Role of Advertising Agency
Content
Role of Advertising Agency
The major role as advertising agency is to work alongside the clients to develop and sustain the
brands that they mutually serve, through consumer understanding and insight and through creative
and media delivery skills to provide best advice and the best execution thereof to those clients for
the advertising of those brands.
“Buildings age and become dilapidated. Machines wear out. People die. But what live on
are the brands.”
Brands are much more than mere products and services. Brands, if successful, are clearly
differentiated entities with which consumers can and do form a mutually beneficial relationship over
time, because of the values – rational and emotional, physical and aesthetic – that consumers
derive from them. The importance can be summed up as follows:
” A product is something that is made, in a factory: a brand is something that is bought, by
a customer. A competitor can copy a product; a brand is unique. A product can be quickly
out-dated; a successful brand is timeless.”
The role of advertising and the advertising agency is to help effect this transformation from product
or service to brand by clearly positioning the offering to the consumer – its role and its benefits –
and by communicating the brand’s own personality. In short its role is to provide meaningful
differentiation via the consumer connection.
As one wise head in advertising once said, “nothing kills a bad product faster than good
advertising”. Typically advertising is playing this role, along with other parts of what we call the
marketing mix, in highly competitive market places.
Most advertisers assign this job of informing the target audience and creating images to advertising
agencies. Thus, the advertising agencies plan, prepare and place ads in the media. But even an
advertiser can do all these things. The management can do planning of ad campaigns. For
preparing ads, creative personal can be hires. And the advertiser for placing the ads can buy media
space or time. So, why hire an advertising agency?
The reason can be enlisted as follows:
Expertise and experience- An advertising agency brings together people with the
required expertise and experience of the various sub-disciplines of advertising. Thus, it has
the copywriters, visualizes, researchers, photographers, directors, planners and people
who get business and deal with clients working in ad agencies. An agency moulds all these
people into a team and gives them a highly conducive work atmosphere. The agency
makes the best use of their talents and experience to deliver rapidly, efficiently and in
greater depth than a company or organization could do on its own.
Objectivity and professionalism- Advertising agencies are highly professional.
Objectivity is a major virtue of ad agency. They operate in a strange way. While they take
up advertising for others, agencies hardly advertise themselves. Ad agencies being outside
intermediaries can be objective. They thus will offer independent and detached viewpoints
and suggestions based on objective analysis.
Cost effective- If an organization wants to hire people to do its advertising, it can not
provide them work all through the year. Also most experts in the fields of advertising like
directors, musicians, photographers, charge huge amounts and are often not affordable.
Moreover, hiring, organizing and managing all talents required to produce advertising
campaigns is not an easy thing. And the fact that 98% of advertisers the worlds over hire
as agencies is proof enough about the cost effectiveness of the agencies. Also the kind of
consistent, powerful and compelling advertising that can be created by using the expertise,
experience, objectivity and professionalism of ad agencies cannot be measured
economically.
Functions of Advertising Agencies
Today advertising agencies are found in virtually every major city on the world and their role in
stimulating economic growth is solidly established. To understand advertising, we need to examine
the functions of an Ad Agency. These are:
Talent & Creative productions: The basic function of an Ad Agency is providing talent.
The creative efforts of the art director, the detailed analysis of the research director and the
political understanding of the campaign director, are just a few examples of the many
abilities of Ad Agency personal have to offer. A business organization or person will
contract the services of an ad agency to help market a product. This function involves
processing the information collected from the client and through research and designing
communication material in the form of advertisements and other publicity material. This
also includes planning creative strategies, copy or script writing, visualization, designing,
layout, shooting of films, editing, giving music, etc.
Research: The second function of an Ad agency is research. In order to distribute the
message to the public successfully, the agency must first know all that it can about the
product. One of the first jobs is to research the product and the company, one must learn,
one possibly can about both. The research must even take one close to the heart of the
firm’s inner operations. Ad agencies use research as a tool to test consumer reactions to
products and services.
