Advertising agencies are full-service businesses which can manage every aspect of an advertising campaign. They vary widely in terms of size and scope and cater to different kinds of businesses. Some agencies have only one or two major clients whose accounts they manage. Others have hundreds of clients spread throughout the country or the world, as well as many field offices from which to service them. In general, an advertising agency will be able to manage an account, provide creative services, and purchase media access for a client.
An agency, depending on its size, will likely have different departments which work on the separate aspects of an account. An account manager or the account planning department will coordinate the work of these departments to insure that all the client's needs are met. The departments within a full-service agency will typically include:
RESEARCH The research department will be able to provide clients with some details about the prospective audience of the final advertising campaign, as well as information about the market for the product being advertised. This should include specific market research which leads to a very focused ad campaign, with advertising directed to the ideal target audience.
CREATIVE SERVICES Advertising agencies employ experts in many creative fields that provide quality, professional services that conform to the standards of the industry. Copywriters provide the text for print ads, and the scripts for television or radio advertising. Graphic designers are responsible for the presentation of print ads, and the art department is responsible for providing the necessary images for whatever format advertisement is decided upon. Some agencies have in-house photographers and printers, while others regularly employ the services of contractors.
The individuals involved in creative services are responsible for developing the advertising platform, which sets the theme and tone of the ad campaign. The advertising platform should draw upon specific, positive features of the product advertised and extrapolate the benefits the consumer could expect to receive as a result of using the product. The campaign, through the development of this platform, should prove to be eye-catching, memorable, and in some way unique. The advertising that is remembered by consumers is that which stands out from the rest; it is the advertising agency's (and specifically the creative services department's) responsibility to provide this quality for their clients.
The final advertising provided by an agency should be fully developed and polished. Television commercials should be produced with professionalism; print ads should be attractive, informational, and attention-getting; radio spots should be focused and of high audio quality.
MEDIA BUYING One of the services provided by advertising agencies is the careful placement of finished advertisements in various media, with an eye toward maximizing the potential audience. The research search conducted by the agency will inform any media-buying decisions.
An agency will be able to negotiate the terms of any contracts made for placing ads in any of various media. A full-service agency will deal confidently with television, radio, newspapers, and magazines. Some agencies are also branching into direct mail marketing and point of purchase incentives; some agencies have expanded into Internet advertising; and some agencies will also place an ad in the local yellow pages, or utilize outdoor advertising or one of the more creative avenues of incidental advertising, such as commercial signs on public buses or subways or on billboards.
The media-buying staff of an advertising agency will draw on specific research done for the client, as well as on past experience with different media. Through this research and careful consideration, the agency will develop a media plan: this should be a fully realized plan of attack for getting out the client's message. Some factors to be considered in the development of the media plan include:
Cost Per Thousand: This refers to the cost of an advertisement per one thousand potential customers it reaches. Media-buyers use this method to compare the various media avenues they must choose between. For example, television ads are considerably more expensive than newspaper ads, but they also reach many more people. Cost per thousand is a straightforward way to evaluate how to best spend advertising dollars: if a newspaper ad costs $100 and potentially reaches 2,000 customers, the cost per thousand is $50. If a television ad costs $1000 to produce and place in suitable television spots, and reaches a potential of 40,000 viewers, the cost per thousand is only $25.
Reach: This term is used when discussing the scope of an advertisement. The reach of an ad is the number of households which can safely be assumed will be affected by the client's message. This is usually expressed as a percentage of total households. For example, if there are 1,000 households in a town, and 200 of those households receive the daily paper, the reach of a well-placed newspaper ad could be expressed as 20 percent: one-fifth of the households in the community can be expected to see the advertisement.
Frequency: The frequency of a message refers to how often a household can be expected to be exposed to the client's message. Frequency differs widely between media, and even within the same medium. Newspapers, for example, are read less often on Saturdays, and by many more households (and more thoroughly) on Sundays. Fluctuation like this occurs in all media.
