The advertising environment and

the agency
Module 1
In this module…
• Brands and environmental challenges
• Role of advertising
• Advertising agency
– Types
– Remuneration
– Client / Agency relationships
– Functional departments in an agency & scope of work
– Agency selection process
Communication

Communication - transmitting,
receiving and processing of
information
The communication framework
Transmission
Sender Encoding
Device

Feedback Receiver Decoding

 The sender, or source, of a communication is
the person or organization that has
information to share with another person or
group of people.
Sender
The source may be an individual (a salesperson
or hired spokesperson) or a non-personal
entity (such as the organization itself).
 Encoding begins when the source selects
words, symbols, pictures, to represent the
message that will be delivered to the receiver.
Involves putting thoughts, ideas, or
information into a symbolic form.
Encoding
The sender’s goal is to encode the message in
such a way that it will be understood by the
receiver. This means using words, signs, or
symbols that are familiar to the target
audience.
 The encoding process leads to development of
a message that contains the information
Message or meaning the source hopes to convey. The
message may be verbal or nonverbal, oral
or written, or symbolic.
 The channel is the method by which the
communication travels from the sender to the
receiver. Channels are of two types, personal
and non-personal.

Transmission Personal channels : When there is direct and

interpersonal (face-to-face) contact with target
Device
individuals or groups.

Non-personal channels : carry a message

without interpersonal contact between sender
and receiver. Referred to as the mass media as
message is sent to many individuals at same
time.
 The receiver is the person with whom the
sender shares thoughts or information. Tend to
be consumers who read, hear or see the
marketer’s message and decode it.
Receiver /
Decoding Decoding is the process of transforming
the sender’s message back into thought.

Influenced by the receiver’s frame of reference

or field of experience, which refers to the
experiences, perceptions, attitudes, and values
The Barrier

If communication is so simple, why

don’t all students score 100%?
Noise

Any obstacle that prevents Noise is anything that distorts

communication from being or disrupts a message and it
efficient and effective is noise can occour at any stage of the
communication process
Noise
Transmission
Sender Encoding
Device

Feedback Decoding Receiver

Noise vs. Clutter Quantity refers to the number of
commercials and the proportion of
the advertising space in the
Advertising-to-editorial ratio or advertising medium.
the amount of advertising and
non-programming space in a Competitiveness is similarity
between advertised products and
medium
the proximity of the
advertisements of competing
Clutter is of 3 types : quantity, brands in the media vehicle.
competitiveness and
intrusiveness Intrusiveness pertains to the extent
to which commercials disrupts the
flow of an editorial unit.
The world out there
 Audience
fragmentation
Source: BARC India; BMW data; Period- Wk08-Wk52, 2017, TG: 15-30 yrs, Market: All India, Channels considered: All
Source: BARC India; BMW data; Period- Wk08-Wk52, 2017, TG: 15-30 yrs, Market: All India, Channels considered: All
 Media
fragmentation
 1790 14984

90459 254 private.

About to
explode
Rise of specialised media,
driven by
consumer interests
Birth and dramatic explosion of
the digital medium

Destruction of barriers
Geographical barriers broken

Language barriers broken

Time barriers broken

Increase in competition & choice
Emergence of brand parity
Where brands or products are
seen to possess similar values Decisions based on price or a
and offer nearly identical specific promotional deal and
benefits not so much on loyalty

Consumers view quality levels of This means that consumers will

the brands as being nearly equal shop from a group of brands
rather than a specific brand
Destruction of brand values

Destruction of ‘premium’
Advertising
“ Advertising is any paid form of non-personal
presentation & promotion of ideas, goods, or services by
an identified sponsor.”
-Philip Kotler
The placement of announcements and persuasive messages in time or space
purchased in any of the mass media by business firms, nonprofit
organizations, government agencies, and individuals who seek to inform
and/ or persuade members of a particular target market or audience about
their products, services, organizations, or ideas.
- American Marketing Association
Advertising : The role
?
Enhancing Brand Equity
 Strength of brand in customers’ mind : Brand recognition: Have you
been exposed to this brand? Brand Recall: What brands can you
Awareness
recall in soaps? TOMA: first brand recalled Brand Dominance : Only
brand recalled
Customer perceptions on quality of product offered : PQ drives
Perceived financial performance. PQ is major strategic thrust of a business.
Quality PQ is linked to & drives other elements of a brand

Stickiness of customers with brand : Loyalty and brand value :

Brand Equity Brand loyalty Directly proportional. Cost of getting new customers > that of loyal
customers.