Distribution & Media planning: The third important function of an ad agency is
distribution. Here you decide what type of message you will create for the company and
what media will be most helpful in sending this message to the public. On the basis of the
media habits (access and exposure) of the target audience, agency people prepare a
media plan. This plan includes which media to be used, which part of the media to be
used, when to place the ads and for how long to place the ads, etc. media planners keep
track of the viewer ship, listener ship and readership of all kinds of media.
Monitoring Feedback: By monitoring consumer feedback, a decision on whether to revise
the message, the medium, the target audience or all of them can be made. Ad agencies
are developing to reach the target audience. As information is the backbone of all
advertising, to prepare ads, one requires information about the product, its competitors, the
market situation and trends, information about the audiences (their likes and dislikes and
media habits) also need to be collected. Some of the most effective advertising includes
advertisement written in their native language. All of these specialized campaigns are
creating new demands on agencies and are requiring new talents for people who work in
advertising.
In addition, many agencies also offer a variety of allied services. These include:
Merchandising
Public relations
Organizing exhibitions and fairs
Preparing all kinds of publicity material
Planning and organizing special events (event management)
Direct marketing
Advertising Agency Functions
Professionals at advertising agencies and other advertising organizations offer a number of
functions including:
Account Management – Within an advertising agency the account manager or
account executive is tasked with handling all major decisions related to a specific client.
These responsibilities include locating and negotiating to acquire clients. Once the client
has agreed to work with the agency, the account manager works closely with the client to
develop an advertising strategy. For very large clients, such as large consumer products
companies, an advertising agency may assign an account manager to work full-time with
only one client and, possibly, with only one of the client’s product lines. For smaller
accounts an account manager may simultaneously manage several different, though noncompeting, accounts.
Creative Team –The principle role of account managers is to manage the overall
advertising campaign for a client, which often includes delegating selective tasks to
specialists. For large accounts one task account managers routinely delegate involves
generating ideas, designing concepts and creating the final advertisement, which generally
becomes the responsibility of the agency’s creative team. An agency’s creative team
consists of specialists in graphic design, film and audio production, copywriting, computer
programming, and much more.
Researchers – Full-service advertising agencies employ market researchers who
assess a client’s market situation, including understanding customers and competitors, and
also are used to test creative ideas. For instance, in the early stages of an advertising
campaign researchers may run focus group sessions with selected members of the client’s
target market in order to get their reaction to several advertising concepts. Researchers
are also used following the completion of an advertising campaign to measure whether the
campaign reached its objectives.
Media Planners – Once an advertisement is created, it must be placed through an
appropriate advertising media. Each advertising media, of which there are thousands, has
its own unique methods for accepting advertisements, such as different advertising cost
structures (i.e., what it costs marketers to place an ad), different requirements for
accepting ad designs (e.g., size of ad), different ways placements can be purchased (e.g.,
direct contact with media or through third-party seller), and different time schedules (i.e.,
when ad will be run). Understanding the nuances of different media is the role of a media
planner, who looks for the best media match for a client and also negotiates the best deals.
An advertising agency or ad agency is a service business dedicated to creating, planning and
handling advertising (and sometimes other forms of promotion) for its clients. An ad agency is
independent from the client and provides an outside point of view to the effort of selling the client's
products or services. An agency can also handle overall marketing and branding strategies and
sales promotions for its clients.
Typical ad agency clients include businesses and corporations, non-profit organizations and
government agencies. Agencies may be hired to produce television commercials and radio
commercials as part of an advertising campaign.
Types of advertising agencies
Generalized advertising agencies
Creative agencies specialize in "creative" or design-based business models: their basic interest is
in the creation of the advertisement or branding. Other ("full-service") agencies offer design in
conjunction with media buying. Media agencies concentrate on media buying. (In the 1990s, media
and creative were often unbundled in the interests of economies of scale in buying media. [7])
The client who chooses to use a design only based advertising agency must assume some of the
advertising purchasing. These are activities that are routinely handled by an agency with a media
buying option. Media buying agencies are oftentimes a good choice for larger businesses. These
agencies can assume greater responsibility for the strategic planning and function of an advertising
campaign. The advantage to a design only-based agency is there is no third-party ordering the
service. In turn, cost can be lower and is oftentimes a good alternative for smaller businesses.
