By: Jonathon Hardcastle
Have
you ever wondered how advertising works and how an advertising agency makes money? Behind the glitz
and glamour, advertising is still really a business and a lucrative one at that.
In
general terms, advertising refers to the promotion of goods and services (as well as companies and
ideas) through media, especially television, radio and print (newspapers and magazines), but also
through outdoor and non-traditional means. It is usually undertaken by an advertising agency on
behalf of a corporation, which is its client. These clients bank on advertising to make their
brands and products stand out in an otherwise cluttered marketplace. To do that, they depend
heavily on the creativity and technical know-how of agency people.
In
a nutshell, the client provides the advertising agency with a set of marketing objectives (usually
to increase sales of its product or service) and a profile of the consumer groups it wants to
target. Based on this, the agency creates a "brand image" through advertising campaigns on media
which will, hopefully, make consumers flock to department stores and clear out the client's
shelves. The key is to make the ad campaign as creative, unique and interesting as possible.
Though
they fulfill the same function, ad agencies tend to vary in size and structure. There are small one
or two-person shops as well as large multinational ad agencies with offices all over the world. In
advertising, though, bigger is not necessarily better as many of the smaller ad firms have
established reputations as creative hotbeds. Some companies also opt to create their advertising
in-house through their advertising departments.
Some
agencies specialize in certain types of advertising, such as TV commercials or print ads. Agencies
usually have a roster of suppliers that provide specific needs such as TV production, billboard
creation and installation, talent agencies that provide actors, art design studios and the
like.
And
how do agencies make money? They do so by taking a 15% commission for work they produce for
clients, particularly for media placements. Hence, if a client places $10 million worth of TV
commercials on, let's say, the Super Bowl, the agency earns $1.5 million or 15%. It's not a bad way
to make a living.
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