Attributes, celebrity, symbol : Associations are driven by brand

Brand identity. Brand identity : what the company wants the brand to
association stand for in the minds of customers

Other brand Patents, Trademarks, Channel relationships etc

assets
Allows a manufacturer to charge
a premium Delivers additional shelf space

Generates higher gross margins Deters consumers from

switching during promotions

Gives power to the trade Prevents erosion of market

share
Parity can be countered by leveraging Brand Equity. “ a
set of assets (and liabilities) linked to a brand
name/symbol that adds to (subtracts from) the value
provided by product to customers”
Need For Constant Engagement
Multiple choices results in A contact point is any place
constant and ongoing effort to where consumers interact with
reinforce loyalty or acquire additional
information about a firm / brand

Best engagement is always a

Focus therefore shifts to two-way process. A process
engaging with consumers at through which both consumers
every contact point and the marketer gain
Management of image
Changing Image
Creating an Image
The Advertising agency
In this section…
• Advertising agency
• Types
• Client / Agency relationships
• Remuneration
• Agency selection process
• Functional departments in an agency & scope of work
An organization that provides a variety of
advertising related services to clients
seeking assistance in their advertising
activities.
"The work of an advertising agency is
warmly and immediately human. It deals
with human needs, wants, dreams and
hopes. Its 'product' cannot be turned out
on an assembly line."
classification of agencies
 By the Line

By Range of
Classification of
services By Function
agencies
provided

By Ownership
 By the Line

By Range of
Classification of
services By Function
agencies
provided

By Ownership
 Advertising / Media
Creative Agencies
Agencies

Collateral Specialised MC
Services Agencies
By Function
An advertising agency, is an external firm that
specialises in the creation, production and / or
placement of the communications message and
may provide other services to facilitate the
Advertising or
marketing and promotions process
Creative
Agency It is not necessary that an advertiser has to
work with one agency only.

Depending on the size of the business, an

advertiser can work with multiple agencies. HUL
has 4-5 agencies.
By Function
A media agency, is an outside firm that
specialises planning, buying and placement of
the communications message, across any
media.
Media Media agencies work with the advertiser
Agency and with media organisations to ensure
that the communication is placed.

A media organisation is any organisation that

has editorial or program content which attracts
consumers so advertisers or their agencies will
want to buy space or time from them.
By Function

Specialised
Include direct marketing agencies, sales
Marketing
promotions agencies, digital agencies and
Communication
public relations agencies
Agencies
By Function

Provide support functions to advertising, media

or specialised agencies, which enable in
Collateral execution and delivery of the message
Agency
Bhasha Bharati : Translation services.
Radiowani : Radio spots production
 By the Line

By Range of
Classification of
services By Function
agencies
provided

By Ownership
In-House External
Agency Agency
In-House Agency
Used in businesses which requires
technical knowledge or where the
turnaround time is very fast

An agency that has been The advertiser believes that no

set-up, owned and external agency has the technical
operated by the advertiser skill or can turnaround a job, on
demand

The in-house agency also has the

flexibility of working with external
agencies to develop
communication campaigns for TV
or print
In-House Agency
Better understanding of product Consistency in brand message

Better understanding of Stability of process

company vision
Better turnaround time
Access to top management
Reduced costs
Better coordination
More control
In-House Agency
Less experience Less flexibility

Less objectivity Less access to top creative

talent
External Agencies
Expertise : Focused & specialised Costs

Outsider’s perspective Timelines

Better understanding of
consumers and trends

Access to top talent

Accountability and therefore

better efficiency
 By the Line

By Range of
Classification of
services By Function
agencies
provided

By Ownership
By range of services provided

Boutique Full service

Agency Agency

A agency which develops Cross-domain expertise offered

expertise in just one area and across creative, media,
offers services in just that area marketing communication and
even collateral services.
Integration to be driven by the
advertiser All services on offer. At a cost
By range of services provided
Brand Creative
Strategy Services
Specialised
services
Campaign Media
Planning Services
 By the Line

By Range of
Classification of
services By Function
agencies
provided

By Ownership
 Above-the-
line agencies
Below-the-
line agencies
 Primarily leverage
Agencies specialising Purpose is to
Above-the- mass media like
in mass media are build equity and
line agencies TV, radio, print,
called ATL agencies share of mind
cinema

Are agencies which Includes the use of

Through-the- use an integrated ATL and BTL
line agencies approach towards a channels in a
campaign campaign

Agencies specialising Primarily leverage Purpose is to

Below-the- in unconventional direct mail, build loyalty and
line agencies media are called BTL sponsorships, PR drive repeat
agencies and PoS. purchase
Client/agency relationships
 Agencies are partners like never
before. Our creative, experiential
and media agencies see our new
products in very early stages of
development. Then we jointly
work on the positioning and
communication strategies.

