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The Icfaian Journal of Management Research, Vol. VIII, No. 6, 200960
P Ammani*
Advertising
Decision-Making Process
The world is profoundly changing in the way products and services are valued,
communicated, bought and delivered. Strong brands elicit loyalty and enhance
market share for the firm. This could be achieved by creating interest for the
product and developing the relevance and emotional connection of the product
with consumers through advertising. Advertising is an incredibly important
communication tool in the hands of firms. A commercial can encapsulate
a brand in a very powerful way. Hence, designing an effective advertisementand offering it through the right media is a challenge faced by the advertisers.
In order to make a successful campaign, advertisers seek professional help
from agencies. In the light of this, a study has been conducted to understand
the decision making process of advertisers and the criteria they consider in
choosing an advertising agency.
* Professor, The Icfai School of Marketing Studies (ISMS), Hyderabad, India.E-mail: [email protected]
IntroductionAdvertising is fascinating and provocative. Advertising creates customer
awareness of the product and builds positive psychological associations that can
enhance the buyer satisfaction. Consumers interest is provoked and sustained
in the product. The purpose of advertising is to make potential buyers respond
more favorably to the firms offering. Advertising provides information to
customers, creates and modifies their desires and provides reasons for preferring
a particular product. Captivating and persuasive advertisements create wants
through passive compulsion, which makes the consumers to buy the product.
Advertising creates demand, and thereby, accelerates the growth in the grossdomestic product. It also helps society by improving competition, lowering prices,
encouraging more product choices, supporting the media and providing
information. Advertising seems to go beyond merely selling products or ideas and
can shape social trends and attitudes in powerful ways. However, advertising
has been accused of harming society on the ground that it creates an
unnecessary hype for the products and also manifests wants for superfluous
products and services (Ammani, 2008).
2009 The Icfai University Press. All Rights Reserved.
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61Advertising Decision-Making Process
The major decisions called for in advertising are: how much should be spent
for overall company advertising; what message and mode of presentation should
be used; what media should be used; how should advertising be phased during
the year; whether the firm should go for outside advertising agency; and what
are the best methods for knowing what advertising company is accomplishing.
Advertising costs depend on creative development time and production elements,such as production quality, multiple size requirements, publication insertions,
photography and illustrations. Well-defined objectives, clear input, communication,
planning and scheduling the campaign are essential to control costs and
accomplishing the tasks on time.
Review of Literature
Alyque Padamsee says, I fear that the sun has set on the fun, thereby implying
that the current trend is that the clients are demanding hard-selling advertising.
This has snapped the lid down on fantasy (Aresh, 1998). Some client firms ask
the agencies to commit their resources and loyalty to the firm for a certain period.
Bovee and Arens (1992) question whether it is ethical to ask an agency to commit
all its resources and loyalty to a single account, particularly when a client spreads
its business among a number of advertising agencies. According to Bovee and
Arens (1989), the account executive is responsible for mustering all the agencys
services for the benefit of the client on one hand, and on the other, for
representing the agencys point of view to the client, the account executive is
often caught in the middle. Bograt (1984) says that, in a competitive economy,
the success of a company often hinges on its ability to master the strategy of
advertising. And the mastery, in turn, depends on the companys ability to
assemble and apply information.
Davies (1994) applied the Analytic Hierarchical Process (AHP) to decide the
relative weights of advertising agency selection criterion in the final stage, but
did not state clearly how the short listing was determined. Oglivy (1983) puts
a premium on the talents of an ad agency to innovate or originate a novel way
to sell a product. An advertising agency is primarily rated on the basis of its
capabilities for creativity. There is ample evidence that the century long
domination in marketing communications by mass media advertising is coming to
an end; marketing budgets are being shifted away from traditional advertising
to behavior-oriented disciplines, like consumer promotions, direct marketing and
direct response advertising. Retailers are gaining strength over manufacturers.
New media technologies are increasing the fragmentation of media usage. Prime
time television, the main channel for mass campaigns, has had its audience
diminish according to a survey conducted by Gronstedt and Thorson (1996) in
the US.