Specialist advertising agencies
In addition to the full-service, general-line advertising agencies, there are also agencies that
specialize in particular kinds of advertising: recruitment, help-wanted, medical, classified, industrial,
financial, direct-response, retail, yellow pages, theatrical/entertainment, investment, travel, and so
on.
Specialization occurs in such fields for a variety of reasons. Often, as in recruitment advertising, for
example, specialized media or media uses are involved that require knowledge and expertise not
ordinarily found in a general-line agency. In other cases, such as medical or industrial advertising,
the subject is technical and requires that writers and artists have training in order to write
meaningful advertising messages about it.
Such specialist advertising agencies are also usually "full-service," in that they offer all the basic
advertising agency services in their area of specialization plus other, peripheral advertising
services related to their area of specialization.
In-House advertising agencies
Some advertisers believe that they can provide such advertising services to themselves at a lower
cost than would be charged by an outside agency.
Interactive agencies
Interactive agencies may differentiate themselves by offering a mix of web design/development,
search engine marketing, internet advertising/marketing, or e-business/e-commerce consulting.
Interactive agencies rose to prominence before the traditional advertising agencies fully embraced
the Internet. Offering a wide range of services, some of the interactive agencies grew very rapidly,
although some have downsized just as rapidly due to changing market conditions. Today, the most
successful interactive agencies are defined as companies that provide specialized advertising and
marketing services for the digital space. The digital space is defined as any multimedia-enabled
electronic channel that an advertiser's message can be seen or heard from. The 'digital space'
translates to the Internet, kiosks, CD-ROMs, DVDs, and lifestyle devices (iPod, PSP, and mobile).
Interactive agencies function similarly to advertising agencies, although they focus solely on
interactive advertising services.
The recent boost in the interactive agencies can also be attributed to the rising popularity of webbased social networking and community sites. The creation of sites such as MySpace, Facebook
and YouTube have sparked market interest, as some interactive agencies have started offering
personal and corporate community site development as one of their service offerings. It still may be
too early to tell how agencies will use this type of marketing to monetize client ROI, but all signs
point to online networking as the future of brand marketing and Interactive being the core of
Brand's Communication and Marketing Strategy.
Search engine agencies
Lately, pay per click (PPC) and search engine optimization (SEO) firms have been classified by
some as 'agencies' because they create media and implement media purchases of text based (or
image based, in some instances of search marketing) ads. This relatively young industry has been
slow to adopt the term 'agency', however with the creation of ads (either text or image) and media
purchases, they do technically qualify as 'advertising agencies'.
Social media agencies
Social media agencies specialize in promotion of brands in the various social media platforms like
blogs, social networking sites, Q&A sites, discussion forums, microblogs etc. The two key services
of social media agencies are:
social media marketing
online reputation management
Healthcare communications agencies
Healthcare communications agencies specialize in strategic communications and marketing
services for the Healthcare and Life Science industries. These agencies distinguish themselves
through an understanding of the strict labeling and marketing guidelines mandated by the U.S.
Food and Drug Administration (FDA) and industry group guidelines, most notably ADVAMED and
PHARMA.
Medical education agencies
Medical education agencies specialize in creating educational content for the Healthcare and Life
Science industries. These agencies typically specialize in one of two areas:
Promotional education - education and training materials tied to the promotion of a given
product or therapy
Continuing medical education - accredited education and training materials created for
continuing physician and medical professional education.
