:

a) Which products to advertise?

b) Which markets to be targeted?

c) What should the media for advertisement?

d) Whether an ad agency is required or not?

The answer to all these questions conform to the overall corporate philosophy and managerial policy decisions.

The further structure of advertising departments is basically of two types:

(a) Functional pattern, (b) Product pattern

(a) Functional pattern: In this pattern, the advertising department is divided into manageable sub-functions such as ad-creation, media selection, advertising research or there may be subordinates for each of the functions like there may be subordinates for sales promotions, public relations, trade advertising for advertising to retailers and wholesalers and mass media consumer advertising. This functional pattern results in specialization with increased skills from focused efforts. However, there may be a problem of coordination within various sub-functions.

(b) Product pattern: Under this pattern the advertising responsibility is assigned to various production departments of various products or various product categories. The underlying principle of such pattern is that the Product manager, having particular knowledge about the product is in a crucial position for the marketing activities pertaining to the product including advertising. The basic responsibilities of the Product manager or Brand manager includes.

· Decisions regarding advertising strategies

· Advertisement creativity

· Media selection decisions,

· Management and control of advertising budget.

In addition the advertisement task may also be divided along geographical lines or along the endosers or the customers pattern. In case of geographical division, each geographical unit or territory has its own responsibility for regional advertising with reporting to the central advertising management. Such divisions encourage formulation of advertising programs best suited to the environment of each local area independent. This pattern is more appropriate when there are important, distinguishable, geographical differences in consumer characteristics or product usage. That is why geographical division is recommended for international marketing of the product.

The customer based division described a separate advertising sub-section for different types of customers served. For example, industrial consumers need different approach than the retail consumers.

2. Advertising Agencies: Advertising agencies started as space broker for the handling of the advertisements placed in newspapers. Through the years, however, the function of the agencies has changed. Their major job today is not to aid media but to serve advertisers.

An advertising agency is a company that helps advertisers create advertisements and place them with appropriate media. An agency is purely a service business, manufacturing nothing. Its products are ideas for what will make goods advertising, its assets are creativity and expertise. A part from creative task, advertising agencies provide a variety of others services like media planning, helping clients make decision on product pricing, package design, distribution, marketing research, presentation  of advertising strategy to client personnel and performance of public relation tasks.

An advertising agency is staffed by people who are knowledgeable about media, copy and art. Agencies study the products, markets competitors and the promotional problems of their clients. They draft and recommend ads and ad campaigns, evaluate and select appropriate media and contract and pay for space and time in their own names, which is important when you see now they are paid. Above all, through advertising, the agency attempts to build attractive, favourable image for their clients brands.

Fig 10.2 shows the organisation chart of a large advertising agency. While the titles may vary from agency to agency the major operational responsibilities classified as creative services, account management, research and promotional services remains same.

Fig. 10.3 shows a typical advertising agency organisation and the nature of relationship between its personnel and that of a major account (clients are usually called accounts by the agency). In addition to account and creative services the agency performs other services such as media selection, marketing research related sales promotion effort on behalf of advertisers.

Skills & Services Offered By Advertising Agency

a)      Account Services: Account services or account management are the link between the advertising agency and its clients. Depending on the size of the client and its advertising budget, one or more account executives serve as liaison. The account executive is responsible for understanding the advertiser’s marketing and promotions needs and interpreting them to agency personnel. He or she coordinates agency efforts in planning creating, and producing ads. The account executive also presents agency recommendations and obtains client approval.

b)      Marketing Services: Over the past two decades use of marketing services has increased dramatically. One service gaining increased attention is research as agencies realize that to communicate effectively with their clients customers they must have a good understanding of the target audience. The advertising planning process begins with a thorough situation analysis which is based on research and information about the target audience.

