Small Business Solutions

How Does An Advertising Agency Get Paid?

by Leonard Manion
Copyright 2010 Citadel Media Solutions

Q: I worked at a radio station selling advertising. When I would ask my supervisor and boss how a marketing / advertising agency works, the answer I would get is…it’s not worth your time or hard work. I have since quit my job due to, well, my boss was a tyrant, but that’s irrelevant. I have run into a couple of my old clients that have asked me to handle their advertising, but I have no idea how to charge them or how I get paid by the advertising avenues. Can someone please tell me, how does an advertising agency get paid? Please be specific…thank you!

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Small Business Media Buying Services

A: There are several ways to do this depending upon your business and marketing model and based upon your market niche.

I think what you may be asking about is not so much an “advertising agency” but a media buying agency. These can be two different types of businesses.

Let me explain:

Advertising Agency is usually a company who is set up to create only media ads such as display ads, radio commercial jingles, company slogans, etc… What is known in the industry as “creatives”.

Media Buying Agency is usually a company who is set up to buy advertising for a business. They do the negotiating, placement and project management for their clients.

There are no real common rules for payment or commissions on this. It really depends upon other factors such as expertise, experience, niche, and hundreds of other details.

The primary thing to look at from a business view point is who can produce the results you expect and deserve.

From your question, I believe that your ex clients are asking you to help them buy media advertising. This is something that most small business owners abhor doing. They’d rather someone else take care of the details for them.

This is what Citadel Media Solutions does for it’s established clients. Especially when it comes to local and national television, cable and radio advertising. In addition we all create the “creatives” for our clients and we create a complete marketing plan to ensure that they receive expoential benefits from all their advertising dollar investments.

To answer your question, how you get paid depends upon you. Most media will offer you a 15% discount on all ads placed with them through your agency. This is standard. Some will offer more and some will offer less.

As a local media buying agency the more clients you have and the bigger budget you have the more you can demand from the media for placing your clients ads with them.

Your client pays you for the advertisement placement. You take your discount and then pay the media what you’ve agreed upon.

I would caution you that you read the fine print on all contracts. That you know exactly what you’re buying and know exactly what loopholes the media has in the contract to keep your money but not give you the agreed upon advertising.

There’s a lot of “tricks of the trade” that the media play on both the media buying agency and the businesses. An example is their “confirmation” letter. Never accept their confirmation letter. The fine print usually says that they can change the terms of the contract and by simply accepting the confirmation letter you agree to these changes.

These little games are what can cause problems between you and your future clients. Media buying is not a business for the inexperience. My consulting firm has professionals who have years of experience in selling and buying media. You have to keep on top of a lot of details if you don’t want to get burned.

Think about It,
Talk to you soon…

Leonard Manion
CitadelMediaSolutions.com

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Small Business Owners

Struggling to keep your business going? Nothing seems to be working? Business not producing enough profits? Let Citadel Media Solutions provide you with the marketing tools you need to survive this economy. We’ll take you by the hand and show you exactly how to build your market base. It’s not as difficult as you might believe. It’s just having someone who knows how to produce the results you expect and deserve. If you’re serious, contact Leonard Manion at: Citadel Media Solutions. We’re a national consulting firm specializing at producing results for small business owners.


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Comments

2 Responses to “How Does An Advertising Agency Get Paid?”
  1. smallbiz says:

    They charge a fee for creative work, and make a 15% commission on media. This means if they place media buys, such as television or radio air time, or print media space, such as newspapers, magazines, or billboards, they add the standard 15% commission on the costs of the media.
    If they produce print work, they add a commission on to that as well.
    Or they may charge a flat monthly rate for creative work and sign a long term contract with a client guaranteeing X amount of work for X amount of money. (A one to three year contract is normal.)
    There may be fees for additional work requested by the client such as producing original market research–polling potential clients with taste tests of a product for instance.
    (And you may be able to tie in bonuses for proof of pre-determined levels of effectiveness. Say the client is opening a new store location, and you get 500 people to show up and get a spot on the local evening news.)
    Go to the business section of your local library. The librarian will be able to help you find shelves of books that explain this all in detail.

  2. Tom E says:

    I paid ad agencies two ways: either on a project basis ( the cost to complete a project) or a retainer of an agreed upon monthly amount with an agreed upon number of hours worked per month.Most companies in my industry placed their own ads to save the commission of the agency placing the ads ( easy to do since there were only a few magazines that covered the B-T-B market we were in and it was primarily print we used to advertise to the trade).

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