Integrated Marketing

Communications
Module 2
Ms Archana Vijay
Topics to be covered
Advertising Agency: Types of Agencies
Services offered by various agencies
Criteria for selecting the agencies and
evaluation
Participants in the Integrated Marketing
Communications Process

Marketing
communication
Advertiser Advertising Media Collateral
specialist
(client) agency organizations services
organizations
Direct marketing
agencies
Sales promotion
agencies
Interactive
agencies
Public relations
firms
Advertising Agencies
The advertisers, or clients are the key participants
in the process. They have the products, services
or causes to be marketed, and they provide the
funds that pay for advertising and promotions.
Many organizations use an advertising agency, an
outside firm that specializes in the creation,
production and/or placement of the
communications message and that may provide
other services to facilitate the marketing and
promotions process.
Media organizations are another major participant
in the advertising and promotions process. The
primary function of most media is to provide
information or entertainment to their subscribers,
viewers, or readers. But from the perspective of the
promotion planner, the purpose of media is to
provide an environment for the firm’s marketing
communications message.
Specialized marketing communications services
provide services in their areas of expertise.
Collateral services are the wide range of support
functions like marketing research used by
advertisers, agencies, media organizations and
specialized marketing communications firms.
Advertising Agencies
Many 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 Agencies
1. Ogilvy & Mather
2. Mudra Communications
3. McCann Erickson
4. JWT
5. Lowe Lintas
6. Rediffusion DY&K
7. Leo Burnett
8. Grey Worldwide
9. FCB-Ulka
10. Satchi & Satchi
11. R K Swamy BBDO
12. Contract Advertising
Reasons for using an Agency
The main reason outside agencies are used
is that they provide the client with the
services of highly skilled individuals who
are specialists in their chosen fields. An
advertising agency staff may include
artists, writers, media analysts,
researchers and others with specific skills,
knowledge and experience who can help
market the client’s products or services.
Types of Ad Agencies
Full-Service Agencies
Creative Boutiques
Media Specialist Companies

Full-Service Agencies – Offers its clients a full range of

marketing, communications and promotions 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 market planning, sales
promotions, direct marketing and interactive
capabilities; package design; and public relations and
publicity.
Creative Boutiques – These are small ad agencies
that provide only creative services.
These specialized agencies have creative personnel
such as writers and artists on staff but do not have
media, research or account planning capabilities.
Creative boutiques have developed in response to
some companies desires to use only the creative
services of an outside agency while maintaining
control of other marketing communication
functions internally.
An example of a successful creative boutique in
India is Vyas Gianneti Creative, which is a
Mumbai based agency whose clients include
Aditya Birla Group, TATA Group, Taj Hotels etc.
Media Specialist Companies – Companies that
specialize in the buying of media, particularly
radio and television time.
Media buying services have found a niche by
specialising in the analysis and purchase of
advertising time and space.
Agencies and clients usually develop their own
media strategies and hire the buying service to
execute them.
Some media buying services do help advertisers
plan their media strategies.
Eg. Initiative is one of the largest media specialist
companies.
Functions performed by Ad Agencies
Account Services – It is the link between
the ad agency and its clients. 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.
Marketing Services – One service gaining increased
attention is research, as agencies realize that to
communicate effectively with their client’s customers,
they must have a good understanding of the target
audience.
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 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.
It also includes account planners who are individuals that
gather information that is relevant to the client’s product or
service and can be used in the development of the creative
strategy as well as other aspects of the IMC campaign.
Media buying services- The media department of an
agency analyzes, selects and contracts for space or time in
the media that will be used to deliver the client’s
advertising message. Media specialists must know what
audiences the media reach, their rates and how well they
match the client’s target market. They identify the lead TV
channels, lead telecast programs, and provide readership
for newspaper and magazines.
Creative Services – The creative services department is
responsible for the creation and execution of
advertisements. The individuals who conceive the ideas
for the ads and write the headlines, subheads and body
copy are known as copywriters. They may also be
involved in determining the basic appeal or theme of the
ad campaign and often prepare a rough initial visual
layout of the print ad or television commercial.
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 will be produced.
Most agencies do not actually produce
finished ads; they hire printers, engravers,
photographers, typographers and other
suppliers to complete the finished
product.
Management and Finance – An advertising agency must be managed
and perform basic operating and administrative functions such as
accounting, finance and human resources. The bulk of an agency’s
income goes to salary and benefits for its employees. Thus, an agency
must manage its personnel carefully and get maximum productivity
from them.
Agency Organization and Structure – Full-function advertising
agencies must develop an organizational structure that will meet their
client’s needs and serve their own internal requirements. Most medium
size and large agencies are structured under either a departmental or a
group system. Under the departmental system, each of the agency
functions is set up as a separate department and is called on as needed
to perform its specialty and serve all of the agency’s clients. Ad layout,
writing and production are done by the creative department, marketing
services is responsible for any research or media selection and
purchases, and the account services department handles client contact.
Many large agencies use the group system, in which individuals from
each department work together in groups to service particular
accounts.
Agency Compensation
Commissions from Media – The 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
Fee, Cost and Incentive-Based Systems – Many
agencies and their clients have developed some
type of fee arrangement or cost-plus agreement for
agency compensation. Some are using incentive-
based compensation, which is a combination of a
commission and a fee system.
Fee Arrangement – In the straight or fixed fee
method, the agency charges a basic monthly fee for
all of its services and credits to the client any media
commissions earned. Agency and client agree on
the specific work to be done and the amount the
agency will be paid for it. Sometimes agencies are
compensated through a fee-commission
combination, in which the media commissions
received by the agency are credited against the fee.
Cost-Plus Agreement – Under a cost-plus system, the
client agrees to pay the agency a fee based on the costs
of its work plus some agreed-on profit margin (often a
percentage of total costs). This system requires that the
agency keep detailed records of the costs it incurs in
working on the client’s account.
Incentive-Based Compensation – Many clients these
days are demanding more accountability from their
agencies and tying agency compensation to performance
through some type of incentive-based system. While
there are many variations, the basic idea is that the
agency’s ultimate compensation level will depend on
how well it meets predetermined performance goals.
These goals often include objective measures such as
sales or market share as well as more subjective
measures such as evaluations of the quality of the
agency’s creative work.
Percentage charges – Adding a mark-up of
percentage charges to various services the
agency purchases from outside providers.
These may include market research,
artwork, printing, photography and other
services or materials. Markups usually
range from 17.65 to 20 percent and are
added to the client’s overall bill.
Process of Selection of Ad Agencies
Client needs Assessment – Prepare Scope of Work
(SOW) outlining the work you expect your agencies to
perform. SOW is prepared based on past experience and
it mentions no. of TV commercials to produce, no of
websites to develop, and no of media plans to develop.
Agency Screening- List of agencies that fit your criteria.
Agency Evaluation – Request for information (RFI) is
being sent to the agency asking for their credentials and
capabilities.
Agency Selection – Personal visit to agency’s office and
check their skills, resources and capabilities.
Contract – Contract is being signed and the
compensation mode is being decided, whether it would
be performance based or percentage of sales incentive.
Client needs Assessment