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The Icfaian Journal of Management Research, Vol. VIII, No. 6, 200962
Purpose and Significance of the Study
The purpose of the study is to understand and describe the decision-making
process of todays advertisers in the context of advertising objectives,
expenditure, budget, types of appeals, media choice, choice of an agency and
client-agency relationships. It is hoped that the study would contribute to
knowledge in the sphere of advertising.
Objectives
The main objectives of the study are:
To delineate the process of advertising in terms of decisions that are
to be taken by the advertisers;
To investigate and report on the advertisers choice; and
To shortlist the significant factors for selecting an advertising agency.
Research Design
The nature of the study was exploratory, descriptive and analytical. Interactions
with eminent academicians and advertisers have given an idea about the
attributes to be considered in understanding the elements of decision making
process of advertisers.
Sample Selection and Size
The sample advertisers were selected from Hyderabad and Secunderabad through
convenience random sampling process. The structured questionnaires were
administered with a specific purpose of identifying the decision making process of
advertisers and prove the importance of selection of an ideal advertising agency.
The questionnaires were sent to 75 advertisers, of whom 58 responded.
Advertising Objectives
The advertisers decision making process begins with contemplating the
objectives of advertising. The objectives of advertising vary from company to
company. They are expressed in terms of communication goals. Most of the
advertising seeks to inform, persuade, and remind its target audience about the
offering of the organization. Building a companys brand image is one of the major
objectives of the advertisers.
Advertising informs the potential customer about a new product or a new use
of technology. Persuasion changes or reinforces an attitude or behavior in one
form or another. The message is sought to be reinformed in the customers minds
by repeated release of the same advertisement. Advertising builds a positive
image of the company that sells the product. The task of advertising, according
to Ogilvy, is to give, a brand a first-class ticket through life.
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63Advertising Decision-Making Process
Objectives No. of Respondents Percentage
To Inform 25 43.10
To Persuade and Remind 6 10.34
To Build the Companys Image 27 46.55
Table 1: Advertising Objectives of Advertisers
The objectives of companies differ based on the purpose for which they wish
to use the advertising. At one extreme, the purpose of advertising is to induce
direct action, and on the other, is to influence the attitudes of the consumers.
Advertising could be used to encourage information search by the potential
customers to relate a product to their needs and to encourage recall of rewarding
experiences. The data has been gathered to find out the objectives for which
companies advertise (Table 1).
As given in Table 1, 46.55% of the advertisers sought advertising to build theircompanys image and 43.10% of the advertisers wanted to inform. To persuade
and remind, happens to be the least choice with 10.34%. This trend may be due
to the fragmented market and increased competition. This could be interpreted
as: the advertisers believe that the sales of their products depend on knowledge
of the product and the corporate goodwill, rather than on aggressive persuasion.
Methods to Determine Advertising Expenditure
There are no scientific methods which can be employed in appropriation of
advertising fund. However, there are a few approaches, which usually, many
companies follow in determining the amount of advertising fund to be spent during
the year. The approaches that companies usually consider are percentage of sales
method, competitive method or objective and task method or the approach
chosen would be based on the need of the hour. Percentage of sales method
is a ratio related to revenue. It is the percentage of the previous years sales
or estimated sales for the following year or it could be combination of the two.
Generally, an industry norm is used as a percentage figure.
In another method, advertising budget is framed at par with that of the
competitors. A company spends as much as its competitors spend. Theassumption behind this is that the collective thinking of various firms in the
industry cannot be too far from the optimal figure. Advertising objective-and-task
method is a logical method, where the advertising budget is based on establishing
advertising objectives and the tasks to be accomplished, and then determining
the required size of the budget. The respondents are asked to give the method
they usually choose in determining the advertising expenditure (Table 2).
