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What does Advertising Agency do

The First World War created conditions for the growth of some of the Indian consumer industries. After the war, new British investment followed. The need arose for specialized advertising services. The British India Corporation, a British firm in Kanpur, with a relatively wide range of consumer goods, set up Alliance Advertising Associates Limited. This was probably the first advertising agency in India to provide a wide variety of services. In 1922, Mr. L.A. Stronach, a senior artist of Alliance Advertising, left to start his own agency in Bombay. Thus was born a new type of business enterprise in the service sector in India.

The Indian advertising industry had a slow start and got its first boost during the Second World War. With the British personnel having to join the armed forces, opportunities opened up for Indians in this new talent-intensive business. Then followed a brief interlude of uncertainty in the years immediately following Independence. The launching of the First Five-Year Plan and more so the Second Five Year Plan, with the accent on rapid industrialization, gave an impetus to the growth of advertising agency business in India. By 1952 there were 109 advertising agencies in India with a total turnover of Rs 3.5 crore. By 1967, the number of advertising agencies had increased to 279 with a total turnover of Rs 35 crore. The Indian advertising industry has really come' into its own with the growing liberalization of the economy since the mid-eighties. According to the fourth agency report of the journal Advertising and Marketing, the Indian advertising industry grew by 36.5 per cent in 199293, far outpacing the growth of Indian industry. What is significant, however, is that three of the top four advertising agencies in India continue to be subsidiaries of international advertising agencies-Hindustan Thompson Associates and Lintas India being the first two, and Ogilvy & Mather being the fourth. What is more with the new interest of many national corporations in the Indian market, a large number of international advertising agencies have entered the Indian advertising industry in collaboration with leading Indian advertising agencies. This is the process of globalization of Indian advertising agency business. This is opening up new opportunities for Indian advertising to assume greater responsibility and serve everywhere in the world and gather experience of global marketing and advertising.

It is interesting to note that advertising departments of the manufacturing and marketing organizations have not expanded very much during these years of growth of the advertising industry. As business has grown, so has the number of advertising agencies. The new advertising agencies that are coming up are also growing very rapidly. A number of them have found their place among the top 25 advertising agencies. It is clear that advertising agencies have been bearing the major burden of the expansion of advertising in India. In the process their scope of activities has increased considerably. The larger advertising agencies have even set up their subsidiaries within the country and some of their specialized services have branched out as separate companies. It is obvious that, even with the uncertainties involved in the process of rapid integration of India with the global economy and predominance of the often unpredictable free market, the advertising agency business in India is on the road to rapid expansion and modernization. This is boom of the compulsions of the fast-emerging battle of international brands for the burgeoning Indian market of consumption-hungry middle class.

There are six broad functions in the modem advertising agency structure today. The actual organizational structure of one agency might differ from that of another in many details, but it would be built round these six broad functions. The scope of these functions has widened considerably in recent years and is reflected in the organizational structure.

The first function is in the area of contact and communication between the advertising agency and the advertiser. This is the opportune time to introduce a new term the client. In the advertising agency language the advertiser whom the agency serves is the' client'. The reason is obvious. What is not so obvious is the other term-account and such related terminology as account executive or account service group. The client is also often referred to as the account. This is because the client hands over the responsibility of spending and maintaining accounts of its advertising budget to the advertising agency it appoints for the work. The person who works in the area of contact and communication between the agency and the client is known as the account executive. In a large agency he could be part of a larger group, which is known as the account service group. It would include specialists in different fields, such as media, art and copy, research and production, and so on.

The next important area of functioning is research. Advertising agencies use research as a tool for their own comprehension of the market in relation to the product or service they have to advertise. Research also helps develop creative ideas and media plans. Advertising agencies use research to test consumer reactions to products and services not only to gather points for effective communication, but also to be able to help the client improve the product or service to suit the needs of the consumer. It can even help find new uses. For instance, I can remember, how a very unstructured survey of a few bulk users of a bleaching chemical, popular with the textile industry, led to its introduction as a domestic whitener. We found out that many people in the textile industry used this bleaching chemical while washing their clothes at home. A great deal of demographic and social and economic data is now available from various social and economic research groups in the country for use in planning and creating advertisements. One might mention the National Sample Survey, the National Council of Applied Economic Research, the National Media Survey, the ORG and so on. Advertising approaches are pre-tested and even post-tested for effectiveness. Some of the big agencies maintain consumer panels for various types of tests and research to help evolve the most effective communication message.

The third important area of functioning is the creative department. This is where ideas are born, the advertising message, the persuasive marketing communication created. This is the kingpin of the operational area developing out of the dialogue between the account service group and the client. This too is an area of teamwork. The copywriter, the visualiser, the art director and the ideas man or the creative director work together as a team. In the process of interaction among these individuals emerges the advertising message in which the words and pictures and where necessary, sound and music become an integrated function.

It is in the creative department that a marketing concept is given flesh and blood in the process of converting it into a communication concept, powerful enough to induce a purchase. The discipline of marketing has entered the field of creativity to give it a direction and purpose.