Agency Screening

Agency Evaluation

Agency Selection

Contract
Criteria of selection of Ad Agencies
Compatibility
The selection of an advertising agency
depends on the compatibility of the agency.
The needs of the company determine the
fitness of the agency. The advertiser visits
several agencies and chooses the best
agency on the basis of its merits, demerits,
accreditation, its methods of handling the
accounts and using the available
opportunities.
Agency Team
This includes management specialists, market
researchers, copywriters, media experts, production
managers and art directors. The attitude, thinking,
experience and personalities of the team members
have positive effects on the selection process.
Agency Stability
An agency, which has been long in existence
generally, performs efficiently and effectively. The
greater the investment in the agency, the more vital
the contribution of the agency to the advertising
activities. The personnel, finance, management and
credit are examined before selecting a suitable
advertising agency.
Services
The services rendered by the agency are evaluated with a view
to choosing the best advertising agency. The greater the range
of an agency’s services, the more fully it can serve the clients’
needs. The agency can serve the clients by its potential capacity
for advertising, sales promotion, media placement, public
relations, market research, sales training and distribution
channels.
Creativity
Creativity is the main element in advertising. If the advertising
agency is capable of great creative efforts, it is selected for the
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 is considered
to be superior and useful. Caliber, compatibility, balanced
services, responsiveness, talent an equitable compensation-these
are important factors in selecting an advertising agency.
An innovative approach developed in Hong
Kong, the Strategic Thinking And Response
(STAR) technique, involves using a business
scenario that several agencies must analyze
and respond to. The approach is designed to
assess the strategic planning and management
capabilities of a few agencies, rather than the
creative and research capabilities of several.
The agency is being given a business scenario
that several agencies must analyse and
respond to. Initial results indicate higher
levels of satisfaction for both client and ad
agencies--even those that were not selected.
Criteria for evaluation of Ad Agencies
The agency evaluation process usually involves two types
of assessments :
Financial audit – Focuses on how the agency conducts its
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 audit – Focuses on the agency’s efforts in
planning, developing and implementing the client’s
advertising programs and considers the results achieved.
The agency evaluation is often done on a subjective,
informal basis, particularly in smaller companies where
ad budgets are low or advertising is not seen as the most
critical factor in the firm’s marketing performance.
Thank You