From Table 2, it can be seen that 20.68% of the respondents adopt percentage
of sales method and an equal number of respondents prefer the competitive
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The Icfaian Journal of Management Research, Vol. VIII, No. 6, 200964
Methods No. of Respondents Percentage
Percentage of Sales Method 12 20.68
Competitive Method 12 20.68
Objective Task Method 23 39.66Need-Based 11 18.97
Table 2: Advertising Expenditure Methods
method. However, the majority of the respondents (39.66%) go in for objective
task method, while 18.97% of them choose any one of the methods depending
on the need of the hour.
Basis for Deciding Advertising Budget
In setting the total budget as well as determining the allocation of expenditure
within the budget, certain factors are taken into consideration. Some of the
factors that are usually considered are the stage in the Product Life Cycle (PLC),
market share and consumer base, competition, and clutter and advertising
frequency. The different stages in the PLC determine the amount to be spent on
advertising, products that are newly introduced into the market are heavily
advertised, compared to those that are already established in the market.
Much of advertising depends on the strategy of the competitors. If the
competitors are advertising heavily, a higher amount would have to be allocated
to neutralize their edge in the market to retain market share. Advertising is also
done to increase the market share and consumer-base. The advertising budget
is also determined based on the average number of times different households
or individuals are reached by a medium in a given period of time. Table 3 presents
the views of the respondents on the subject.
Basis No. of Respondents Percentage
Stages in PLC 13 22.41
Market Share and Consumer Base 14 24.14
Competition and Clutter 5 8.62
Advertisement Frequency 5 8.62
Need-Based 21 36.21
Table 3: Bases for Determining Advertising Budget
Contrary to the belief that basis for deciding advertising budget is competition
and clutter, 24.14% of the respondents said that market share and consumer-
base are the bases for determining advertising budget. This is closely followed
by 22.41% of the respondents determining their budget on the basis of stages
in PLC. Competition and clutter and advertising frequency each with 8.62% are
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65Advertising Decision-Making Process
far lower. Majority of the respondents (36.21%) opted for need-based, which
means they are indifferent to different bases.
Types of Appeals
Advertising appeals are created for the purpose of activating human needs and
wants, and showing how the advertised brand can satisfy those needs and
wants. The advertiser has to determine the needs at which the advertising
message should be directed. The advertising message should appeal directly or
indirectly to those key needs which influence behavior response. The different
types of appeals usually adopted by the advertisers are rational, sensory, social
and ego satisfaction.
Rational appeals are based on logic and aim at selling the products based on
objective considerations like performance, features or problem solving capacity.
They are directed at the thinking process of the audience. The appeals that are
aimed at the five senses are sensory appeals. Social appeals cater to the needof belongingness. Man is a social creature. He seeks the company of others to
gain some impersonal reward and wants to be a part of national stream. Ego
appeals refer to the personality traits of the consumer, their physical appearance,
sense of humor, intelligence, beauty and status.
The advertisers are asked to which kind of appeals they usually go for. Their
responses are summarized in Table 4.
Types of Appeal No. of Respondents Percentage
Rational 34 58.60
Sensory 21 36.20
Social 2 0.03
Ego Satisfaction 1 0.02
Table 4: Types of Appeals
A majority of 58.6% of the respondents said that the appeals are rational,
whereas 36.2% of them go for sensory appeals according to the survey. Social
and ego satisfaction appeals are not preferred, with only 0.03% of them goingin for the former and 0.02% for the latter.
Media Choice
Media is required to transmit the message about a product or service to its
targeted customers. In the process of transmission, the advertiser tries out
different kinds of media, such as print, television, radio, outdoor, direct mail, point
of purchase, the Internet and mobile phones to attract its customers. Effective
advertising refers to informing the public about the right product at the right time
through the right medium. Therefore, right media selection is the key for the
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The Icfaian Journal of Management Research, Vol. VIII, No. 6, 200966
Media Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7
Print 43 52 5 0 0 0 0
TV 46 48 0 0 6 0 0
Outdoor 8 0 43 40 9 0 0
Radio 2 0 0 0 0 98 0
Internet 1 0 15 45 39 0 0
Direct Mail 0 0 37 0 0 2 61
Phone 0 0 0 15 46 0 39
Total 100 100 100 100 100 100 100
Table 5: Media Choice Percentage of Respondents
success of the entire advertising campaign. In order to get the most out of the
amount spent on advertising, it should be directed to the right audience and this
could be achieved through media.
