Chapter 5
The Advertising Agency,
Media Services, and Other
Services
Objectives_1
Understand
• The agency
• The history of the agency business
• The full-service agency
• Global advertising agencies
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Objectives_2
Understand
• Agency and client relationships
• Forms of agency compensation
• Other advertising services
5-3
Agency Challenge
5-4
Advertising Red Books:
Directory of Agencies
• Company name
• Annual billings
• Company address
• Breakdown of billings by
media
• New accounts
• Key personnel
• Number of employees
• Branch offices
• Specializations
5-5
How Agencies Developed
The Early Age
The No-Rebate Age
The Age of Negotiation
The Reengineering Age
Media and the Digital Age
5-6
The Early Age
(Colonial Times to 1917)
• Space salesman • Agency-client
• Space wholesalers relationship
• First rate directory • Curtis No-Rebating
• Shift to creative rule
center • Standard
commissions
• AAAA founded
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American Association of
Advertising Agencies
founded 1917
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The No-Rebate Age
(1918 to 1956)
• Radio
• Television
• Electronic Data Processing
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The Age of Negotiation
(1956 to 1990)
• Consent decrees stopped no-rebating
provisions
• 15% commissions remained but total
compensation became an issue
5-10
The Reengineering Age
(1990 to 2000)
• Mergers created giant communication
• Integrated services became a buzz phrase
– Advertising
– Public relations
– Package design
– Web design
– Sponsorship
– And more….
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Media and the Digital Age
(Since 2000)
• Agency holding companies
• Media services agencies
• Global clients
• Interactive agencies
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The Full Service Agency
A full-service agency is one that
handles planning, creation, production,
and placement of advertising (and other
aspects of IMC) for its clients.
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The Agency Process
for New Clients
Diagnosing the Marketing and Brand Strategy
Setting Objectives and Developing Strategy
Creating the Communication
Notify Trade of Forthcoming Campaign
Billing and Payments
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Creating the Communication
• The Media Plan
• The Total Plan
• Evaluation Plan
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Exhibit 5.4
Organizational Structure
5-16
Exhibit 5.5 Typical
Team Responsibilities
5-17
Jay Chiat
on Agency Reengineering…
“We believe the hierarchical structure [of the
traditional agency], if not obsolete at present,
is on its way. The traditional pyramid is about
personal power and focuses on how to run a
business. Most of the decisions are about the
organization’s needs—fiscal and
administrative issues. An agency is a service
organization whose sole existence depends
on satisfying client needs.”
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Agency Life
• Evolution of • Agency of record
agencies • Multiple offices
– Specialization • Global
– Size representation
• Competing accounts • Agency networks
• Client-agency
relationship length
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JWT’s
Global Agency Network
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Coca-Cola Creates
a Global Dialogue
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Mega-Agency
Holding Companies
Interpublic’s network
includes 33 full-
service advertising
agencies from 87
agencies in the
communications and
marketing industries.
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Top 5 Mega Conglomerates
• Omnicom Group • Publicis Groupe
• WPP Group • Dentsu
• Interpublic Group
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Other Advertising Services
• Talent and production agencies creating
creative
• Independent creative services
• A la carte agencies
• In-house agency
• Rolodex agency
• Media buying services
• In-house media services
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Exhibit 5.10 Created by
Broyhill’s In-House Agency
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Forms of
Agency Compensation
• Media commissions
• Production
commissions or
markups
• Fee arrangements
• Performance fees
5-26
Other Services
Research Managing
Barter
integration
5-27
For Discussion
• What is a full-service agency?
• Explain the organization of a global
agency network.
• What is an agency of record?
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