The important area of modem advertising agency structure, the media department, has assumed major significance today with the proliferation of not only different types of print media, but also the electronic media, particularly with the advent of telecast from outside the country through satellites. Slowly but steadily, over the last two or three decades, the media scene has been changing, particularly with the publication of a number of magazines aimed at a select readership. As the advertisers face severe competition, they are becoming more exacting in the demand for reaching out to the right consumer, most effectively. The proliferation of the media and the specialization in relation to audience or readership that is taking place are also demanding of the advertising agencies the best possible utilization of the available media. This is an area important for both the advertiser and the advertising agency. According to a rough estimate, 10 per cent of the advertising budget is spent on creating advertisements, while 90 per cent is spent on the media. Even the most effective advertisement is ineffective if it does not reach the right potential consumer. It is from this 90 per cent of the advertising budget that the advertising agency realizes its major income. Thus, in media planning too has come the discipline of research, including market research. Even computers are being used to find out the best possible combination of media for the most extensive and effective coverage of the target consumers at the least possible cost. Hence, leading advertising agencies today have media planners and media controllers.

Modem media planning demands a wide range of studies. For example, I was once involved in planning the advertising of certain transport products. This involved the study of road and road transport development data and the preparation of a road map of the turnover of lorry traffic. With this data is possible to pinpoint and space out the strategy of locating hoardings. We studied the habits of transport operators to ensure that we could get the marketing communication through to them at the right time and at the right place, where the drivers relaxed. That was the time when they were likely to absorb the advertising message. We even studied color preferences and tried to understand the reason for such preferences. Today media planners and controllers are part of the team that participates in the dialogue between the advertising agency and the client. When the final advertising plans are presented to the client, a major ritual in advertising agency operations, the media presentation or the analysis of the media plan is, at times more important than even the presentation of the creative work or the explanation of the rationale behind the advertisements proposed.

The fifth important area of the advertising agency structure is the production department. As the name implies, it is concerned with the production of the advertising material. When practically all newspapers were printed by letterpress, the production department's main responsibility was to get the blocks made out of the artworks of the advertisements produced by the creative department and dispatch them to the newspapers concerned, according to the instructions of the media department. With the switchover to the offset process of printing, the artworks are now sent directly to the publishers for processing and printing. The production department still continues to handle all print jobs with the help of the printers. It engages contractors to paint the hoardings from designs produced by the creative department, or for constructing exhibition stalls and stands, models and so on. Depending on the load of work involved,. this department would have to supervise the production of audio-visual material, such as radio/TV spots and. films. With the increasing use of the electronic media, specialized departments have come up in the larger agencies to handle the work with the assistance of outside studio services and video/film makers. It is often simpler for the creative department to deal directly with the production of audio-visual material. The production department in such cases would come in mainly in the management area.

Finally, we come to the business area of the advertising agency structure. This is the area of financial management. The major source of income of the advertising agency is the 15 per cent commission received from the media and all other suppliers of advertising material. Obviously the main sources of income are the newspapers and magazines and TV, followed by radio and cinema. For long media rates in India were very low. Yet the demand on the advertising agency is such that it has to invest heavily in talent, at high cost. For the managers of advertising-agencies, the main problem has always been to operate profitably within the constraints of high costs and low returns. It is true that media rates have rocketed in recent years. At the same time the demands on the advertising agencies have also increased. They ate investing in new types of talent and services, which are very costly. They have to buy other services also at high costs.

What has happened, however, is that the total business has increased considerably and the returns in quantitative terms are high. This enables advertising agencies pay high salaries. At the same time the increase in the staff is not proportionate to the new business acquired. This means that the load on the teams servicing accounts is very high. In such a situation it is difficult for an advertising agency to absorb the financial shocks of sudden shifts in business, leading to lowering of returns in investment already made on staff. It is this uncertainty of business prospects every year, which often leads to quick turnover of staff, particularly at the account servicing level. In such a situation it is becoming more economical for an agency to shed some of its specialized departments, such as market research or public relations or audio-visual production and set up subsidiary organizations for these services. Buying these services from outside means an expansion of the source of income for the agency-the 15 per cent commission.

Some agencies have developed such relations with their clients that the fees for these special services are negotiated and do not come under the usual services offered by the agency. As for public relations, it has never developed into a full-fledged department as such. The agency has usually had a person who specialized in this area, apart from his or her account servicing activities. With increasing emphasis on public relations, setting up a subsidiary unit for this purpose has become the pattern.

The general pattern of advertising agency remuneration, the 15 per cent commission from the media, in practice in also extended both to the expanding in-house and outside services which the agency buys on behalf of the client. This means that if an advertiser agrees to spend Rs 1 crore on newspapers and magazines and TV, the agency would earn Rs 15 lakh. To this would be added the cost of the artwork for a series of press advertisements. A similar costing process would apply to the production of audiovisual advertisements as well. This form of financial management would seem to lend itself easily to a change in the existing advertising agency structure, with a parent company and a number of specialized services as subsidiary organizations. This process has already begun with some of the largest advertising agencies in the country, setting up their subsidiary market research, public relations and financial advertising organizations. They are setting up media buying organizations as well, as a more sophisticated reincarnation of the old space contractor.

