Advertising agencies are full-service businesses which can manage every aspect of an

advertising campaign. They vary widely in terms of size and scope and cater to different
kinds of businesses. Some agencies have only one or two major clients whose accounts
they manage. Others have hundreds of clients spread throughout the country or the
world, as well as many field offices from which to service them. In general, an
advertising agency will be able to manage an account, provide creative services, and
purchase media access for a client.

STRUCTURE OF ADVERTISING AGENCIES

An agency, depending on its size, will likely have different departments which work on
the separate aspects of an account. An account manager or the account planning
department will coordinate the work of these departments to insure that all the client's
needs are met. The departments within a full-service agency will typically include:

RESEARCH The research department will be able to provide clients with some details
about the prospective audience of the final advertising campaign, as well as information
about the market for the product being advertised. This should include specific market
research which leads to a very focused ad campaign, with advertising directed to the
ideal target audience.

CREATIVE SERVICES Advertising agencies employ experts in many creative fields that
provide quality, professional services that conform to the standards of the industry.
Copywriters provide the text for print ads, and the scripts for television or radio
advertising. Graphic designers are responsible for the presentation of print ads, and the
art department is responsible for providing the necessary images for whatever format
advertisement is decided upon. Some agencies have in-house photographers and
printers, while others regularly employ the services of contractors.

The individuals involved in creative services are responsible for developing the
advertising platform, which sets the theme and tone of the ad campaign. The advertising
platform should draw upon specific, positive features of the product advertised and
extrapolate the benefits the consumer could expect to receive as a result of using the
product. The campaign, through the development of this platform, should prove to be
eye-catching, memorable, and in some way unique. The advertising that is remembered
by consumers is that which stands out from the rest; it is the advertising agency's (and
specifically the creative services department's) responsibility to provide this quality for
their clients.

The final advertising provided by an agency should be fully developed and polished.
Television commercials should be produced with professionalism; print ads should be
attractive, informational, and attention-getting; radio spots should be focused and of
high audio quality.

MEDIA BUYING One of the services provided by advertising agencies is the careful
placement of finished advertisements in various media, with an eye toward maximizing
the potential audience. The research search conducted by the agency will inform any
media-buying decisions.

An agency will be able to negotiate the terms of any contracts made for placing ads in
any of various media. A full-service agency will deal confidently with television, radio,
newspapers, and magazines. Some agencies are also branching into direct mail
marketing and point of purchase incentives; some agencies have expanded into Internet
advertising; and some agencies will also place an ad in the local yellow pages, or utilize
outdoor advertising or one of the more creative avenues of incidental advertising, such
as commercial signs on public buses or subways or on billboards.

The media-buying staff of an advertising agency will draw on specific research done for
the client, as well as on past experience with different media. Through this research and
careful consideration, the agency will develop a media plan: this should be a fully
realized plan of attack for getting out the client's message. Some factors to be considered
in the development of the media plan include:

Cost Per Thousand: This refers to the cost of an advertisement per one thousand
potential customers it reaches. Media-buyers use this method to compare the various
media avenues they must choose between. For example, television ads are considerably
more expensive than newspaper ads, but they also reach many more people. Cost per
thousand is a straightforward way to evaluate how to best spend advertising dollars: if a
newspaper ad costs $100 and potentially reaches 2,000 customers, the cost per
thousand is $50. If a television ad costs $1000 to produce and place in suitable
television spots, and reaches a potential of 40,000 viewers, the cost per thousand is only
$25.

Reach: This term is used when discussing the scope of an advertisement. The reach of
an ad is the number of households which can safely be assumed will be affected by the
client's message. This is usually expressed as a percentage of total households. For
example, if there are 1,000 households in a town, and 200 of those households receive
the daily paper, the reach of a well-placed newspaper ad could be expressed as 20
percent: one-fifth of the households in the community can be expected to see the
advertisement.

Frequency: The frequency of a message refers to how often a household can be expected
to be exposed to the client's message. Frequency differs widely between media, and even
within the same medium. Newspapers, for example, are read less often on Saturdays,
and by many more households (and more thoroughly) on Sundays. Fluctuation like this
occurs in all media.

Continuity: The media-buyer will also need to consider the timing of advertisements.
Depending on the client's product, the ads can be evenly spread out over the course of a
day (for radio or television advertisements), a week (for radio, television, or print
advertisements), or a month (radio, television, print, or other media). Of course,
seasonal realities influence the placement of advertisements as well. Clothing retailers
may need to run more advertisements as a new school year approaches, or when new
summer merchandise appears. Hardware stores may want to emphasize their wares in
the weeks preceding the Christmas holiday. Grocery stores or pharmacies, however,
might benefit from more evenly distributed advertising, such as weekly advertisements
that emphasize the year-round needs of consumers.

SETTING AN ADVERTISING BUDGET

Deciding on an advertising budget is highly subjective, depending on the type of

business, the competitive atmosphere, and the available funds. It will also depend on
how well established the business is, and what the goal of the advertising is. Trade
publications are often good resources to consult in pondering this matter; many provide
information on industry standards for advertising budgets.

PRICE STRUCTURES Advertising agencies charge their clients for all the itemized
expenses involved in creating finished ads, including hiring outside contractors to
complete necessary work. The client should receive invoices for all such expenses. For
example, the client may receive an invoice for a television ad which includes a
photographer's fee, a recording studio's fee, an actor's fee, and the cost of the film itself.
The client will also be charged for the cost of placing the final advertisement in whatever
media the agency has chosen (and the client has agreed to, of course).

Beyond these expenses, easily invoiced and itemized for the client, advertising agencies
include a charge for their services. This fee pays for the extensive account management,
creative services, research, and media placement provided by the agency, all the hidden
costs involved in the production of a quality advertising campaign, and profit margin.

