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Advertising agencies are independent businesses
that evolved to develop, prepare, and place advertising
in advertising media for sellers seeking
to find customers for their goods, services, and
ideas (American Association of Advertising
Agencies, 2000). Advertisers use agents when they
believe the agency will be more expert than they
are at creating advertisements or at developing an
advertising campaign. As businesses have become
more complex and diversified, many of them
have consulted agencies to help them carry out
their marketing communication efforts.
The modern advertising agency provides a
variety of important services to clients, including
media planning and buying, research, market information,
sales promotion assistance, campaign
development and creation of advertisements, plus
a range of services designed to help the advertiser
achieve marketing objectives. The first documented
advertising agency in the United States
was the N. W. Ayer Agency, established in 1877
(Gilson, 1980). Prior to this time, advertising
agents were space brokers—agents who solicited
ads from businesses and then sold them to newspapers
that had difficulty getting out-of-town
advertising (Gilson, 1980; Russell and Lane,
1998).
EVOLUTION OF THE ADVERTISING AGENCY FROM THE 1870s TO THE EARLY 1900s
During the late nineteenth century, most advertising
appeared in newspapers, on posters, and in
handbills (Wells et al. 2000). Because it was difficult
to reproduce illustrations, most of these ads
were simple text-based items.
By 1900, the first specialized magazines had
begun to appear in the United States. Magazines
such as Field & Stream (in 1895) and Good
Housekeeping (in 1900) established niche markets,
which allowed for mass marketing to consumers
with varied interests. Also, print technology
had evolved considerably, making full-color
illustrations possible. Advertising agencies began
to use the new technology to create more attractive
advertisements for the new niche markets,
thus becoming creative centers rather than
merely space brokerages.
The late nineteenth and early twentieth centuries
were times of public concern about unethical
business practices. Many professions formed their
own organizations to create ethical standards of
operation. The American Association for Advertising
Agencies (AAAA) was founded in 1917,
partially in response to these ethical concerns.
Newspapers also set their own ethical standards
concerning rates charged for advertisements.
By 1917, publishers had agreed to set a flat
rate of 15 percent as the standard commission an
advertising agency would receive—with the exception
of local advertising, for which there was
generally no predetermined commission (Russell
and Lane, 1998).
In addition, two laws were passed to alleviate
concerns about unethical advertising practices.
The Federal Trade Commission Act of 1914 was
originally designed to make all unfair methods of
competition unlawful. It was not until 1922 that
advertising was legally regulated under this act.
The case that set this legal precedent was FTC v.
Winsted Hosiery Company (1922) (Russell and
Lane, 1998). The Pure Food and Drug Act of 1906
was the first act that limited the advertising of
patent medicines—drugs that were advertised
using exaggerated claims of effectiveness—for
use by children.
EVOLUTION OF THE ADVERTISING
AGENCY FROM 1920 TO THE EARLY 1950s
By the 1920s, the majority of advertising agencies
had determined that most family purchasing decisions
were either made by or influenced by
women (Goodrum and Dalrymple, 1990). Thus,
advertising agencies created full-color magazine
advertisements for goods such as expensive automobiles,
refrigerators, and radios. Newspapers
continued to use simple advertisements.
Although Guglielmo Marconi had invented
the first operating radio in 1895, radio became
popular for home and family use only in the early
1920s. In that decade, as a result of radio’s mass
appeal, advertising agencies produced radio programs
for the sole purpose of attracting consumers
for popular national products. For example,
soap operas were originally created for the
purpose of advertising Procter & Gamble’s soap
products (Gilson, 1980).
The 1930s were a time of renewed public
interest in legislation concerning unfair and deceptive
business practices. The 1934 Wheeler-Lea
Amendment to the Federal Trade Commission Act
enabled the Federal Trade Commission (FTC) to
protect consumers from deceptive advertising in
the food, drug, therapeutic device, and cosmetic
industries (Russell and Lane, 1998). The
Robinson-Patman Act of 1936 prevented manufacturers
from providing promotional allowances
to a retail customer unless it also offered promotional
allowances to that customer’s competitors.
Although World War II suspended production
of many peacetime goods and services, many
advertising agents found employment working
for the War Advertising Council, which was responsible
for mobilizing public support for the
war effort. This organization later became the Ad
Council.
EVOLUTION OF THE ADVERTISING
AGENCY FROM THE 1950s TO THE
EARLY 1990s
The end of World War II saw a culmination of
more than a decade of unsatisfied consumer demand
as a result of the Great Depression and war.
Most markets for goods and services found a
willing consumer base for new products—
including television sets. Due to the proliferation
of television sales in the 1950s, advertising agencies
began to combine the visual impact of print
ads with the aural impact of radio to create a
lifelike effect. This, in turn, created a change in
the structure of advertising agencies. For example,
prior to the 1950s, the main source of creativity
was the person writing the advertising message—
referred to as the copywriter. As television
made more consumers comfortable with visual
imagery, the art director and artist became more
important (Goodrum and Dalrymple, 1990).
