1. Selecting and Evaluating Advertising Agencies
Advertising Management
Paul Gaskin and Irene Powell

2. Evaluating Agency Performance
To evaluate existing agency (review)
To evaluate potential agency (selection)
Underlying change in philosophy:
Move away from presumption of agency competence, only evaluating when problems occur, to regular measure to ensure accountability

3. Evaluation Process Decide & weight your ideal attributes
Determine questions which will elicit info on attributes from agency (agree them with agency!)
Rate agency against these attributes
Analyse the results

4. Decide & weight your ideal attributes
Importance*
Creativity
Media planning & buying .20
Account management .15
Services provided .15
Chemistry
Track record
Compatibility
1.00
* figures for illustration only

5. Determine questions to elicit info on attributes
eg Compatibility
Does the agency personnel have knowledge of our industry?
Complete knowledge .5
Good knowledge .4
Average knowledge .3
Poor knowledge .2
No knowledge .1
Are the backgrounds of the agency people compatible with our needs, marketing qualified, planning expertise?
Completely compatible .5
Good compatibility .4
Average compatibility .3
Poor compatibility .2
No compatibility .1

6. Rate each agency

7. Selecting an advertising agency
Requirements
Agency v Agencies v In-house
Selection Criteria - prioritised
Questionnaire / Checklist
Preliminary List
Short List
Briefing Short List
Credentials, strategy pitch or Full (creative) Pitch
Assessment against Criteria
Appoint and Contract

8. Why clients change agencies
“New broom”
“Follow my leader”
“Our policy on global alignment”
“But we always do that with your account”
“We just can’t see eye to eye”

9. The Agency Register Agency scorecards Client counselling
Agency de-briefing
Assessing your needs
Conflict issues
Existing relationships
Agency profiles
Strict confidentiality
Capabilities presentation
Presentation schedules
Stage managing presentations

10. Agency remuneration Commission system - historical
Level of commission = 10%
Service fee = 7.5%
Example
Gross media cost (agency bills client) 1000
Less 10% commission
Net media cost (agency remits net to media) 900
agency keeps 10%
+ 7.5% GMC or
19.44% of NMC
Production billed as net to client + Service Fee of 19.44% !!!

11. Alternatives to Commission System
Hourly rates
Fixed fee (Cost + Profit)
Sliding Scale
Performance based

12. Commission System Disadvantages - Advertiser
Agency overspending in commissionable media
Commission + Service Fee on high media spend prohibitive
Good, Bad, Indifferent get commission

13. Commission System Disadvantages - Agency
Media spend = Servicing cost???
Immediate work but not income
Works for buyer, paid by seller
Exceptional skills not rewarded

14. Commission System Advantages - Media Prompt payment via agency
Ease of communication (200 accredited agencies)
“Acceptable” ads (Codes & technical)

15. Commission System Advantages - Agency Guaranteed income from media
Well known
More effective advertising more commission more effective advertising...
Advantages - Advertiser
Agency co-ordinates
Agency bears cost of media upfront

16. How clients pay agencies
Remuneration method %
Service fee only
Comm + serv fee
Flat fee
Person hours
Comm + flat fee
Performance incent
Comm only
Other
Source: AMR Quantum Harris/Aus Street Cons

17. What clients pay agencies
Level of service fee %
Over 10%
7.6-10%
7.5% %
2.6-5%
Up to 2.5%
Refused/DK
Source: AMR Quantum Harris/Aus Street Cons

18. Reasons for appointing a media agency
To take advantage of greater expertise in media planning & buying 39%
To get better rates from the media 24%
To reduce the cost of planning & buying media %
Need to appoint a global ad agency 8%
To gain more creativity in media
buying 8%
Other %

19. The Ten-Point Pitch Guide for Advertisers (AFA 98)
1 The Background Information
identifying agency capabilities you need
2 The Initial Prospect List
no competitors, size compatibility, ‘chat’, questionnaire eg appendix
3 The Pitch List
3-4 agencies on strength of questionnaire, media release

20. The Ten-Point Pitch Guide for Advertisers (cont’d)
4 The Brief
Quality of brief = quality of pitch
5 Financial Compensation
Payment for strategic/creative (?)
6 Confidentiality & Copyright
Agreement for protecting both parties
7 The Evaluation System
Agreed criteria with all decision-makers

21. The Ten-Point Pitch Guide for Advertisers (cont’d)
8 Contract & Remuneration
Takes time to get it right
9 Decision Time
Inform winners & losers & media
10 The Changeover
Losing agencies debrief, have confidential material returned, ~ 90 days notice