AGENCY COMPENSATION
Agency agencies may be compensated in diverse ways including:
A. Commissions from Media—the agency is compensated based on the time or space it
purchases for its client. The commission is typically 15% (16 2/3% for outdoor), and sometimes
have been negotiate downward. The commission system has be the target of criticism for a
number of years as critics argue that it ties agency compensation to medium costs and encourages
agencies to rely too much on expensive, commissionable medium such as network box and avoid
noncommissionable media. Many advertisers enjoy moved to a negotiated commission system that
take the form of reduced percentage rates, variable commission rates and minimum and maximum
compensation rates. A recent survey by the Association of National Advertisers found that smaller
amount than 10 percent of clients pay their agencies a 15% commission. However, most clients do
use the 15% commission as a benchmark to evaluate their current agency compensation
agreement.
B. Fee, Cost and Incentive-based Systems—in situations where on earth billings are low,
and/or the client does not wish to recompense a direct commission, an agreement may be reached
within which the agency is compensated in the opening of a fee, cost-plus or incentive-based
compensation system.
1. Fee arrangements are of two types: a fixed-fee method where on earth the agency
charges a basic monthly allowance for all of its services and credits to the client any medium
commissions earned. Under a fee-commission combination the medium commissions received by
the agency are credited against the fee. If commissions are smaller number than the agreed-on
fee, client must label up the difference.
2. Cost-plus agreement—under this compensation method the client agrees to pay the
agency a
payment based on costs of its work plus some agreed-on profit side-line. This system requires the
agency to keep detailed store of costs incurred in working on a client’s tale.
3. Incentive-based compensation—while there are heaps variations on this system, the
simple idea is that the agency’s compensation rank will depend upon how well it meet
predetermined performance goal for its clients such as sales or souk share. Incentive-based
compensation. Incentive based compensation systems are becoming more prevalent as marketers
are wish to make their agencies more in charge and reduce costs.
C. Percentage Charges—when agencies purchase services from other outside agencies they
typically supply a percentage in the form of a markup charge as their compensation. These
markups usually list from 17.65 to 20 percent.
Agency compensation is the amount that an insurance company pays the agency to "write/sale" its
product.
The amount of commission varies from company to company and product to product. This
compensation is determined by your company contract.
The major role as advertising agency is to work alongside the clients to develop and sustain the
brands that they mutually serve, through consumer understanding and insight and through creative
and media delivery skills to provide best advice and the best execution thereof to those clients for
the advertising of those brands.
“Buildings age and become dilapidated. Machines wear out. People die. But what live on
are the brands.”
Brands are much more than mere products and services. Brands, if successful, are clearly
differentiated entities with which consumers can and do form a mutually beneficial relationship over
time, because of the values – rational and emotional, physical and aesthetic – that consumers
derive from them. The importance can be summed up as follows:
” A product is something that is made, in a factory: a brand is something that is bought, by
a customer. A competitor can copy a product; a brand is unique. A product can be quickly
out-dated; a successful brand is timeless.”
The role of advertising and the advertising agency is to help effect this transformation from product
or service to brand by clearly positioning the offering to the consumer – its role and its benefits –
and by communicating the brand’s own personality. In short its role is to provide meaningful
differentiation via the consumer connection.
As one wise head in advertising once said, “nothing kills a bad product faster than good
advertising”. Typically advertising is playing this role, along with other parts of what we call the
marketing mix, in highly competitive market places.
Most advertisers assign this job of informing the target audience and creating images to advertising
agencies. Thus, the advertising agencies plan, prepare and place ads in the media. But even an
advertiser can do all these things. The management can do planning of ad campaigns. For
preparing ads, creative personal can be hires. And the advertiser for placing the ads can buy media
space or time. So, why hire an advertising agency?
The reason can be enlisted as follows:
Expertise and experience- An advertising agency brings together people with the
required expertise and experience of the various sub-disciplines of advertising. Thus, it has
the copywriters, visualizes, researchers, photographers, directors, planners and people
who get business and deal with clients working in ad agencies. An agency moulds all these
people into a team and gives them a highly conducive work atmosphere. The agency
makes the best use of their talents and experience to deliver rapidly, efficiently and in
greater depth than a company or organization could do on its own.
