One of the most important influences on how – and on how effectively the billions of dollars spent for advertising are spent is a specified service organization known as an advertising agency. The advertising agency performs a wide variety of different types of advertising and marketing services for their clients who are advertisers like your own organizations.
It is important for an executive with even partial responsibility for advertising decisions to have a clear picture of the nature of and the strengths and weaknesses of advertising agencies. That knowledge is called into play when you consider such vital questions as these:
Should we hire an advertisement agency? A new advertiser has the problem of deciding whether or not to use the services of an advertising agency. That decision, if affirmative, may lead to a whole series of closely related sub decisions. If he decides to hire (or “appoint”, as it is often euphemistically termed) an advertising agency, the advertiser has to determine what type and size of agency is most likely to provide the best “fit” to his needs. From a list of a number of agencies of that type and size, he has to select the one which he feels will do the most effective advertising job for him.
What agency should we use for our new product, or to handle our advertising in a new field or industry? An advertiser launches a new product, or enters a new field or industry as a consequence of a diversification move or merger. Should the new advertising assignment be given to an existing advertising agency already serving the advertiser, or should it be given to a new agency? If there was an agency-client relationship already in existence prior to the merger, the question of whether or not to continue with that agency needs to be answered. This is a particularly important question where the more places an advertiser who has been primarily active in industrial marketing in the consumer-product field, or vice versa.
What should we do about an agency solicitation? All advertisers are expected continually, in business-paper advertising and through personal solicitation, to the claims of advertising agencies that are not but would like to be that advertiser’s agency. In their sales talks and “presentations”, the agency soliciting an account often seems to offer more or better service than the advertiser, perhaps, is receiving from his present agency. How far should an advertiser go in exploring those claims? If the claims seem true, should the advertiser move his account from his present agency? Or should he instead try to achieve the same end, in terms of increased service, by stimulating his existing agency to supply it?
To answer questions like these require some understanding of what advertising agencies are, how they work, what types of agencies exist, and related matters. It is the objective of this chapter to introduce the reader to the advertising agency’s operations, and thus lay a foundations for subsequent discussions in later chapter of specific problem-areas in advertising agency-client relationships.
An advertising agency is a service business, providing a service which is essentially intangible:
Many manufacturing executives find it difficult initially to understand what an advertising agency is and how it “works”. The first thing to not in trying to understand the role of the advertising agency is that an advertising agency is primarily a service business. Unlike more familiar service business like banks and insurance companies, however, the service provided by an advertising agency is essentially intangible.
Advertising agencies operate in a universe of people and ideas. In this they differ from the manufacturer whose universe is made up largely of materials and machinery, operated and handled by people to produce the company’s products. The difference here is an important one, which extends through the balance sheets of the two types of organizations. The major assets of an advertising agency lie in the combined experience the individuals in the organizations have accumulated. The experience was developed as they prepared and executed advertising of a wide variety of types, for a variety of client organisations. The balance sheet of an agency does not typically include many assets other than office equipment and cash in the bank no factory buildings, no expensive machinery, no in-process of finished goods inventories.
When you hire an advertising agency, the effect is to add to your staff additional specialized personnel who are qualified by their past training and experience to help you increase the effectiveness and productiveness of the money you spend for advertising. Some people in the advertising agency business make very large salaries, a fact, which has been published and sometimes emphasized in popular novels, movies etc. Where there is so much smoke, there must be fire – which raises this important question: Can you afford to hire an advertising agency? Before that question can be answered, it is necessary to explore briefly the subject of advertising agency compensation.
It is important for an executive with even partial responsibility for advertising decisions to have a clear picture of the nature of and the strengths and weaknesses of advertising agencies. That knowledge is called into play when you consider such vital questions as these:
Should we hire an advertisement agency? A new advertiser has the problem of deciding whether or not to use the services of an advertising agency. That decision, if affirmative, may lead to a whole series of closely related sub decisions. If he decides to hire (or “appoint”, as it is often euphemistically termed) an advertising agency, the advertiser has to determine what type and size of agency is most likely to provide the best “fit” to his needs. From a list of a number of agencies of that type and size, he has to select the one which he feels will do the most effective advertising job for him.
What agency should we use for our new product, or to handle our advertising in a new field or industry? An advertiser launches a new product, or enters a new field or industry as a consequence of a diversification move or merger. Should the new advertising assignment be given to an existing advertising agency already serving the advertiser, or should it be given to a new agency? If there was an agency-client relationship already in existence prior to the merger, the question of whether or not to continue with that agency needs to be answered. This is a particularly important question where the more places an advertiser who has been primarily active in industrial marketing in the consumer-product field, or vice versa.
What should we do about an agency solicitation? All advertisers are expected continually, in business-paper advertising and through personal solicitation, to the claims of advertising agencies that are not but would like to be that advertiser’s agency. In their sales talks and “presentations”, the agency soliciting an account often seems to offer more or better service than the advertiser, perhaps, is receiving from his present agency. How far should an advertiser go in exploring those claims? If the claims seem true, should the advertiser move his account from his present agency? Or should he instead try to achieve the same end, in terms of increased service, by stimulating his existing agency to supply it?
To answer questions like these require some understanding of what advertising agencies are, how they work, what types of agencies exist, and related matters. It is the objective of this chapter to introduce the reader to the advertising agency’s operations, and thus lay a foundations for subsequent discussions in later chapter of specific problem-areas in advertising agency-client relationships.
An advertising agency is a service business, providing a service which is essentially intangible:
Many manufacturing executives find it difficult initially to understand what an advertising agency is and how it “works”. The first thing to not in trying to understand the role of the advertising agency is that an advertising agency is primarily a service business. Unlike more familiar service business like banks and insurance companies, however, the service provided by an advertising agency is essentially intangible.
Advertising agencies operate in a universe of people and ideas. In this they differ from the manufacturer whose universe is made up largely of materials and machinery, operated and handled by people to produce the company’s products. The difference here is an important one, which extends through the balance sheets of the two types of organizations. The major assets of an advertising agency lie in the combined experience the individuals in the organizations have accumulated. The experience was developed as they prepared and executed advertising of a wide variety of types, for a variety of client organisations. The balance sheet of an agency does not typically include many assets other than office equipment and cash in the bank no factory buildings, no expensive machinery, no in-process of finished goods inventories.
When you hire an advertising agency, the effect is to add to your staff additional specialized personnel who are qualified by their past training and experience to help you increase the effectiveness and productiveness of the money you spend for advertising. Some people in the advertising agency business make very large salaries, a fact, which has been published and sometimes emphasized in popular novels, movies etc. Where there is so much smoke, there must be fire – which raises this important question: Can you afford to hire an advertising agency? Before that question can be answered, it is necessary to explore briefly the subject of advertising agency compensation.