INTRODUCTION
“The work of a tailor is to collect the raw material, find matching threads, cut the cloth in desired shape, finally stitch the cloth and deliver it to the customer.”
Advertising Agency is just like a tailor. It creates the ads, plans how, when and where it should be delivered and hands it over to the client. Advertising agencies are mostly not dependent on any organizations.
These agencies take all the effort to sell the product of the clients. They have a group of people expert in their particular fields, thus helping the companies or organizations to reach their target customer in an easy and simple way.The first Advertising Agency was William Taylor in 1786 followed by James “Jem” White in 1800 in London and Reynell & Son in 1812.
MEANING
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 advertising agency is composed of creative and business people – the writers and artists, showmen and market analysts, merchandising and research people, advertising specialists of all sorts.
Philip Kotler opines that “Advertising agency is a marketing service firm that assists its clients in planning, preparing, implementing and evaluating various activities of advertising campaigns.”
ROLE OF AN ADVERTISING AGENCY
As part of an overall marketing strategy, some companies turn to an advertising agency to develop an advertising campaign.
Ad agencies combine their creative and research expertise with the input of the client to develop a campaign that appeals to customers. When used properly, an ad agency can save you the time of creating your own campaign, can provide market and industry expertise, and can help you increase revenue or improve brand recognition. An effective advertising campaign can help in increasing sales, develop brand loyalty and build brand equity. All of which contribute to increase in profits and market share. Similarly, without advertising customers stop buying products and services which lead to decrease in sales and eventually minimizes the profit. Therefore, the role of an advertising agency is highly crucial for the success of organization
FUNCTIONS OF ADVERTISING AGENCY
Advertising agency is an independent service-rendering organization. It delivers various services and performs many functions for its clients, who are advertisers. It is mainly involved in activities like planning, preparing and placing ads in the media. It also performs non-advertising functions for them. It offers them advisory and creative services. It does so to make a profit. main functions of ad agency are as follows:
1. Attracting clients: Advertising agency needs clients (advertisers). Without them, it cannot survive. Ad agencies always try to attract clients usually by giving ads in trade journals. It also seeks their attention by offering them various services. It offers expert, cheap and quick services. It maintains good relations with them. It tries to give them full satisfaction. It strives harder to attain their goodwill and customer-loyalty.
2. Research function: Advertising agency gathers information related to the client's product. It collects the following information about a product under its research function: Features, quality, advantages and limitations of a product, Present and future market possibilities, Competition in the market, Situation in the market, Distribution methods, Buyers' preferences, and so on. Ad agency analyses (studies) all this collected information properly and draws conclusions for its research. It helps in planning an advertising campaign, selecting proper media and creating functions.
3. Advertising planning: Advertising agency plans the entire ad campaign of its client. Advertising planning is a primary function of an ad agency. It is done when its research function is completed. That is, after analyzing the client's product, its competitors, market conditions, etc. It is done by experts who use their professional experience to make a result
oriented advertising-plan. After making the advertising plan, it is shown to the client. If the client likes and approves it, then the plan is executed (put into action).
4. Creative function: Advertising agencies put the advertising-plan into action under its creative function. Creation of ads is the most important function of an ad agency. Generally, it involves activities like: Copywriting, drawing photographs, Making illustrations, layouts, an effective ad message, etc. These jobs are done by experts like copy writers, artists, designers, etc. These people are highly skilled and creative. They make an advertisement more appealing. Attractive ads help to increase the sales of the product. The ad agency must always use fresh ideas for creating ads. It must neither use old tactics nor copy the ad campaign of other products.
5. Media selection: Advertising agency helps an advertiser to select a proper media (ad platform) to promote his advertisement effectively. Media selection is a highly specialized function of an ad agency. It must select the most suitable media for its client's ad. It must choose media, which has a potential to give best results for the lowest cost. It must select more than one media for the ad. For example, an advertisement can be put on television, the Internet, newspapers, magazines, etc. After selecting the media, the ad agency must maintain good contacts with the media.