It was during the 1950s that large numbers of
returning veterans began to marry and have children—
the generation of children known as babyboomers.
For the first time in the United States,
advertising agencies found it profitable to market
certain goods and services directly to the youth
market. Ads for blue jeans and stereo equipment
appeared in newspaper inserts, in youth-oriented
niche market magazines, and on television.
During the 1960s, large accounts from Fortune
500 companies migrated from the larger
agencies to smaller, more responsive agencies
(Goodrum and Dalrymple, 1990). The newer,
more creative advertisements proved popular
and profitable. The profits allowed agencies to
spend more money on advertising research—
often employing behavioral psychologists to design
elaborate studies of consumer buying behavior
(Goodrum and Dalrymple, 1990). It was the
function of the behavioral psychologist to determine
why consumers buy goods and services.
Advances in product design during the 1960s
and 1970s resulted in few differences between
most products—a problem known as product
parity (Goodrum and Dalrymple, 1990)—and
forced advertising agencies to become more creative
in order to differentiate their client’s product
from competitors’ equally good products. All
of this creativity had a cost—it became very expensive
to produce two-minute TV advertisements.
Advertising agencies solved the cost dilemma
by designing thirty-second television
commercials with memorable advertising slogans—
short phrases designed to keep a consumer’s
attention and maintain recognition of a
particular brand of good or service.
Advertising agency clients began to demand
results for increasingly expensive ads—in the
form of research data from the end-consumer
(Goodrum and Dalrymple, 1990). However, the
cost of this research, including the employment
of advertising researchers, was too great for small
agencies, forcing smaller agencies to merge into
larger ones during the 1980s (Goodrum and Dalrymple,
1990). During this decade, some advertising
agencies moved from traditional radio and
TV advertising toward sales promotion techniques
(such as rebates, coupons, and sweepstakes) that
offered measurable proof of increased sales
(Wells et al., 2000).
EVOLUTION OF THE ADVERTISING
AGENCY FROM 1991 TO THE PRESENT
Present-day advertising agencies employ many of
the techniques that were popular in the early
years of advertising. Newspapers continue to advertise
primarily in text format, although color
inserts are becoming popular. Advertising agencies
continue to be able to advertise in smaller
and smaller niche-market magazines. Radio remains
a popular advertising medium in local
markets. The widespread availability of cable TV
and satellite transmission has fragmented television
advertising into niche markets. However,
some changes in the advertising industry continue
to change how advertising agencies operate.
These changes are discussed below.
Globalization. Advertising agencies are under
increasing pressure to create ads for products in a
global market, often advertising the same brand
to different markets around the world. Agencies
must often consider culture, language, and customs
when designing an advertisement tailored
to the international market. Today, in order to
meet the demands of a global market, advertisers
are forming large multinational agencies and
continuing to debate whether to standardize advertising
globally or to segment advertisements
by culture or nationality (Wells et al., 2000).
The Internet. Although the Internet continues
in be most accessible in developed countries,
satellite transmission may soon make Internet
access available to most people worldwide. The
Internet allows advertising agencies to target consumers
worldwide and to conduct market research
inexpensively. The easy access to market
research information may allow advertising
agencies to continue developing ads to reach
smaller and smaller niche markets worldwide. At
the same time, certain forces are reducing the
availability and use of information gathered over
the Internet. For example, the Children’s Online
Protection Act (1998), or COPA, is a U.S. law
that affects business transactions by children using
the Internet. COPA requires Web sites soliciting
personal information from children under
the age of 13 to prominently post a privacy policy
and require parental consent for the release of
personal information provided by those children
before any business can be transacted. Many
countries are developing laws similar to COPA,
and it remains to be seen how COPA and other
impending legislation will affect advertising
agencies that conduct business globally.
The Role of Government in Advertising As of
2000, the Ad Council acts as an advertising
agency that addresses social ills such as drunk
driving, racial intolerance, and domestic violence
(Russell and Lane, 1998; The Ad Council, 2000).
The Ad Council will probably expand its role as
an advertising agency that serves as a catalyst for
social change.
Changing Incentives While the 15-percent
commission on gross sales has been around for
some time, it is now common to offer other
incentives, such as box seats at sporting events
and music concerts (Mayer, 1991).
EVOLVING CAREER FIELDS IN
ADVERTISING
Today’s advertising agencies include a vast array
of specialists who work together to create a complete
and thorough advertising campaign. Account
managers allocate agency resources, including
time, money, and personnel for
individual projects. An account manager often
assembles a team of individuals, each bringing a
particular advertising specialty to the project. The
team includes an art director, creative director,
artist(s), copywriters, and designers. The team
may also include other specialists such as media
analysts, product testers, researchers, and public
relations consultants. |
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