When working with a new client, and particularly with a small business, an agency may
ask that the client put the agency on a retainer. This retainer will consist of the full
advertising budget agreed upon, and will be used to pay all production expenses and
media buying costs, as well as provide the agency with its fee. The client should still
insist on detailed and accurate invoices for expenses taken from the retainer.

DECIDING TO USE AN AGENCY

Depending upon how important advertising is to the overall health of the particular
business, and the amount of resources available for use in advertising, the small
business owner should consider whether an investment in the services of advertising
agency will yield meaningful benefit.

BENEFITS OF ADVERTISING AGENCIES Advertising agencies provide a valuable

resource for any enterprise seeking to increase its customer base or its sales. They bring
together professionals with expertise in a wide array of communication fields, and often
—though not always—produce polished, quality ads that are well beyond the capacities
of the client. Agencies are generally knowledgeable about business strategy and media
placement as well. The media-buying experts at an agency will develop a strategic,
targeted media plan for their clients, drawing upon years of experience and close
relationships with media professionals. This experience and these connections are likely
not available to the small business owner, and can be important factors in launching a
successful media campaign.

DRAWBACKS OF ADVERTISING AGENCIES One drawback to using an agency, of course,

is the added stress of dealing with unfamiliar people and unknown territory. Choosing
the right agency will take time, and the process of reaching a satisfactory ad campaign
can be a taxing and time-consuming one (especially if the client is vague about his or her
desires, or expects a top-dollar campaign at a bargain-basement price). Work will have
to be reviewed, changed, and reviewed again. And the account will have to be monitored
closely. As with any outside contractor, the small business owner will need to keep
careful tabs on what is received for his or her hard-earned dollar.

Cost is another factor that must be weighed carefully by the small business owner.
Although advertising agency campaigns are often extremely valuable in terms of shaping
market share, product recognition, and public image, the small business owner will have
to carefully consider the potential benefits against the costs associated with hiring an
agency of any size. When deciding whether or not to use an agency, the small business
owner should consider if the advertising he or she envisions really requires a team of
experts working on it. If the ads will be fairly simple, or if they will be placed only in one
medium (such as a local newspaper), the owner should probably attempt to create the
ads without the aid of an agency. It will be more economical to hire one expert, such as a
graphic designer, and to place the ads personally than to hire an agency.

SELECTING A PARTICULAR ADVERTISING AGENCY

Agencies vary widely in their focus. Some cater to only a few large clients, and do not
generally accept new accounts. Others have hundreds of clients of varying sizes. It is
important for a small business to work with an agency that will be able to devote the
time needed to insure a successful ad campaign. Smaller, local agencies can usually offer
more one-on-one attention. On the other hand, agencies that maintain a stable of larger
companies are unlikely to regard a small business as an important client unless they are
convinced that the establishment is destined for big things. At the same time, however,
larger agencies can sometimes enhance a small business's reputation and improve its
geographic reach.

Instead, the agency should ideally be one that is familiar with the specific set of concerns
shared by most small businesses. Indeed, it is very important that the advertising agency
understand the issues that a small business owner must consider. These include having
a limited advertising budget, finding a niche in a community, and establishing a loyal
customer base. The agency should have worked in the past for clients in similar
situations; it is not imperative, though, that they have other clients which are exactly the
same as your business. If the business is a bookstore, for example, and the agency has
never promoted a bookstore before, it does not mean they will necessarily be a poor
choice to create and manage an advertising campaign. They may have done work for
other local retail stores that have faced the same obstacles and challenges.

In an article for Entrepreneur, Kim T. Gordon outlined a series of questions for small
business owners to ask when evaluating a potential advertising agency. First, they
should ascertain whether the agency is familiar with the target audience and knows how
to reach them. An agency that works primarily with consumer markets may not be the
best choice for a small business whose main customers are other businesses or the
government, for example. Second, the small business should make sure that the agency
has done extensive work in the media they plan to use most extensively. An agency that
has built a reputation for creating great television ads may not be well-suited to Internet
advertising. Third, small business owners should ask about the results the agency has
achieved in working with similar clients. And finally, the business owner should ask for
a clear picture of what they should expect to accomplish with their specific advertising
budget.

One of the best ways to choose an agency is the same way you would choose a bank, a
doctor, or a housepainter: ask someone you trust who they use. If your friends,
neighbors, or fellow business owners have used an agency they were pleased with, it is
worth further inquiry. If you see advertising you really like, call up the business and
compliment them on their good taste; then ask who prepares their ad copy. The agency-
client relationship is very much trust-based, and the creative work agencies do is
subjective. You should work with an agency whose collective personality and creative
work make you feel comfortable. These services will cost a considerable amount, and
starting off with a firm you feel optimistic about will help insure your satisfaction
throughout the relationship. The American Association of Advertising Agencies (AAAA)
helps match agencies and clients through their Web site.

During the introductory meeting, the agency will be prepared to show samples of their
work. These are called case histories, and they should be relevant to your business.
These samples should reflect the agency's understanding of the needs of your small
business—including who your customer base is—and a working knowledge of the kind of
marketing necessary to sell your product. As a potential client, you should feel free to
ask many questions concerning the approach of the advertisements, the audience
reached by certain media, and what media plans have been developed for businesses
similar to yours. An agency, though, should never be asked to do work "on spec."
Advertising agencies cannot afford to use their considerable creative resources doing
free work for potential clients. The case histories they provide, along with the answers to
any questions you may have, should be sufficient to decide whether to give them your
business.

Once you have found an agency you feel comfortable with, and have together agreed
upon a budget and a timeline for the advertising, the agency will begin producing copy
for you to approve. Laying a strong foundation, including asking all the questions you
have as they arise, will pave the way for a productive, mutually beneficial relationship.