Objectivity and professionalism- Advertising agencies are highly professional.
Objectivity is a major virtue of ad agency. They operate in a strange way. While they take
up advertising for others, agencies hardly advertise themselves. Ad agencies being outside
intermediaries can be objective. They thus will offer independent and detached viewpoints
and suggestions based on objective analysis.
Cost effective- If an organization wants to hire people to do its advertising, it can not
provide them work all through the year. Also most experts in the fields of advertising like
directors, musicians, photographers, charge huge amounts and are often not affordable.
Moreover, hiring, organizing and managing all talents required to produce advertising
campaigns is not an easy thing. And the fact that 98% of advertisers the worlds over hire
as agencies is proof enough about the cost effectiveness of the agencies. Also the kind of
consistent, powerful and compelling advertising that can be created by using the expertise,
experience, objectivity and professionalism of ad agencies cannot be measured
economically.
Functions of Advertising Agencies
Today advertising agencies are found in virtually every major city on the world and their role in
stimulating economic growth is solidly established. To understand advertising, we need to examine
the functions of an Ad Agency. These are:
Talent & Creative productions: The basic function of an Ad Agency is providing talent.
The creative efforts of the art director, the detailed analysis of the research director and the
political understanding of the campaign director, are just a few examples of the many
abilities of Ad Agency personal have to offer. A business organization or person will
contract the services of an ad agency to help market a product. This function involves
processing the information collected from the client and through research and designing
communication material in the form of advertisements and other publicity material. This
also includes planning creative strategies, copy or script writing, visualization, designing,
layout, shooting of films, editing, giving music, etc.
Research: The second function of an Ad agency is research. In order to distribute the
message to the public successfully, the agency must first know all that it can about the
product. One of the first jobs is to research the product and the company, one must learn,
one possibly can about both. The research must even take one close to the heart of the
firm’s inner operations. Ad agencies use research as a tool to test consumer reactions to
products and services.
Distribution & Media planning: The third important function of an ad agency is
distribution. Here you decide what type of message you will create for the company and
what media will be most helpful in sending this message to the public. On the basis of the
media habits (access and exposure) of the target audience, agency people prepare a
media plan. This plan includes which media to be used, which part of the media to be
used, when to place the ads and for how long to place the ads, etc. media planners keep
track of the viewer ship, listener ship and readership of all kinds of media.
Monitoring Feedback: By monitoring consumer feedback, a decision on whether to revise
the message, the medium, the target audience or all of them can be made. Ad agencies
are developing to reach the target audience. As information is the backbone of all
advertising, to prepare ads, one requires information about the product, its competitors, the
market situation and trends, information about the audiences (their likes and dislikes and
media habits) also need to be collected. Some of the most effective advertising includes
advertisement written in their native language. All of these specialized campaigns are
creating new demands on agencies and are requiring new talents for people who work in
advertising.
In addition, many agencies also offer a variety of allied services. These include:
Merchandising
Public relations
Organizing exhibitions and fairs
Preparing all kinds of publicity material
Planning and organizing special events (event management)
Direct marketing
Advertising Agency Functions
Professionals at advertising agencies and other advertising organizations offer a number of
functions including:
Account Management – Within an advertising agency the account manager or
account executive is tasked with handling all major decisions related to a specific client.
These responsibilities include locating and negotiating to acquire clients. Once the client
has agreed to work with the agency, the account manager works closely with the client to
develop an advertising strategy. For very large clients, such as large consumer products
companies, an advertising agency may assign an account manager to work full-time with
only one client and, possibly, with only one of the client’s product lines. For smaller
accounts an account manager may simultaneously manage several different, though noncompeting, accounts.
Creative Team –The principle role of account managers is to manage the overall
advertising campaign for a client, which often includes delegating selective tasks to
specialists. For large accounts one task account managers routinely delegate involves
generating ideas, designing concepts and creating the final advertisement, which generally
becomes the responsibility of the agency’s creative team. An agency’s creative team
consists of specialists in graphic design, film and audio production, copywriting, computer
programming, and much more.