Continuity: The media-buyer will also need to consider the timing of advertisements. Depending on the client's product, the ads can be evenly spread out over the course of a day (for radio or television advertisements), a week (for radio, television, or print advertisements), or a month (radio, television, print, or other media). Of course, seasonal realities influence the placement of advertisements as well. Clothing retailers may need to run more advertisements as a new school year approaches, or when new summer merchandise appears. Hardware stores may want to emphasize their wares in the weeks preceding the Christmas holiday. Grocery stores or pharmacies, however, might benefit from more evenly distributed advertising, such as weekly advertisements that emphasize the year-round needs of consumers.
Deciding on an advertising budget is highly subjective, depending on the type of business, the competitive atmosphere, and the available funds. It will also depend on how well established the business is, and what the goal of the advertising is. Trade publications are often good resources to consult in pondering this matter; many provide information on industry standards for advertising budgets.
PRICE STRUCTURES Advertising agencies charge their clients for all the itemized expenses involved in creating finished ads, including hiring outside contractors to complete necessary work. The client should receive invoices for all such expenses. For example, the client may receive an invoice for a television ad which includes a photographer's fee, a recording studio's fee, an actor's fee, and the cost of the film itself. The client will also be charged for the cost of placing the final advertisement in whatever media the agency has chosen (and the client has agreed to, of course).
Beyond these expenses, easily invoiced and itemized for the client, advertising agencies include a charge for their services. This fee pays for the extensive account management, creative services, research, and media placement provided by the agency, all the hidden costs involved in the production of a quality advertising campaign, and profit margin.
When working with a new client, and particularly with a small business, an agency may ask that the client put the agency on a retainer. This retainer will consist of the full advertising budget agreed upon, and will be used to pay all production expenses and media buying costs, as well as provide the agency with its fee. The client should still insist on detailed and accurate invoices for expenses taken from the retainer.
Depending upon how important advertising is to the overall health of the particular business, and the amount of resources available for use in advertising, the small business owner should consider whether an investment in the services of advertising agency will yield meaningful benefit.
BENEFITS OF ADVERTISING AGENCIES Advertising agencies provide a valuable resource for any enterprise seeking to increase its customer base or its sales. They bring together professionals with expertise in a wide array of communication fields, and often—though not always—produce polished, quality ads that are well beyond the capacities of the client. Agencies are generally knowledgeable about business strategy and media placement as well. The media-buying experts at an agency will develop a strategic, targeted media plan for their clients, drawing upon years of experience and close relationships with media professionals. This experience and these connections are likely not available to the small business owner, and can be important factors in launching a successful media campaign.
DRAWBACKS OF ADVERTISING AGENCIES One drawback to using an agency, of course, is the added stress of dealing with unfamiliar people and unknown territory. Choosing the right agency will take time, and the process of reaching a satisfactory ad campaign can be a taxing and time-consuming one (especially if the client is vague about his or her desires, or expects a top-dollar campaign at a bargain-basement price). Work will have to be reviewed, changed, and reviewed again. And the account will have to be monitored closely. As with any outside contractor, the small business owner will need to keep careful tabs on what is received for his or her hard-earned dollar.
Cost is another factor that must be weighed carefully by the small business owner. Although advertising agency campaigns are often extremely valuable in terms of shaping market share, product recognition, and public image, the small business owner will have to carefully consider the potential benefits against the costs associated with hiring an agency of any size. When deciding whether or not to use an agency, the small business owner should consider if the advertising he or she envisions really requires a team of experts working on it. If the ads will be fairly simple, or if they will be placed only in one medium (such as a local newspaper), the owner should probably attempt to create the ads without the aid of an agency. It will be more economical to hire one expert, such as a graphic designer, and to place the ads personally than to hire an agency.