To identify which media is preferred by the respondents, they are asked to
rank different media according to their preference. The responses are presented
in Table 5.
According to the survey, television happened to be the most preferred media
among the respondents, with 46% of them giving rank one, followed by print
media at 43%. Outdoor, radio and internet advertising are preferred by a small
number of respondents, with 8%, 2% and 1% respectively. Direct mails and
telephones are the least sought out media for advertising. There is a greater
preference for television, because it is an extremely creative and flexible medium.
Virtually, any product or service message can be effectively communicated to the
audience. With its mix of color, audio and motion, its impact on the customer is
immense. Print media is also preferred by the respondents, since there is no
literate household where the day does not begin with a newspaper.
Radio has lost its charm and importance after the advent of televisionan
audio visual medium. Therefore, it is the least preferred medium by the advertisers
compared to TV and print. However, with the introduction of FM radio, for which
a large number of consumers have an ear, this medium is likely to regain its
importance.
Outdoor advertising in India is chiefly utilized by sellers of consumer goods,
government, social and charitable organizations, hospitals, commercial houses
and newspapers. Internet advertising could appeal only to a small audience, who
are computer savvy and those who go for e-shopping. As the reach of the Internet
is low, internet advertising is not much preferred.
Thus, it has been seen that television and print media lead the way, followed
by outdoor advertising, radio and the Internet.
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67Advertising Decision-Making Process
Advertising Agency No. of Respondents Percent
Yes 35 60
No 23 40
Table 6: Choice of Outside Advertising Agency
Choice of Outside Advertising Agency
The advertiser has two clear options. The first is that the entire work of
advertisingplanning, creativity, art and copy writing, media selection and buying
will be undertaken by the in-house advertising cell of the advertiser. The second
option entrusts the entire advertising work to an outside advertising agency.
Table 6 gives the preference of advertisers in this regard.
Options No. of Respondents Percent
Complete Task 13 56.50
Mostly from Free-Lancers 7 30.04
Buying Media Slots and Planning 3 13.00
Table 7: In-House Advertising Options
It has been observed that majority of the respondents (60%) approach the
advertising agencies. Although many advertisers opt to hire outside advertising
agencies, a lesser number of firms prefer an in-house advertising cell, for reasons
of control, responsiveness and saving time and cost.
In-House Advertising Options
Advertisers advertising through their in-house cell have again a number of options.
At one extreme, the in-house cell undertakes the complete advertisement work
from planning to buying to attract its customers. Advertisers may develop their own
copy and just buy media slots. Another extreme situation is advertising manager
buys and coordinates from free-lancers, copy writers, artists, and media planning
and buying. Table 7 presents the in-house advertising options.
It is seen from Table 7 that 56.5% of the respondents make their
advertisements completely in-house, 30.4% of them simply coordinate withfree-lancers for their advertisements. In the case of 13% of them, the in-house
cell does all the work excepting media planning and buying.
Client-Agency Relationship
With the advertising budgets growing fabulously and the competition among the
advertising agencies soaring, the clients have become more demanding and
expecting state-of-the-art services. On the other hand, advertising agencies are
striving to provide excellent services to give value to the clients moneys worth
by employing the best creative teams. Consequently, client-agency relationship
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The Icfaian Journal of Management Research, Vol. VIII, No. 6, 200968
Nature of Relationship No. of Respondents Percent
Very Strong 20 57.2
Strong 4 11.4
Moderate 11 31.4
Poor 0 0
Very Poor 0 0
Table 8: Client-Agency Relationship
is even more prone to stress and strain than ever before. The relationship ranges
from very strong warm relationship to very poor bickering relationship. The nature
of relationship of the sample firms with their agencies is presented in Table 8.
Majority of the respondents (57.2%) have a very strong relationship, followed
by 31.4% having moderate relationship and the remaining 11.4% have strong
relationship. There are no firms with poor relationship. It is obvious that firms
which could not maintain good relationship, dispense with the service of such
advertising agencies.
