MBA Notes - Advertising Agency and its Functions

Question - What is Advertising Agency? Describe functions of advertising agency.


Definition of Advertising Agency

According to American marketing Association, "An Advertising agency is an independent business organization composed of creative and business people who develop, prepare and place advertising in advertising media for sellers seeking to find customers for their goods and services."

Advertising Agency is an independent business organization specialized in advertising related work which undertakes the work of planning, preparing, and executing advertising campaign for its clients. Advertising Agency is a body of experts specialized in advertising. Advertising Agency performs following activities for its clients:
  1. Planning: Advertising agency studies the product or services of clients to identify the inherent qualities in relation to competitor's product or services, analysis competition and marketing environment to formulate advertising plan.
  2. Preparing: After the study of product, competition, and marketing environment the experts of agency has to write, design, and produce the advertisement, it is also called formulation of ad-copy. 
  3. Executing: Now, media is selected for time or space, ad is delivered to media, checked, verified, and released in media. After ad release payment is done to media and client is billed for the services provided.

Functions of Advertising Agency

Advertising agency performs following functions:
  1. Contacting Clients: Advertising agency first of all identify and contact firms which are desirous of advertising their product or services. Ad-agency selects those firms which are financially sound, makes quality products or services, and have efficient management.  

  2. Planning Advertisement: Advertising agency's next function is to plan ad for its client. For ad planning following tasks are required to be performed by ad-agency:
    • Study of client’s product to identify its inherent qualities in relation to competitor’s product.
    • Analysis of present and potential market for the product.
    • Study of trade and economic conditions in the market.
    • Study of seasonal demand of the product
    • Study of competition, and competitor’s spending on advertising.
    • Knowledge of channels of distribution, their sales, operations, etc.
    • Finally, formulation of advertising plan

  3. Creative Function: Creative people like - the copywriters, artists, art-directors, graphic-specialists have to perform the creative function which is most important part of all advertising function.

  4. Developing Ad-Copy: Ad-agency with the help of their writers, artists, designers, animators, graphic-designers, and film-directors prepares and develops Ad-copy. 

  5. Approval of Client: Ad-copy is shown to the client for his approval

  6. Media Selection and scheduling: It is very important function of ad-agency to select appropriate media for its clients. Ad-agency has to consider various factors like- media cost, media coverage, ad-budget, nature of product, client's needs, targeted customer, and etc while selecting media.

  7. Ad-Execution: After approval, verification, and required changes, the ad-copy is handed to the media for ad-execution.

  8. Evaluation Function: After execution, it is the responsibility of ad-agency to evaluate the effectiveness of ad to know how beneficial the ad is for its client.

  9. Marketing Function: The advertising agency also performs various marketing function like- selecting target audience, designing products, designing packages, determining prices, study of channel of distribution, market research, sales promotion, publicity, etc.

  10. Research Function: Ad-agency performs various research functions like- research of different media, media cost, media reach, circulation, entry of new media, information regarding ratings, and TRP's of TV programmes, serials.

  11. Accounting Function: Accounting function of ad-agency includes checking bills, making payments, cash discounts allowed by media, collection of dues from clients, payment to staff, payment to outside professionals like- writers, producers, models, etc.


After the above explanation we can conclude that ad-agency has to perform all the advertising functions for their clients.

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