Agencies vary widely in their focus. Some cater to only a few large clients, and do not generally accept new accounts. Others have hundreds of clients of varying sizes. It is important for a small business to work with an agency that will be able to devote the time needed to insure a successful ad campaign. Smaller, local agencies can usually offer more one-on-one attention. On the other hand, agencies that maintain a stable of larger companies are unlikely to regard a small business as an important client unless they are convinced that the establishment is destined for big things. At the same time, however, larger agencies can sometimes enhance a small business's reputation and improve its geographic reach.
Instead, the agency should ideally be one that is familiar with the specific set of concerns shared by most small businesses. Indeed, it is very important that the advertising agency understand the issues that a small business owner must consider. These include having a limited advertising budget, finding a niche in a community, and establishing a loyal customer base. The agency should have worked in the past for clients in similar situations; it is not imperative, though, that they have other clients which are exactly the same as your business. If the business is a bookstore, for example, and the agency has never promoted a bookstore before, it does not mean they will necessarily be a poor choice to create and manage an advertising campaign. They may have done work for other local retail stores that have faced the same obstacles and challenges.
In an article for Entrepreneur, Kim T. Gordon outlined a series of questions for small business owners to ask when evaluating a potential advertising agency. First, they should ascertain whether the agency is familiar with the target audience and knows how to reach them. An agency that works primarily with consumer markets may not be the best choice for a small business whose main customers are other businesses or the government, for example. Second, the small business should make sure that the agency has done extensive work in the media they plan to use most extensively. An agency that has built a reputation for creating great television ads may not be well-suited to Internet advertising. Third, small business owners should ask about the results the agency has achieved in working with similar clients. And finally, the business owner should ask for a clear picture of what they should expect to accomplish with their specific advertising budget.
One of the best ways to choose an agency is the same way you would choose a bank, a doctor, or a housepainter: ask someone you trust who they use. If your friends, neighbors, or fellow business owners have used an agency they were pleased with, it is worth further inquiry. If you see advertising you really like, call up the business and compliment them on their good taste; then ask who prepares their ad copy. The agency-client relationship is very much trust-based, and the creative work agencies do is subjective. You should work with an agency whose collective personality and creative work make you feel comfortable. These services will cost a considerable amount, and starting off with a firm you feel optimistic about will help insure your satisfaction throughout the relationship. The American Association of Advertising Agencies (AAAA) helps match agencies and clients through their Web site.
During the introductory meeting, the agency will be prepared to show samples of their work. These are called case histories, and they should be relevant to your business. These samples should reflect the agency's understanding of the needs of your small business—including who your customer base is—and a working knowledge of the kind of marketing necessary to sell your product. As a potential client, you should feel free to ask many questions concerning the approach of the advertisements, the audience reached by certain media, and what media plans have been developed for businesses similar to yours. An agency, though, should never be asked to do work "on spec." Advertising agencies cannot afford to use their considerable creative resources doing free work for potential clients. The case histories they provide, along with the answers to any questions you may have, should be sufficient to decide whether to give them your business.
Once you have found an agency you feel comfortable with, and have together agreed upon a budget and a timeline for the advertising, the agency will begin producing copy for you to approve. Laying a strong foundation, including asking all the questions you have as they arise, will pave the way for a productive, mutually beneficial relationship.
"Checking the Local Market, Asking Media Can Help Start Long-Term Relationship." Arkansas Business. December 27,1999.
Gordon, Kim T. "Call in the Pros." Entrepreneur. December 2000.
Peppers, Don. Life's a Pitch and Then You Buy. Doubleday, 1995.
Poteet, G. Howard (editor). Making Your Small Business a Success: More Expert Advice from the U.S. Small Business Administration. Liberty Hall Press, 1991.
"Select an Advertising Agency." Milwaukee Business Journal. February 11, 2000.
Semon, Larry. "Did You See My Ad?" Brick House Publishing, 1988.
Smith, Jeanette. The Advertising Kit. Lexington Books, 1994.