Criteria for Selecting Advertising Agency
Since the promotional process determines the success or failure of the marketing
and sales of the product/services, the choice of the right advertising agency is
of great significance. A wrong choice of the advertising agency is not only dearer
but also costs heavily in terms of time and missed opportunities. Advertising firms
are deliberative and screen and select the right agency on the bases of rigorous
selection criteria. The selection criteria include capability for creativity and
simplicity to a host of other factors, such as the agencies track record, size and
image, etc. Table 9 shows the relative importance given to each of the sought
out attributes of the advertising agency.
From Table 9, it is seen that creativity, innovative ideas to attract
customers topped the list with an average rating of 4. The ability to present the
advertisement also goes a long way in the success of an advertisement. This is
evident from the equal rating of 4 given to the criterion, ability to present. These
are closely followed by track records, image of the agency, personal working in
the agency and cost effectiveness, worth with a rating of 3.8. Thus, it can be
said that these factors are also equally important in selection of an agency.
Simplicity, which is the secret of creativity, is given a rating of 3.3, branding
and positioning skills are each given a rating of 3. Personal equation is also
moderately considered. However, all other factors, like size of the agency and
accounts gained and lost, are not given much importance.
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69Advertising Decision-Making Process
As revealed by the results, advertisers bank on creative capabilities of the
advertising agency in producing an advertisement of excellence. Qualitative
features are stressed upon more than quantitative aspects.
The responses given by 35 respondents for 14 attributes that are mentioned
in Table 9 have been further analyzed by factor analysis to reduce the number
of variables in the research problem to smaller and more manageable numbers
by combining related ones into factors.
Factor Analysis
The output of the factor analysis is obtained by performing principal component
analysis and specifying the rotation. There are two stages in factor analysis,
wherein the objective is to identify how many factors are to be extracted from
the data. As evident from Table 9b, we find that six factors extracted together
account for 74.2% of total variance (information contained in the original 14
variables, Table 9a). Hence, the number of variables are reduced from 14 to 6
underlying factors.
Looking at Table 9d, the attributes mutual understanding and number of
awards have loadings of 0.881 and 0.838 on component 1. This suggests that
factor 1 is a combination of these factors. Table 9c also suggests the same
grouping. This component can be termed as credibility.
Attribute Average Rating
Creativity 4.0
Simplicity 3.3
Track Record 3.8
Accounts Gained and Lost 1.8
Personal Equation 2.6
Presentation Skills 4.0
Size of the Agency 2.4
Image 3.8
Personnel Working in Agency 3.8
Mutual Understanding 3.4
No. of Awards 3.0
Cost Effectiveness 3.8
Accounts Management 2.8
Branding and Positioning Skills 3.0
Table 9: Selection Criteria
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The Icfaian Journal of Management Research, Vol. VIII, No. 6, 200970
Attributes Initial Extraction
Creativity 1.000 0.821
Simplicity 1.000 0.509
Track Record 1.000 0.697
Accounts Gained and Lost 1.000 0.699
Personal Equation 1.000 0.631
Presentation Skills 1.000 0.837
Size of the Agency 1.000 0.774
Image 1.000 0.901
Personal Working in the Agency 1.000 0.676
Mutual Understanding 1.000 0.805
No. of Awards 1.000 0.747
Cost Effectiveness 1.000 0.771
Accounts Management 1.000 0.764
Branding and Positioning Skills 1.000 0.755
Note: Extraction Method: Principal Component Analysis.