c)       Research Services: Most full-service agencies maintain a research department whose function is to gather analyze and interpret information that will be useful in developing advertising for their clients. This can be useful in developing advertising for their clients. This can be done through primary research-where a study is designed executed and interpreted by the research department-or through the use of secondary sources of information. Sometimes the research department acquires studies conducted by independent syndicated research firms or consultants. The research staff then interprets these reports and passes on the information to other agency personnel working on that account.

d)      Media Services: Department of an agency analyses selects and contracts for space or time in the media that will be used to deliver the clients advertising message. The media department is expected effectively communicate the message. Since most of the clients advertising budget is spent on media time and/or the clients department must develop a plan that both communicates with the right audience and is cost-effective.

e)      Creative Services: To a large extent the success of an agency depends on the creative service department to which is responsible for the creation and execution of the advertisement. The creative specialist is known as copywriters. They are the ones who conceive the ideas for the ads and write the headlines, subheads, and body copy. They are also involved determining the theme or basic appeal of the advertising campaign and often prepare the rough layout of the advertising or story board for TV commercials.

f)       Media Buying Services: Media buying services are independent companies that specialize in the buying of media, particularly radio and television time. The task of purchasing advertising media has grown more complex as specialized media proliferate so media buying services have found a niche by specializing and hire the buying service to execute them. Some media buying services do help advertisers plan their media strategies.

g)      Special Services: Some agencies focus their efforts only in some selected areas and then become specialists in those areas. There is great multiplicity of firms whose objective is to provide advertisers, advertising agencies and the advertising media with a host of specialized services. These firms collectively are called special service groups and they are by far the least known component of the advertising industry.

h)      Direct Response Services: Direct response agencies deal with companies or advertisers involved in direct marketing of their products and services through telemarketing direct mail etc. Companies dealing with magazine subscriptions business travel package tours, credit cards, savings and investment, use direct response techniques. A direct response agency has four main department, viz., account management, creative, media and database department.

i) Sales Promotion Services: Sales promotion agencies look after activates involved in sales promotions. Stiff competition has made companies promote their goods in the best possible way. As sales promotion started becoming complex, companies realized the need for planning and organizing them systematically. As these agencies have experienced in handling the activities in the market, companies prefer to use their services for greater efficiency.

j) Sponsorship Services: Some companies use sponsorship of events to increase their visibility. Companies increase their exposure to the audience of the event by associating with that event. Companies also sponsor sports events like cricket matches, football matches, racing, awards functions etc. The sponsorship agency maintains the relationship between the sponsors and the even management company in a mutual manner. The agency also takes care of making and distribution promotional material organizing prizes and the presentation ceremony.

While selecting an advertising agency, the importance of compatibility should be borne in mind. An agency takes a long time to grasp the problems and accumulate the facts that are necessary for the smooth functioning of an client. Though this investment period is long, it pays rich dividends. Therefore, an agency should not be frequently changed, for that results in repeated wastage of the investment period leading to a lowering of the effectiveness of advertising.

The agency should be told that the client is theirs only so long as their services are of the highest quality standards ensuring rich dividends. The agency should understand the need for the advertising to sell a product and that advertising is salesmanship in print, sound and action. The agency should understand the importance of creating and developing a long term brand image of the product.

In fact, selection of right agency goes a long way in determining the success or failure of a product/brand name/company image. The selection of wrong agency can prove to be very costly. Therefore, a logical approach to selecting an agency would be to establish a selection criterion and evaluate short listed agencies on that basis. Some of the factors that can be part of selection criterion are as follows:

(a) Suitability of the agency from advertiser’s view point: The suitability of the agency can be evaluated from following angles:

i.Competing products: If an agency has already another client with the same or similar product, then it would be advisable to select some other agency to avoid conflict of interests.

ii.Agency size and location: Large advertiser having large advertising budget prefer to go to large agency as they feel large agencies have more specialization and expertise. Similarly large agencies have a preference for large budget advertisers as these small clients are not profitable.

