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An advertising agency is a service based on advertising business dedicated to creating, planning, and handling advertising and sometimes other forms of promotion and marketing in a promotion for its clients. An ad agency is generally independent from the client; it may be an internal department or agency that provides an outside point of view to the effort of selling the client's products or services, or an outside firm. An agency can also handle overall marketing and branding strategies and sales promotions for its clients.
Typical ad agency clients include businesses and corporations,non-profit organizations and private agencies. Agencies may be hired to produce television commercials, radio commercials, online advertising, out-of-home advertising, mobile marketing, and AR advertising, as part of an advertising campaign.
The first acknowledged advertising agency was William Taylor in 1786. Another early agency, started by James 'Jem' White in 1800 at Fleet Street, London, eventually evolved into White Bull Holmes, a recruitment advertising agency, that went out of business in the late 1980s. In 1812 George Reynell, an officer at the London Gazette, set up another of the early advertising agencies, also in London. This remained a family business until 1993, as 'Reynell & Son,' and is now part of the TMP Worldwide agency (UK and Ireland) under the brand TMP Reynell. Another early agency that traded until recently, was founded by Charles Barker, and the firm he established traded as 'Barkers' until 2009 when it went into Administration.
In 1856 Mathew Brady created the first modern advertisement when he placed an ad in the New York Herald paper offering to produce "photographs, ambrotypes and daguerreotypes." His ads were the first whose typeface and fonts were distinct from the text of the publication and from that of other advertisements. At that time all newspaper ads were set in agate and only agate. His use of larger distinctive fonts caused a sensation. Later that same year Robert E. Bonner ran the first full-page ad in a newspaper.
In 1864, William James Carlton began selling advertising space in religious magazines. In 1869, Francis Ayer, at the age of 20, created the first full service advertising agency in Philadelphia, called N.W. Ayer & Son. It is the oldest advertising agency in America. James Walter Thompson joined Carlton's firm in 1868. Thompson rapidly became their best salesman, purchasing the company in 1877 and renaming it the James Walter Thompson Company. Realizing that he could sell more space if the company provided the service of developing content for advertisers, Thompson hired writers and artists to form the first known Creative Department in an advertising agency. He is credited as the "father of modern magazine advertising" in the US.
Global Advertising Agency
Globalization of advertising originates in earlier days of the twentieth century. American advertising agencies began the process of opening overseas offices before the two World Wars and accelerated their globalization throughout the latter part of the twentieth century.
McCann Erickson, an agency established in New York City in 1902, opened its first European offices by 1927. It was followed up with offices opening in South America in 1935 and in Australia in 1959.
Companies such as J. Walter Thompson adopted a strategy to expand in order to provide the advertising services wherever clients operated.
In the 1960s and 1970s, English agencies began to realize the overseas opportunities associated with globalization. Expanding overseas gives potential to wider markets. Saatchi & Saatchi, perhaps one of the most iconic English agencies was founded in 1970 and rapidly developed a global network of offices on the back of relationships with clients such as British Airways and Toyota.
Studies show that successful advertising agencies tend to have a shared sense of purpose with their clients through collaboration. This includes a common set of client objectives where agencies feel a shared sense of ownership of the strategic process. Successful advertisements start with clients building a good relationship with the agencies and work together to figure out what their objectives are. Clients must trust the agencies to do their jobs correctly and accordingly with the resources they have provided. Breakdowns in relationships were more likely to occur when agencies felt undermined, subjugated or even feel they don’t have an equal status. Traditionally advertising agencies tend to be in a position to take the lead on projects but results are best when there is a more collaborative relationship.
Stronger collaboration happens in situations where a personal chemistry has been established between both parties. Finding out similar likes and dislikes, points of view and even hobbies and passions. Personal chemistry builds with the length of the client relationship, frequency of meetings, and how far mutual respect goes between parties. This was one trait that advertising agencies were perceived to not always have. It was suggested that on occasions that media planner and researchers were more closely involved in the project because of their personal relationships with their clients. Successful strategic planning is best when both parties are involved due to the bond between sides by understanding each other's views and mindset.
Involved advertising account planners are seen to contribute towards successful agency client collaboration. Planners of advertising agencies tend to be capable of creating a very powerful, trusting relationship with their clients because they were seen as intellectual prowess, seniority and have empathy in the creative process.
All advertising agencies are called that because they are acting as agents for their principals which were the media. They were then, and are now, paid by the media to sell advertising space to clients. Originally, in the 18th century, and the first half of the 19th, advertising agencies made all of their income from commissions paid by the media for selling space to the client
Although it is still the case that the majority of their income comes from the media, in the middle of the 19th century, agencies began to offer additional services which they sold directly to the client. Services such as writing the text of the advertisement.
Agencies believe that there is only one rule for advertising to be effective "it has to be creative". It is not just the sense of how it is visually presented, filmed, or worded but most agencies should be very innovative in terms of how they plan to pass on the message to consumers. Success comes when agencies are able to be creative enough to break through the targets mindset and be compelling that it will ignite a brand relationship. Advertising agencies can either play it safe and risk losing the marketing war or can try to constantly come up with fresh ideas.
Use of creativity by agencies is "unexpected" because so much advertising today is expected. This will capture the attention of audiences, therefore the message is more likely to get through. There have been many advertisements that have surprised audiences because it was not normal for them to see that in an advertisement of that nature. The best use of creativity is when the agencies make consumers think about the product or brand. The type of creativity is distinctive communication which is breaking through the clutter.
People don't buy products, they buy benefits. Mere product benefits can be the same across multiple products, so then how does a consumer chose one product over the other? In a marketplace increasingly full of parity products, consumers buy into the advertising. The more persuasive and charmingly put forth proposition, generally wins the consumers' attention and share of wallet. Agency practitioners strongly believe that when audiences are exposed to ads it causes changes in human cognition, emotions, and behavior. An account manager[clarification needed] of twenty-two years of experience in the industry says that people wouldn’t want to be in the advertising business if they didn’t believe that it worked, therefore you will not find anyone in an advertising agency questioning whether or not advertising works.
First effect is making audiences stop and look at the ad generating attention. Once attention is gained, ads are next thought to lead to brand awareness. Establishing brand awareness is a key component of an advertisement's effectiveness. Practitioners believe that advertising will lead to changes in attitudes towards a brand, referring to the concept of attitude by different labels such as "opinions", "judgments", "perception", "persuasion", "brand image", "interest in the brand". Advertising can create change in both emotional and rational based attitudes. It is believed that a good advertisement includes both components.
Studies show that advertising spending has increased significantly throughout the years. In 2007, an estimated $150 billion was spent on advertising in the US; and $385 billion globally. By 2010 the number had exceeded $450 billion.
The main reason for the increase in spending is the fact that the costs of selling are lower than they used to be, therefore companies are able to increase spending on advertising without increasing their sales budgets. They do this in search of new markets to further their businesses.
Commission rates for advertising agencies
The worldwide commission rate for advertising agencies is fixed at 15% of the total billing. This is the only source of income they earn from media. The 15% must cover costs such as payroll, fixed and variable costs. Agencies are demanding to increase the commission rate but clients are not even willing to give the 15% even though it's the only source of revenue for the Agency. There are cases that agencies are forced to lower their rates to the level of 5% to 10% due to competition. So in some cases there are agencies that are not even getting the fixed 15%.
- Mackay, Adrian (2004), The Practice of Advertising, London: Butterworth-Heinemann, ISBN 0-7506-6173-9. p.70.
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1841 - Volney B. Palmer opens the first American advertising agency, in Philadelphia.
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