Researchers – Full-service advertising agencies employ market researchers who
assess a client’s market situation, including understanding customers and competitors, and
also are used to test creative ideas. For instance, in the early stages of an advertising
campaign researchers may run focus group sessions with selected members of the client’s
target market in order to get their reaction to several advertising concepts. Researchers
are also used following the completion of an advertising campaign to measure whether the
campaign reached its objectives.
Media Planners – Once an advertisement is created, it must be placed through an
appropriate advertising media. Each advertising media, of which there are thousands, has
its own unique methods for accepting advertisements, such as different advertising cost
structures (i.e., what it costs marketers to place an ad), different requirements for
accepting ad designs (e.g., size of ad), different ways placements can be purchased (e.g.,
direct contact with media or through third-party seller), and different time schedules (i.e.,
when ad will be run). Understanding the nuances of different media is the role of a media
planner, who looks for the best media match for a client and also negotiates the best deals.
An advertising agency or ad agency is a service business dedicated to creating, planning and
handling advertising (and sometimes other forms of promotion) for its clients. An ad agency is
independent from the client and provides an outside point of view to the effort of selling the client's
products or services. An agency can also handle overall marketing and branding strategies and
sales promotions for its clients.
Typical ad agency clients include businesses and corporations, non-profit organizations and
government agencies. Agencies may be hired to produce television commercials and radio
commercials as part of an advertising campaign.
Types of advertising agencies
Generalized advertising agencies
Creative agencies specialize in "creative" or design-based business models: their basic interest is
in the creation of the advertisement or branding. Other ("full-service") agencies offer design in
conjunction with media buying. Media agencies concentrate on media buying. (In the 1990s, media
and creative were often unbundled in the interests of economies of scale in buying media. [7])
The client who chooses to use a design only based advertising agency must assume some of the
advertising purchasing. These are activities that are routinely handled by an agency with a media
buying option. Media buying agencies are oftentimes a good choice for larger businesses. These
agencies can assume greater responsibility for the strategic planning and function of an advertising
campaign. The advantage to a design only-based agency is there is no third-party ordering the
service. In turn, cost can be lower and is oftentimes a good alternative for smaller businesses.
Specialist advertising agencies
In addition to the full-service, general-line advertising agencies, there are also agencies that
specialize in particular kinds of advertising: recruitment, help-wanted, medical, classified, industrial,
financial, direct-response, retail, yellow pages, theatrical/entertainment, investment, travel, and so
on.
Specialization occurs in such fields for a variety of reasons. Often, as in recruitment advertising, for
example, specialized media or media uses are involved that require knowledge and expertise not
ordinarily found in a general-line agency. In other cases, such as medical or industrial advertising,
the subject is technical and requires that writers and artists have training in order to write
meaningful advertising messages about it.
Such specialist advertising agencies are also usually "full-service," in that they offer all the basic
advertising agency services in their area of specialization plus other, peripheral advertising
services related to their area of specialization.
In-House advertising agencies
Some advertisers believe that they can provide such advertising services to themselves at a lower
cost than would be charged by an outside agency.
Interactive agencies
Interactive agencies may differentiate themselves by offering a mix of web design/development,
search engine marketing, internet advertising/marketing, or e-business/e-commerce consulting.
Interactive agencies rose to prominence before the traditional advertising agencies fully embraced
the Internet. Offering a wide range of services, some of the interactive agencies grew very rapidly,
although some have downsized just as rapidly due to changing market conditions. Today, the most
successful interactive agencies are defined as companies that provide specialized advertising and
marketing services for the digital space. The digital space is defined as any multimedia-enabled
electronic channel that an advertiser's message can be seen or heard from. The 'digital space'
translates to the Internet, kiosks, CD-ROMs, DVDs, and lifestyle devices (iPod, PSP, and mobile).
Interactive agencies function similarly to advertising agencies, although they focus solely on
interactive advertising services.