The nature of agency client relationship requires frequent communication. Therefore, the proximity of agency to the client is desirable. However, if the advertiser needs to promote the product in different geographic areas, it may select network agency.

Some experts advocate using service of smaller agencies if the advertiser needs closers and personalized services.

(b) Agency skill and facilities: Some agencies are known for their skill in advertising consumer goods while others may have perfection in legal advertising. Accordingly, it would be better for the advertiser to know the area of specialization of the agency so that the same knowledge can be applied in choosing an agency is known for its innovation or problem solving capabilities the advertiser may decide in its favour.

(c) Length of time the agency has been in business: The longer an agency has been in business, more would be its experience and expertise in handling diverse issues and more stable it is expected to be and stable agencies aere more reliable.

(d) Agency’s financial position: The agency should be financially sound and should be able to cover both local and national advertising campaign. A financially weak agency will be spending more time in solving its own problem than working on the advertisers campaign. Moreover, poor financial conditions of the agency indicates poor planning and execution of the campaign and lack of stability.

(e) Agency’s client turnover ratio: Analysing the list of client of the agency would help the advertiser know how many old clients left the agency and how many new clients were acquired during the past say 2-3 years. The reasons for the lost clients may highlight some of the weaknesses the agency may possess which would affect advertiser’s decisions to choose the agency.

(f) Agency’s method of payment: As there are various methods of agency compensation the advertiser must discuss them before entering the contract. The method whether fees based or commission based or otherwise must be discussed and decided in details so that there is no misunderstanding afterwards at the time of payment.

a)      The agency should be given all possible information if good service is expected from it.

b)      The advertiser should go as far as possible to keep the agency on its toes. 

c)       The agency should be challenged to produce results.

d)      Criticism, when it is handed out, should not be only unfavourable. It should also be favourable.

e)      Unnecessary details should not be fussed over.

f)       The advertiser should appoint a special person for liaison work between his company and the agency, and not expect the agency to contact the junior staff.

g)      The advertiser should allow the agency, where necessary, to break away from convention in its presentations.

h)      The agency should be paid extra, if it does any extra work.

i) The advertiser should examine the work his agency does for other parties to get new ideas. It is about time that the top management looked upon advertising as a basic capital investment –a long-term investment –which does not necessarily always bring in immediate returns. The management should realize that advertising has two functions to perform. It has to sell products today and sell the name of the company, so that tomorrow’s products, too, will sell.

Even though much of the responsibility of maintaining a congenial liaison between the agency and the advertiser falls on the accounts executive, there are certain ground rules pertaining to the efficient handling of issues and business ethics that are expected to be observed by both parties in maintaining a long-range productive relationship.

Similarly, the advertising manager has the responsibility of setting the direction for the relationship with the advertising agency and his expectations from the agency include the following:-

a)      The agency team should work hard on the client’s account and be involved and enthusiastic  about its commitment.

b)      The agency team efforts should be creative and imaginative. New approaches should be explored and creativity encouraged.

c)       The agency team should be frank, open and honest. It should have the courage to disagree and state what it believes. An honest and open relationship goes a long way.

The working relationship between the advertiser and the advertiser agency can be strengthened if both parties follow some ground rules which result in friendship trust and productive efficiency.

(A) Guidelines for the Advertiser

a)      Treat the agency, as a part of the organizational family. Treat the members of the agency as partners with equal states in the success of the advertising programmes. This would create a basis for trust so that the communication channels between the two will remain open and honest.

b)      Set high standards of excellence and motivate the agency people to reach those standards. Be demanding as far as quality is concerned and make provision for extra rewards for better performance. However, the demands must be realistic and targets must be achievable.

c)       Do not interfere in the agency operations. Once the responsibility has been given, then the agency people must be left free to work and their speciality and expertise must be respected. If a problem occurs, let the agency find the solution for your perusal and approval. In this way, you can gain the benefits on their specialized skill.

d)      Regularly review and evaluate the agency. The agency should be periodically evaluated to make sure that it is in a sound financial position. Ensure that payments are made on time and also make sure that superior performance is fully reward, so that the agency is never justified to cut corners or reduce the necessary costs which could affect the performance. This periodic evaluation also lets the agency team know where is and in relation to the advertiser.

