Agency Management Lecture 7 1/7/2011Agency Management – Ruia – TYBMM 2010

Lecture break ups DateLecture topicAssignment Jan 5 th Communication models, DAGMAR, Communication Objectives Jan 7thAgency finances and client evaluationRead up notes, form 4 questions/thoughts to submit – Chapter 4 and 5 Jan 12 th Chapter 6 – setting up an agency Read Chapter 6, Assignments handed back, final assignments handed out

Agency Finances An agency is constantly in the midst of cash flows To keep the monies flowing right, you HAVE to understand agency finances Client Servicing and Business Development HAVE to understand finances to understand the company and their value add Creatives have to understand finances to understand their worth Finances have to be completely crystal for everyone concerned from the beginning

Agency makes ad Buys media space at Rs.x/- 15% of x is agency’s – rest paid out to media owners Discounts to media buys will be linked to client Commission based or commission from media – % charge on all media/space/time bought usually 15% – Established and accepted – Efforts required might not always = 15% commission – Big and more money making accounts ends up paying for smaller accounts – BTL Activities might not get recommended because of no commission coming in from there – May result in more services added to bundle even if clients don’t want it that could increase media spends to just earn more – Results in big money for agencies if media is pre-bought at discounted rates Types of billings/sources of income

Fee-for-service or fee arrangement – Unbundling of services has caused the commission system to change to fee for service – Charges one flat sum to be paid to agency for all the work done, estimated based on number of man hours worked per month or a per hour fee is fixed which is paid as billed – Media commissions are credited to client and work and media is pre decided. – Additional costs are counted as costs plus to be billed to clients – Can lead to price wars between agencies, lowered standard of work or servicing, less time spent on account – Negotiations leading to deciding the fees might become bitter – No savings in media cutbacks or discounts.. Since that is only for agencies who charge in bulk.. Types of billings/sources of income

Cost plus arrangement – Pre decided fee + percentage of total costs of profit Incentive based compensation – Bundling agency compensation to performance of the campaign – Sale or market share or quality of work determines the fee Percentage charges – Compensation of about 20% above actual hard costs to the client – Not deducted from suppliers bill but over and above that Types of billings/sources of income

Financial assessment – Verification of business done to costs – Personnel hours worked charged to an account – Payments made to media and other vendors Qualitative assessment – Effort put by agency into planning, developing and implementing – Quick turnaround time and creativity under pressure – Track record of losing clients and/or retaining them Sustained results in advertisements produced Consistency in the servicing team Involvement, understanding, positive attitude and passion for the clients How is an agency evaluated?

Say the truth to the clients and not just agree with everything Responsibility of spending clients money Creative evaluation – Consistency in approach along with brand’s marketing/advertising and creative objectives – Appropriate for TG? – Clear communication? – Does not overshadow the message – Appropriate approach for the media it will be seen in – Is it truthful as well as tasteful How is an agency evaluated?

Fresh ideas, original approaches and suggestion of such opportunities Execution are based as per strategy Research is used in development as well as pre and post testing Creative team inducted about the client Creatives produced are on time and margin for revisions Performance under pressure Has lots of good examples for execution and visual references Participation in major campaign presentations Can use constructive criticism and redirection Has good control over costs and can evaluate the strategy Parameters to judge creative dept

Has knowledge of brand and communication plan’s objectives New uses of media and use of new media, knows the market trends Full knowledge of company market, TG, Service, objectives and recommendations made with these in mine Is not niche but has a broader perspective Pursues original research to select and use media Keeps tabs on what competition is doing Administration – coordination, payments, verification Conducts analysis on placements Gets the bet and most competitive rates in the market Has flexibility for unexpected opportunities, and most saving strategies Sets specific and measurable goals for reach, frequency etc Parameters to judge media dept

Knowledge Experience Abilities Chemistry Selection of ad agency Service needed Agency defines what they need for their IMC News spreads News media is informed that an agency is needed Screen applications Client sets criterion and narrows down to about 5 agencies The Pitch Invite screened agencies who make a pitch based on needs of the client and a speculative campaign Selection Agency is chosen based on set criteria by client and informed. Work begins.

That’s it! Please read Chapter 6 for next class and have thoughts/questions ready for submission and discussion