We have flow come to the stage when we can discuss how the advertising agency actually works. We shall discuss here the actual flow of work. In the following chapters we shall go into more details about the working of the important departments and the role of certain individuals. Once again we can only consider a broad pattern. The system can differ in detail from agency to agency. The entire process begins with the account director who secures business for the agency and is responsible to the client for servicing the account. He would be assisted by a number of account executives and assistant executives depending on the size of the budget and the number of accounts he has to handle. In some organizations the account director would head an account service group, which would virtually be a mini-agency within the advertising agency. In the account service group would be representatives of the market research, creative, media and production departments. This would constitute a team, which would service a number of accounts. In the larger agencies, such account service groups might be servicing particular types of client's consumer goods or engineering or financial advertising. The account service groups would consult other specialists available with the agency-TV and PR specialists, for example.

The account director would gather all the necessary information from the client. He might associate his assistants or his account service group in this process. With an account service groups what follows now would be simple. The group would discuss all the information and set about gathering more information if necessary about the product/ service, benefits it offers, the competition, the consumers and so on. This would be the job of the market research specialist in the group. Some agencies have a Plans Board. The heads of the different departments and other specialists constitute the board. It is to this board that the account director would first report about the client and his requirements. Then each department would take up its responsibilities. The Plans Board would then continue to meet from time to time as the work progresses. The account director or his assistants would co-ordinate the work or the different departments.

As is obvious, the approach to the advertising campaign or the marketing communication approach can be identified only when all the necessary information is available. In an account service group system, this process would take place within the group. Otherwise the account director would have to work out the marketing communication objective on the basis of all the information gathered. This would then come up before the Plans Board. After its approval would start the process of giving flesh and blood to this approach by the creative department, while the media department would work out the media plan and production department would take over in the final stages.

There is no reason why a Plans Board should not function simultaneously with the account service group system. The Plans Board is able to bring a team of mature minds to bear on the work. In such a system the Plans Board would initiate work for the preparation of the advertising campaign and finally approve it before it is presented to the client. Such a system would assure the client that the campaign has the benefit of the experience and thinking of the agency as a whole and not just a particular group of people working on it. A Plans Board is also able to protect the financial interest of the advertising agency, as it would also have the benefit of the advice of the chief executive of the organization or the managing director, or whatever might be his designation. Some agencies have a separate Review Board, consisting of members of the organization who have not been associated. with the preparation of the advertising campaign. They would give the final verdict of the agency. Obviously the composition of the Review Board cannot be permanent. It has to be of an ad hoc nature.

Once the advertising campaign is finalized and has received the approval of the agency, it has to be presented to the client. At this stage only the advertising manager and may be, some marketing and sales personnel might be involved. In some cases, depending on the relationship between the agency and the client and the expertise of the advertisement manager, she/he would have already been aware of the proposed advertising plan, having been associated with its evolution through frequent interaction with the account service group or the Plans Board. The main emphasis at this presentation is on the marketing communication approach and how it is to be worked out creatively and in terms of the media, in relation to the budget. The budget is decided either by the client independently or in consultation with the agency. At this stage only rough ideas are given of the creative interpretation of the marketing communication message. The media details are of course, provided. The entire presentation is a justification of the approach of the advertising agency.

Once the advertising plan and rough creative interpretation are accepted, the agency proceeds to finalize everything. Then there is a final presentation before the top management of the client. In this presentation the creative interpretation in terms of press advertisements, TV/radio spots, etc. would be the finished product, as they appear before the public. The different department heads or executives concerned would explain their approach. Once the client gives his approval, the advertising plan would be executed.

It is at this stage that the accounts and billing department would get into action. It would check the actual appearance of the advertisements in the different media, at the right time as scheduled by the advertising agency and whether properly reproduced. Then it would secure the bills from all the outside service organizations, including the media, every month and prepare bills for the client. There is a stipulated period within which the agency must pay the media and the suppliers of various services. The client is also supposed to pay within a certain period.

One important point to remember in this context is that no advertising agency can charge 15 per cent commission and buy advertising space and other services on credit unless formally recognized by the Indian Newspaper Society (INS). This is known as accreditation. Without such an accreditation an advertising agency would, have to pay in advance for the space it buys on behalf of its client. Nor would it be able to get the full commission.

Once the agency receives the accreditation of the INS it receives the same facilities from all other media organizations and suppliers. To secure accreditation the agency must have a certain specified capital and experienced and qualified personnel.

By now you should have some idea of the scope of operations of an advertising agency and the option it offers you for a career in one area or the other of advertising. The main functions of an advertising agency could be summed up as follows: study the product or service in relation to competition; analyze the present and the potential market; study distribution channels; evaluate the advertising media; develop an advertising plan; design, write and illustrate advertisements; prepare the necessary advertising material; arrange for placing the advertisements; check verify the appearance of the advertisements in the media; and handle the billing from and payment to the media owners. In the following chapters we shall discuss in greater detail the responsibilities and qualifications of the personnel involved in each of these departments.