6. Advertising budget: Advertising agency helps an advertiser to prepare his ad budget. It helps him to use his budget economically and make the best use of it. Without a proper advertising budget, there is a risk of client's funds getting wasted or lost. If an advertiser suffers a loss, he may not bring new projects. As a result, there is a possibility of losing a potential client that can bring more business to an ad agency.
7. Coordination: Advertising agency brings a good coordination between the advertiser, itself, media and distributors. This is a very important function. If coordination is proper, it will increase the sales of the product.
8. Sales promotion: Advertising agency performs sales promotion. It helps an advertiser to introduce sales promotion measures for the dealers and consumers. This helps to increase the sales of the product.
9. Marketing research: Advertising agencies help their clients to solve their marketing problems. It does so by conducting marketing research for them.
10. Non-advertising functions: Advertising agencies also perform many non-advertising functions: It fixes the prices of the product, it determines the discounts, It designs the product, It also designs its package, trademarks, labels, etc. These non-advertising services help an advertiser to increase its sales.
11. Public relations: Advertising agency does the public relations (PR) work for its clients. It increases the goodwill between its clients and other parties like consumers, employees, middlemen, shareholders, etc. It also maintains good relations between the client and media owner.
TYPES OF ADVERTISING AGENCY
The various types of agencies are as follows:
1. In house agencies – Firstly, in large organizations, there may be a separate whole department devoted to advertisement headed by advertisement manager reporting to marketing manager, who in turn reports to top management. Secondly, in small firms, there may be a person looking after the advertisement tasks and reporting to the top management. The advertiser has many advantages of an in –house agency. They are their own personnel and their time can be efficiently utilized for better coordination and control in the advertisement process. Further, they know the present marketing strategies and have control over distribution tactics. It also leads to cost saving in terms of commission saved by the advertiser to the external agency.
2. Full service agency – A Full service agency offers a full range of communication and promotion services to their clients. It performs research on behalf of advertisers and offers creative and media services to their clients. They also offer to prepare an integrated marketing communication campaign to coordinate all the promotional tools.
Therefore known for providing both advertising and non-advertising services. The range of services provided by them include planning, creating, producing, performing research, buying media, copywriting, artwork, media planning in the nature of advertising services and pricing
3.Specialized service agency – With the growth in the need of advertising agencies and its specialized services. Many advertising agencies have come up that do not provide a full range of services but specialize in one or the other services only. They provide their expert services to either the advertiser or other ad agencies. The advertising agencies that restrict and specialize in niche areas. For example, Soubhagya advertising agency specializes in financial advertising only.
Types of specialized service agencies
a. Creative boutiques -It include few people ranging from two or three to a dozen or so and include artists, designers, and copywriters. They offer creative and artistic services unlike full service agencies. They do not involve themselves in strategic planning, target audience etc. Their focus is only on the development of a creative idea into the message theme.
b. Media buying services – Media agencies have gained high growth in the last few decades and have become major players on the advertising stage.A media buying agency is not only responsible for booking the space and time for their clients, but are also responsible for providing market research and analysis and guiding them with respect to ideal space and time for their advertisement.
c. Interactive agencies – The interactive agencies have come up with the growth of Internet technology and the need for integrated marketing communications.
d. Direct response agencies – The direct response advertising agencies offer specialized services to the clients and help them integrate advertising through various mediums like television, print, radio, online etc. The growth of direct marketing has led to the growth of direct response agencies.
e. Sales promotion agencies – These agencies specialize in providing services of designing sales promotional programs, identifying suitable sales promotional tools, carrying pre-sales promotion evaluation, executing the sales promotion program, performing post-test for evaluating effectiveness of sales promotional tools.
f.Public relations firms – These firms specialize in providing services that enhance the goodwill and image of the clients’ companies amongst its publics, namely, employees, labor groups, suppliers, government and other stakeholders.