Virat Khullar
Head of Marketing, Renault India Agencies are our windows to
the changing world.
 The relationship between a
manufacturer and his advertising
agency is almost as intimate as the
relationship between a patient
and his doctor. Make sure that you
can life happily with your
prospective client before you
accept his account.
David Ogilvy
 Client

Agency Brand
Agency remuneration
Agency remuneration

Commissions from media Fee based compensation

Cost plus agreement Incentive based agreement

Other charges
Commission from media

A system of remuneration where

The commission is fixed at 15%
the agency receives commission
of the gross amount and is levied
from the media for space / time
on all media
purchased on behalf of its client
Commission from media

Advertising released for Rs. 10,00,000 in ToI

Media
Media Cost
Cost 10,00,000
10,00,000 Agency
Agency bills
bills client
client 10,00,000
10,00,000
ToI
ToI bills
bills agency
agency 8,50,000
8,50,000 Agency
Agency receives
receives from
from Client
Client 10,00,000
10,00,000
Agency
Agency retains
retains 1,50,000
1,50,000
Fee based compensation
Fixed fee method Combination method

Based on the scope of work the Under this method the agency is
agency charges a fixed monthly compensated by way of a fixed fee
fee for all the services as well as defined media
commission
Fee revised on an annual basis
based on review However, if media spends fall
below budgeted amount then the
Media commission are credited agency will have to be
to the client compensated through some other
means
Fee based compensation
Cost Plus Incentive based

The client pays the agency on Under this method the agency is
the cost of work plus an agreed compensated for cost. However, in
profit margin addition the agency is also given
performance incentives
Detailed records need to be
maintained by agency personnel Agencies given incentives if the
on resources allocated under achieve or exceed pre-defined and
this method measurable results
Other charges

Agency also earns between 15-

Services provided include
20% commission on all services
research, artwork, printing,
provided or sourced from third
photography and so on
party
Agency roles
 Voice of the consumer! Represents the
consumer’s thinking process in the agency.

Is primarily responsible for all strategic and

Account
planning work done including brand strategy
Planners
and campaign planning

Works with the account management team,

client team and the creative team to ensure
that the right communication is created
 Primary liaison between the agency and the
client

Account Is responsible for the day-to-day management

Management of the business, fiscal discipline, all internal
coordination and deadline management

Also contributes to the brand strategy and as

to campaign planning
 A creative team is made up of an art
director and a copy writer

Their primarily role is to create

Creative communication based on the
‘creative briefs’ given to them

Also responsible for the quality

(comprehension & technical) of the
communication produced
 Media planners work closely with the
agency management / planning teams to
develop a media plan

Their primarily role is to ensure that the

Media planners communication message reaches the
defined target audience at an optimised cost

A crucial role a as planners have to ensure

return on investment, on every rupee
 Once a media plan is approved, by client,
media buyers step in and take over

Media buyers buy space, negotiate rates,

time and schedule of the ads
Media buyers

They are specialists as they have a great

deal of knowledge about media rates.
Buyers also strike value-added deals with
media organisations
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Choosing an external agency
(creative pitch)
Define objectives Define criteria Prune the list

Request
Creative pitch Shortlist
references
Define Objectives
Define organisational objectives

Define brand objectives

Based on the objectives defined

above, set expectations from an
agency
Define Selection Criteria
Based on the goals and expectations, define selection criteria to eliminate
bias

Size of the agency Media capability

Category experience Production capability

Conflict of interest Retention rates

Creative reputation & capabilities

Pruning the List

Based on the selection criteria, prune

the list of agencies to a level that can
be managed
Reference Request
Once the initial screening is done,
it is time to request references
from the agencies still in the Most agencies will provide a list
running of their clients, as references

Checks with key agency partners Check with the references on

will also gives an idea of the creative and service quality
agency’s culture and therefore fit standards of the agency
Creative Pitch
Once the list is narrowed down A creative pitch, is a formal
to 2-3 agencies the agencies are presentation made by the agency
asked to participate in a creative to client. It addresses a specific
pitch brand problem or a situation

Pitches help client choose an The pitch reveals an agency’s

agency which best understands ability to develop solutions. It also
an issue and offers a showcases the agency approach
comprehensive solution to to addressing issues
address the issue
Agency Selection

During the pitch, opportunity

exists for the client to visit the Visits important fine-tune
agency and meet key personnel chemistry between the client
who would be working on the and the selected agency
business
 Digital
Agency
Digital marketing agencies are
organizations that use a range of
digital-focused marketing tactics to A digital marketing agency comprises
increase clients’ digital engagement website designers, graphic designers,
and discoverability on the internet— marketing consultants, writers, social
ultimately helping them make more media marketing managers, digital
sales. strategists, and other specialists who
work with clients to create successful
digital marketing campaigns catered to
They can be an in-house digital their needs.
agency or a full serviced outsourced
digital agency, too.
What services do they provide?
• Google Ad management

• Email marketing campaigns

• Content marketing

• Social media marketing

• SEO (search engine optimization)

• Website development
Criteria for selecting a digital
agency
• What are the services the agency offers?
• What successful campaigns can you share?
• What kind of impressions did the campaigns create?
• What was the clients’ feedback on the campaigns?
• Who ideated the campaigns?
• How long did it take to create and execute the campaigns?
• What’s needed from my end?
• What relevant business results can I expect in 90 days?
• How long will it take to achieve the overall results I’m looking for?
• What is the budget I should aim for?
• How long will the retainer be for?
• Who will be handling my project on your end?
• What online and software tools do you use?
• What is your specific proposal for my project?
• Will you complete a small paid task so that I can assess whether we’re on the same page?
End of module