The recent boost in the interactive agencies can also be attributed to the rising popularity of webbased social networking and community sites. The creation of sites such as MySpace, Facebook
and YouTube have sparked market interest, as some interactive agencies have started offering
personal and corporate community site development as one of their service offerings. It still may be
too early to tell how agencies will use this type of marketing to monetize client ROI, but all signs
point to online networking as the future of brand marketing and Interactive being the core of
Brand's Communication and Marketing Strategy.
Search engine agencies
Lately, pay per click (PPC) and search engine optimization (SEO) firms have been classified by
some as 'agencies' because they create media and implement media purchases of text based (or
image based, in some instances of search marketing) ads. This relatively young industry has been
slow to adopt the term 'agency', however with the creation of ads (either text or image) and media
purchases, they do technically qualify as 'advertising agencies'.
Social media agencies
Social media agencies specialize in promotion of brands in the various social media platforms like
blogs, social networking sites, Q&A sites, discussion forums, microblogs etc. The two key services
of social media agencies are:
social media marketing
online reputation management
Healthcare communications agencies
Healthcare communications agencies specialize in strategic communications and marketing
services for the Healthcare and Life Science industries. These agencies distinguish themselves
through an understanding of the strict labeling and marketing guidelines mandated by the U.S.
Food and Drug Administration (FDA) and industry group guidelines, most notably ADVAMED and
PHARMA.
Medical education agencies
Medical education agencies specialize in creating educational content for the Healthcare and Life
Science industries. These agencies typically specialize in one of two areas:
Promotional education - education and training materials tied to the promotion of a given
product or therapy
Continuing medical education - accredited education and training materials created for
continuing physician and medical professional education.
AGENCY COMPENSATION
Agency agencies may be compensated in diverse ways including:
A. Commissions from Media—the agency is compensated based on the time or space it
purchases for its client. The commission is typically 15% (16 2/3% for outdoor), and sometimes
have been negotiate downward. The commission system has be the target of criticism for a
number of years as critics argue that it ties agency compensation to medium costs and encourages
agencies to rely too much on expensive, commissionable medium such as network box and avoid
noncommissionable media. Many advertisers enjoy moved to a negotiated commission system that
take the form of reduced percentage rates, variable commission rates and minimum and maximum
compensation rates. A recent survey by the Association of National Advertisers found that smaller
amount than 10 percent of clients pay their agencies a 15% commission. However, most clients do
use the 15% commission as a benchmark to evaluate their current agency compensation
agreement.
B. Fee, Cost and Incentive-based Systems—in situations where on earth billings are low,
and/or the client does not wish to recompense a direct commission, an agreement may be reached
within which the agency is compensated in the opening of a fee, cost-plus or incentive-based
compensation system.
1. Fee arrangements are of two types: a fixed-fee method where on earth the agency
charges a basic monthly allowance for all of its services and credits to the client any medium
commissions earned. Under a fee-commission combination the medium commissions received by
the agency are credited against the fee. If commissions are smaller number than the agreed-on
fee, client must label up the difference.
2. Cost-plus agreement—under this compensation method the client agrees to pay the
agency a
payment based on costs of its work plus some agreed-on profit side-line. This system requires the
agency to keep detailed store of costs incurred in working on a client’s tale.
3. Incentive-based compensation—while there are heaps variations on this system, the
simple idea is that the agency’s compensation rank will depend upon how well it meet
predetermined performance goal for its clients such as sales or souk share. Incentive-based
compensation. Incentive based compensation systems are becoming more prevalent as marketers
are wish to make their agencies more in charge and reduce costs.
C. Percentage Charges—when agencies purchase services from other outside agencies they
typically supply a percentage in the form of a markup charge as their compensation. These
markups usually list from 17.65 to 20 percent.
Agency compensation is the amount that an insurance company pays the agency to "write/sale" its
product.
The amount of commission varies from company to company and product to product. This
compensation is determined by your company contract.