CRITERIA FOR SELECTING THE AGENCIES AND EVALUATION
The Advertiser looks for an advertising agency whose services and expertise meets his requirements.
Following factors should be considered while selecting an advertising agency:-
1. Services offered by Ad-agency - There are different agencies that provide different services, some provide all the services, some provide selected services, some provide only media services. It depends on the requirement of the advertiser whether he needs a full service agency, creative boutique, media buying service agency, or a sweet shop.
2. Experience of Agency - An experienced agency performs better than a new agency because it is familiar with different components of the marketing environment like competitors' policies, taste of consumer, income of consumer, consumer responses, fashions and trends, reputation of different media etc.
3. Location - A major factor to be considered while selecting an ad-agency is location of the office of agency. A considerable amount of communication is required at different levels of ad planning, creation and execution. So, a local or nearby ad-agency should be preferred which is easily accessible.
4. Size of Agency - There are both large size agencies and small size agencies, both have their own advantages and disadvantages. Large agencies serve big clients, provide a wide variety of services, and charge higher but, cannot give personal attention because of having a large number of clients, also cannot give much attention to small clients because of having a large number of big clients.
5. Competitors' Agency - Agency which is working for competitors must be avoided otherwise the agency will not prepare ads which help the advertiser to take an edge over competition.
6. Image of Agency - While selecting an ad-agency the advertiser should enquire about the image, integrity, ethical standards, and relations of the agency with its clients.
7. Creativity and other skills - Ad-agencies must be creative enough to generate new ideas to gain the attention of the target audience.
8. Rates Charged by Agency - The rates of agency must suit the pocket of the client. Advertisers should select agencies whose rates are reasonable and within the ad-budget.
9. Financial Strength of Agency - A financially strong ad-agency has better turnover and better contacts with media owners, and can afford better infrastructure, well-equipped ad labs, and quality staff.
10. Past Records of Agency - It is necessary to know who were the past clients of agency, how long were they with agency, why they left the agency, brand image of products of clients, etc
11. Current clients: Most advertisers are very careful in selecting an agency Theyusually see the list of the clients of an agency. An agency with a solid list of clients would be more desirable. It will also be useful to know how many new accounts were acquired in the last two or three years and how many accounts were lost. The reasons for the lost accounts may highlight some of the weaknesses of the agency.
12. The process of payment: It should be seen what is the process of payment in an agency. The advertiser will have to pay in advance or after the advertising. The client should have a detailed analysis of the method adopted so that there is no misunderstanding afterwards.
13. Product conflicts: If an agency already has another account with the same or similar product, then it is not advisable to select that particular agency because of conflict of interest involved.
14. Special skills of an agency: Some agencies specialize in certain areas such as industrial advertising, legal advertising or medical advertising. It would be useful to know if the agency specializes in a particular product or if it has specialists who are familiar with the promotion of this particular product. If the agency has special skills for the promotion of this product, it will run a successful advertising campaign.
EVALUATION OF AN ADVERTISING AGENCY
The process of agency evaluation involves regular assessment of two aspects of performance area – financial and qualitative.
The financial assessment focuses on how the agency conducts its business to verify costs and expenses, the number of personnel hours charged to an account and what payments are made to media and other outside service suppliers.
Qualitative assessment explores the agency’s efforts devoted in planning, developing and implementing the client company’s advertising campaign and an assessment of the achievements. For a qualitative assessment even the small things matter; such as a quick turnaround time, creativity because this is what the agency is in the business of, value add in terms of giving the client a creative edge by giving them a ‘creative leap’ etc.One can also evaluate agencies by their track record of losing clients or acquiring new clients and retaining them.
The parameters on which an ad agency’s creative services dept is evaluated are as follows: (The various parameters are ranked on a scale of 1-10 with 1 being the poorest and 10 being Excellent)
• Agency regularly produces fresh ideas and original approaches?
