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ADVERTISING AGENCIES
METHOD OF COMPENSATION
JOBUSH MATHEW
NO. 30
Advertising Agency
• Independent business organization
specialized in advertising works
which undertakes the work of
planning, preparing and executing
advertising campaign for its clients.
• Body of experts who specialized in
advertising.
Compensation Methods
• The Commission System
• Fee Arrangements
• Cost-Plus Agreements
• Incentive-Based Compensation
• Percentage Charges
The Commission System
 Traditional method
 Agency usually receives 15 percent
 Commissions are paid by the media
 Commission system is controversial
 System is becoming less common
 Simple and easy to operate
Fee Arrangements
 Fixed fee method
 Client and ad agency negotiate a
flat sum to be paid to the agency
for all work done.
 Agency estimates cost
 Client either accept or negotiates
for a lesser amount.
Cost-Plus Agreements
• Fee basis on the cost of its work
• When media billings are relatively low and a
great deal of agency service is required by the
client.
• Happens in case of industrial products and
introduction of new products.
• Client agrees to pay the agency fee based on
the costs of its work plus some agreed on profit
margin.
Incentive-Based Compensation
• Many clients demanding to their agencies.
• Agencies ultimate compensation level will
depend on how well it meets predetermined
performance goals.
• Goals include sales or market shares
• Evaluation of the quality of the agencies
creative work
• Compensation through Media commission,
fees, bonuses, or combination of these
methods.
Percentage Charges
• Agency purchase service from
various outside providers.
• They will not allow the agency a
commission, administrative cost
and reasonable profit for agencies
work.
• Such all is added to the bill.
References
• B.S. Rathor, advertising
management,Himalaya publishing
House.
• www.wikipedia.com
THANKYOU

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Ad agencies - Method of compensation

  • 1. ADVERTISING AGENCIES METHOD OF COMPENSATION JOBUSH MATHEW NO. 30
  • 2. Advertising Agency • Independent business organization specialized in advertising works which undertakes the work of planning, preparing and executing advertising campaign for its clients. • Body of experts who specialized in advertising.
  • 3. Compensation Methods • The Commission System • Fee Arrangements • Cost-Plus Agreements • Incentive-Based Compensation • Percentage Charges
  • 4. The Commission System  Traditional method  Agency usually receives 15 percent  Commissions are paid by the media  Commission system is controversial  System is becoming less common  Simple and easy to operate
  • 5. Fee Arrangements  Fixed fee method  Client and ad agency negotiate a flat sum to be paid to the agency for all work done.  Agency estimates cost  Client either accept or negotiates for a lesser amount.
  • 6. Cost-Plus Agreements • Fee basis on the cost of its work • When media billings are relatively low and a great deal of agency service is required by the client. • Happens in case of industrial products and introduction of new products. • Client agrees to pay the agency fee based on the costs of its work plus some agreed on profit margin.
  • 7. Incentive-Based Compensation • Many clients demanding to their agencies. • Agencies ultimate compensation level will depend on how well it meets predetermined performance goals. • Goals include sales or market shares • Evaluation of the quality of the agencies creative work • Compensation through Media commission, fees, bonuses, or combination of these methods.
  • 8. Percentage Charges • Agency purchase service from various outside providers. • They will not allow the agency a commission, administrative cost and reasonable profit for agencies work. • Such all is added to the bill.
  • 9. References • B.S. Rathor, advertising management,Himalaya publishing House. • www.wikipedia.com