(B) Guidelines for the Agency

a)      Ensure that the client is treated as special, as if he were the only client. Before taking on a new client, make sure that is no conflict of interest between the new client and any existing client so that they do not compete in the same market. This problem may arise when a large diversified company gives and account to an advertising agency about a new product which is competing with an earlier product. Such situations should be handled vary sensitively.

b)      Make sure that the question of agency compensation is fully discussed and agreed upon and understood before taking the account. This will eliminate any misunderstanding that may arise later.

c)       It is very important that all communication channels between the advertiser and the agency are kept honest and open. This means regular client-agency contact at the top management, middle management, and operational level. This endorses satisfaction for both sides.

d)      Make sure that success is not taken for granted. Periodic evaluation of agency operations would look for and expose any deviations, so that timely corrective action can be taken. These evaluations would also ensure that the agency is continuously on its toes and is up-to-date with new ideas and techniques.

e)      Get to know your client’s business. Be specially aware of any technological developments that would affect the client’s organisation. This would give the opportunity to grow with the dynamic changes that are continuously taking place.

f)       Adopt a leadership role in the relationship. Adopt an aggressive role with the new ways and ideas. Convince the clients demands but bring your enthusiasm and creativity. Do not fit your ideas to suit your clients demands but bring your client around to your point of view. Do give credit to your client’s imagination and advice but play an aggressive role yourself.

There are several legal provisions that advertising agencies in India must follow when creating and distributing ads. Some of the main legal considerations include:

1. Truth in advertising: Advertising in India must be truthful, accurate, and not misleading. Advertisements must not contain false or deceptive statements or representations, and must not omit important information that could affect the consumer’s decision to purchase a product or service.

2. Fair competition: Advertising in India must not be unfair or deceptive and must not create confusion in the marketplace. Advertisements must not unfairly compare the advertised product or service to competing products or services, and must not be likely to mislead consumers about the nature, characteristics, suitability, or quantity of the product or service.

3. Consumer protection: Advertising in India must not be harmful to consumers or exploit their lack of knowledge or experience. Advertisements must not be targeted at children or vulnerable groups in a way that is likely to cause harm or exploit their lack of understanding.

4. Privacy and data protection: Advertising in India must comply with data protection laws, which regulates the collection, use, and processing of personal data. Advertisements must not collect or use personal data in a way that is not transparent or that violates the rights of the individual.

5. Intellectual property: Advertising in India must respect intellectual property rights and must not use copyrighted material without permission. This includes music, images, logos, and other protected works.

6. Advertising standards: Advertising in India must comply with the Advertising Standards Council of India (ASCI), which sets out guidelines for advertising content and conduct. The ASCI’s guidelines cover a wide range of topics, including truth in advertising, fair competition, consumer protection, privacy and data protection, and responsible advertising.

7. Media regulations: Advertising in India must comply with the laws and regulations governing the various media in which ads can be displayed. For example, television and radio ads must comply with the Cable Television Networks (Regulation) Act and the Indian Wireless Telegraphy Act, respectively. Print ads must comply with the Press Council of India’s guidelines, and online ads must comply with the Information Technology Act.

8. Industry-specific regulations: Advertising in India may also be subject to industry-specific regulations, depending on the sector in which the business operates. For example, advertising for pharmaceutical products must comply with the Drugs and Cosmetics Act, and advertising for financial products must comply with the Reserve Bank of India’s guidelines.

Advertising agencies in India must be aware of and comply with a wide range of legal provisions when creating and distributing ads. Failure to comply with these provisions can result in legal action, fines, and reputational damage

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