• Creative executions are consistently on strategy?
• Research is effectively used in strategic development and in pre-post testing of advertising
• Creative group knowledgeable about the company’s products, markets and strategies?
• Creative group is concerned with good and consistent advertising communications and develops campaigns, ads that exhibit this concern
• Creative group produces on time and submits for review in time to permit orderly revisions
• Creative group performs well under pressure
• Agency presentations are well organized with sufficient examples of proposed executions
• Creative group participates in major campaign presentations
• Agency presents ideas and executions not requested but which they feel are good opportunities.
• Creative group takes constructive criticism and redirection
• Creative group effectively controls costs
• Overall evaluation of creative services
ADVERTISING PLANNING
The major activities of advertising management are planning and decision making. In most instances, the advertising or brand manager will be involved in the development, implementation, and overall management of an advertising plan. The development of an advertising plan essentially requires the generation and specification of alternatives. The alternatives can be various levels of expenditure, different kinds of objectives or strategy possibilities, and numerous kinds of options associated with copy creation and media choices.
The essence of planning is thus to find out what the feasible alternatives are and reduce them to a set on which decisions can be made. Decision making involves choosing from among the alternatives.
A complete advertising plan reflects the results of the planning and decision-making process and the decisions that have been made in a particular product market situation.
(i) Development of alternative advertising plans.
(ii) Decision Making: Choosing from these alternatives.
(iii) Implementation of chosen advertising plan.
(iv) Management of the advertising plan.
If advertising management begins with advertising planning, the advertising plan itself is based on the marketing program of the organisation / product / brand.
ADVERTISING OBJECTIVES
(i) Setting Objectives:
Objectives serve several functions in modern management. One function is to operate as communication and coordination devices. They provide a vehicle by which the client, the agency account executive, and the creative team communicate. They also serve to coordinate the efforts of such groups as copywriters, radio specialists, media buyers and research specialists.
A second function of objectives is to provide a criterion for decision making. If two alternative campaigns are generated, one must be selected.
A related function of an objective is to evaluate results. This function implies that there needs to be a measure such as market share or brand awareness associated with the objective. At the end of the campaign, that preselected measure is employed to evaluate the success of the campaign – such success is increasingly how advertising agencies are getting compensated.
(ii) Sales as an objective: A convenient and enticing advertising objective involves a construct like immediate sales or market share. The measure is usually readily available to “evaluate” the results of a campaign. There are clearly some situations – mail-order advertising and some retail advertising, for example - when immediate sales are a good operational objective and others in which they can play a role in guiding the advertising campaign.
(iii) Towards operational objectives: If immediate sales do not form the basis of operational objectives in most situations, how does one proceed? The answer lies in part in three sets of questions. Addressing these questions in a careful, systematic way will often yield useful and effective objectives.
- Who is the target segment?
- What is the ultimate behavior within that segment that advertising is attempting to precipitate, reinforce, change or influence?
- What is the process that will lead to the desired behavior and what role can advertising play in the process? Is it necessary to create awareness, communicate information about the brand, create an image or attitude, build long-term brand equity and associations, or associate feelings or a type of user personality with a brand?
(iv) New customers from other categories: Attract people from other segments, those not now using the product class. Pepsi might conclude that it is easier to get young coffee drinkers to switch from coffee to Pepsi for their morning drink, than it is to get Coke drinkers to switch to Pepsi.
(v) Increasing share of requirements (SOR): Other customers may repeatedly switch among our brand and others. In many product categories, customers have more than one preferred brand, and they allocate their total category requirements over these few brands based, in part, on temporary price discounts, habits, and so on.
