The Advertising Business

Ad Agencies
Roles, Structure & Functions
Income
Client Agency Relationship

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 The Key Players
• Advertiser • Uses advertising to send
out a message about its
(client) products
• Initiates the advertising
• Agency effort by identifying a
marketing problem
• Media • Approves audience, plan
and budget
• Supplier • Hires the advertising
agency
• Audience
 The Key Players
• Advertiser • Has strategic and
creative expertise,
(client) media knowledge,
workforce talent, and
• Agency negotiating abilities
– Advertising
• Media department
– In-house agency
• Supplier
• Audience
 The Key Players
• Advertiser • The channels of
communication that carry
(client) the message to the
audience
• Agency • Are also companies or
huge conglomerates
• Media • Mass media advertising
can be cost effective
• Supplier because the costs are
spread over the large
• Audience number of people the ad
reaches
 The Key Players
• Advertiser • Assist advertisers,
agencies, and the
(client) media in creating and
placing the ads
• Agency • Vendor services are
often cheaper than
• Media those in-house
• Supplier
• Audience
 The Key Players
• Advertiser • The desired audience for
the advertising message
(client) • Data-gathering
technology improves
• Agency accuracy of information
about customers
• Media • Advertisers must
recognize the various
• Supplier target audiences they are
talking to and know as
• Audience much about them as
possible
 Why an Ad Agency?
• Branding as a concept developed
• Brands are assets
• Advertising function required specialized
skill sets
• Intra-organization bias could be reduced
• Outsourcing was viewed as a cheaper
option

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 Agencies:
Roles

Develop marketing & ad plans

Agency
Develop ads & promotions
roles

Purchase ad space and time

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 Structure of a decentralized department

Corporate

Consumer Products Industrial Products International

Division Division Division

R& D Manufacturing Marketing Marketing Services

Sales Promotions
Brand Mgr
Package Design
Ad Agency
Merchandising
Brand Mgr
Ad Agency
Brand Mgr 9
Ad Agency
 Structure of an Ad Agency

Agency Head

Client Account Creative Media Studio/ HR Finance

Servicing Planning
Creative Production
dir.
Acc.Dir
Traffic

Art Copy
Acc.
Sup.

Acc. Planners Buyers

Exec
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 Functions of different roles

• Account Management
• Otherwise called client servicing department
• Liaison between the client and the agency
• Understand client needs and translate company briefs
into creative briefs
• Create advertising opportunities for the agency
• Ability to manage tough timelines

Brand Manager Acc. Ex/Mgr Creatives

Media Planner Studio/Production 11

 Functions of different roles

• Research & Account Planning

• Finds out market trends, media trends
• Provides insights consumer needs and lifestyles
through primary research
• Helps in better connecting the brand to its T.A.
• Decides on how the tone and language should
be

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 Account
Planner’s
research is
involved
- visual &
headline

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 Functions of different roles

• Creatives
• Ideates and designs ad campaigns by
interpreting Acc. Planners insights and client’s
needs
• Develops ideas on the positioning and makes it
interesting, true, and simple
• Produce print ads, TVCs, packaging designs,
POP designs, direct mailers etc
• Copywriters, art directors, and graphic designers
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 Functions of different roles

• Studio/Production
• Buying for print ads: type, photos, illustrations,
printers, engravers
• Work on approved copy and visuals, scripts,
storyboards, DM kits
• Use actors, camera operators, and production
specialists

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 Functions of different roles

• Media Planning and Buying

• Determine how a client’s message can most
effectively and efficiently reach the T.A.
• Building media plans and budget optimization
• Tough negotiation and attention to details
• In-depth knowledge of T.A. media habits,
geographic market dynamics, and product
market potentials

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 Agency’s income
• Media Commissions

Agency
Ad rate bills client
card full ad Rs.15,000
price: Agency amount: difference
Rs.100,000 buys ad Rs.100,000 Is kept
at 15% By the
discount: agency
Rs.85,000

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 Agency’s income
• Other Commissions
• Markups – 17.65% on the invoice from outside
suppliers

Agency
Agency
bills for
buys Agency
materials
materials Materials bills
plus a
for cost
Rs.10,000
17.65% which is
campaign Rs.8,500 markup costs plus
markup
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 Agency’s income
• Fee-commission combination
• Basic monthly fee + media commissions
• Straight-fee or retainer fee
• Charges all services together on hourly or monthly
basis
• Incentive system
• Compensation depends on campaign’s goal
attainment
• Eg: DDB Needham has a grade point scale to
evaluate campaigns
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 Agency’s income
• Competency-based system
• Followed by Leo Burnett, Lintas, and a few
others, which links agency remuneration to
sales figures
• Can be a serious hindrance to brand-
building advertising

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