(vi) Behavioral or action objectives: An analysis of market dynamics can lead to behavioral measures that by themselves can provide the basis for operational objectives. If the advertising’s target is new customers, the goal may be to get new customers to try a brand for the first time. The results would be measured by the number of new customers attracted. Such an estimate could be obtained from a consumer panel or by a count of cents-off coupon if that were a part of the advertising effort. The number of new triers, of course, is quite different from short-run sales. The quantity of sales in the short run represented by new customers is usually minuscule and will be swamped by the behavioral patterns of regular customers.
ADVERTISING BUDGET
Advertising budget is an estimated amount an organization decides to invest in its promotional expenditure over a period of time. An advertising budget is the money a company sets aside to accomplish its marketing objectives.
Objectives of advertising budgets are
Communication: In the budgeting process Managers in every department justify the resources they need to achieve their goals. Subordinates explain to their superiors the scope and volume of their activities as well as how their tasks will be performed. The communication between superiors and subordinates helps to support their mutual commitment to company goals.
Coordination:¬ Different units in the company must also coordinate the many different tasks they perform. For example, the number and types of products to be marketed must be coordinated with the purchasing and manufacturing departments to ensure goods are available. Advertising promotions may need to be planned and implemented and all tasks have to be performed at the appropriate times.
Planning:¬ A budget is ultimately the plan for the operations of an organization for a period of time. Many decisions are involved and many questions must be answered. Managers ask what resources are available and what additional resources will be needed. Control:¬ Once a budget is finalized, it is the plan for the operations of the organization. Managers have authority to spend within the budget and responsibility to achieve revenues specified within the budget. Budgets and actual revenues and expenditures are monitored constantly for variations and to determine whether the organization is on target.
Evaluation:¬ Manager is to compare the budget with actual performance the manager reaches the target revenue within the constraints of the targeted expenditures. Other factors such as market and general economic conditions affect the manager's performance.
Types / Methods of Advertising Budgets:
Percentage of Sales Budget¬ According to this approach the business organization has to set their advertising spending at a fixed percentage of either past or anticipated sales. This Approach can be followed by organizations operating in markets with stable and predictable sales patterns. As it is simple in application, it is most commonly used by small business organizations.This approach has some disadvantages, as sales is not directly related to advertising, it gets affected by different variables too.
Competitive Parity Approach¬ This approach is followed by organizations whose product is well established and operating in a market with predictable sales patterns. Organizations following this approach compare their advertising spending with that of its competitors. As the organization is aware of how much its competitors are spending in advertising, it can logically decide its advertising budget either equal, more, or less to that of the competitors.Here considering competitors advertising budget organization should consider its objectives too, as the competitors objectives may not be similar or comparable.
Objectives and Task Approach¬ This approach is followed by big organizations having well defined marketing objectives, and business goals. Following this approach, advertisers can correlate their advertising spending to marketing objectives. In the long term this correlation is important to keep organizational spending focused on business goals. All organizations can afford to approach it. It is difficult for small business organizations to invest heavily in advertising. Small business organization's advertising spending depends more on their affordability. According to this approach advertisers base their advertising budget on what they can afford.
Market Share Approach¬ Similar to competitive parity approach, the market share approach bases its advertising spending on external market trends. With this method a business equates its market share with its advertising expenditures.
All Available Fund Approach¬ According to this approach all available profit is used in advertising spending. It can be too risky for any size of organization as the all available fund is used in advertising and no fund is allocated to help business grow in other ways like
technology up-gradation, or workforce development. This approach is useful for new business organizations trying to develop its brand.
Managerial Judgment Approach¬ In the long run managers gain expertise in their field of operation. Similarly, some of the marketing managers working over the years develop a feel for the market that permits them to arrive at appropriate decisions. According to this approach the organization's advertising spending depends on the judgment of experienced managers.
The affordable method—as the title says, this is to budget what you can afford. The method is inferior because it doesn’t take into account what the marketer is trying to accomplish with the money allocated. In lean times, owners of small businesses might be tempted to say to themselves, “I can’t afford to do ANY advertising this year” that may contribute to business failure.
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