Table 9a: Communalities
1 2.364 16.884 16.884 2.364 16.884 16.884 2.256 16.111 16.111
2 2.063 14.736 31.620 2.063 14.736 31.620 2.021 14.436 30.547
3 2.001 14.292 45.912 2.001 14.292 45.912 1.840 13.140 43.687
4 1.637 11.695 57.607 1.637 11.695 57.607 1.525 10.895 54.581
5 1.272 9.086 66.694 1.272 9.086 66.694 1.501 10.718 65.300
6 1.051 7.510 74.204 1.051 7.510 74.204 1.247 8.904 74.204
7 0.717 5.120 79.324
8 0.710 5.073 84.396
9 0.642 4.587 88.984
10 0.538 3.843 92.826
Table 9b: Total Variance Explained
Comp-
onent
Initial EigenvaluesExtraction Sums of
Squared Loadings
Rotation Sums of
Squared Loadings
Total% of
Variance
Cumula-
tive %Total
% of
Variance
Cumula-
tive %Total
% of
Variance
Cumula-
tive %
(Cont.)
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71Advertising Decision-Making Process
Table 9b: Total Variance Explained
Comp-
onent
Initial EigenvaluesExtraction Sums of
Squared Loadings
Rotation Sums of
Squared Loadings
Total% of
Variance
Cumula-
tive %Total
% of
Variance
Cumula-
tive %Total
% of
Variance
Cumula-
tive %
11 0.461 3.292 96.118
12 0.281 2.005 98.124
13 0.167 1.194 99.317
14 0.096 0.683 100.000
Note: Extraction Method: Principal Component Analysis.
Table 9c: Component Matrixa
1 2 3 4 5 6
VAR00001 0.161 0.370 0.740 0.002 0.154 0.295
VAR00002 0.494 0.169 0.135 0.314 0.340 0.069
VAR00003 0.168 0.717 0.370 0.128 0.046 0.008
VAR00004 0.053 0.691 0.388 0.231 0.119 0.015
VAR00005 0.373 0.072 0.164 0.580 0.076 0.343
VAR00006 0.263 0.264 0.409 0.324 0.569 0.319
VAR00007 0.148 0.549 0.205 0.516 0.371 0.068
VAR00008 0.181 0.168 0.304 0.591 0.590 0.225
VAR00009 0.609 0.151 0.017 0.461 0.263 0.016
VAR00010 0.865 0.151 0.004 0.182 0.018 0.028
VAR00011 0.788 0.216 0.076 0.094 0.087 0.239
VAR00012 0.237 0.469 0.571 0.340 0.232 0.019
VAR00013 0.021 0.420 0.611 0.027 0.135 0.441
VAR00014 0.068 0.112 0.336 0.202 0.391 0.657
Note: Extraction Method: Principal Component Analysis; a 6 components extracted.
Component
Table 9d: Rotated Component Matrixa
1 2 3 4 5 6
VAR00001 0.048 0.753 0.478 0.136 0.007 0.069
VAR00002 0.416 0.059 0.199 0.413 0.102 0.336
Component
(Cont.)
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The Icfaian Journal of Management Research, Vol. VIII, No. 6, 200972
Factor 2 is a combination of track record, accounts gained and lost, with
loadings of 0.819 and 0.811 respectively. Table 9c also suggests the same
combination. This factor is termed as performance. As for factor 3, it is evident
that cost-effectiveness and accounts management have the highest loading of
0.75 and 0.829, respectively and it is also reflected in Table 9d. This factor
consisting of above two variables can be termed as efficiency.
Factor 4 consists of the attributes personal equation and ability to present
with the highest loadings of 0.601 and 0.873. This factor could be termed as
relationship.
Factor 5 consists of the attribute size of the agency with a loading of 0.668
and the factor is termed as size. Factor 6 consists of the attribute branding and
positioning skills with a loading of 0.854 and the factor is termed brand.
Thus, it can be said that the significant factors of analysis for choosing an
advertising agency are creativity, performance, efficiency, relationship, size and
brand.
Tenure of Client-Agency Relationship
Advertisers leave one advertising agency and switch over to the other due to
several reasons. The average tenure for a client-agency relationship is 9-10 years
Table 9d: Rotated Component Matrixa
1 2 3 4 5 6
VAR00003 0.033 0.819 0.125 0.039 0.009 0.090
VAR00004 0.032 0.811 0.124 0.156 0.024 0.008
VAR00005 0.099 0.043 0.038 0.601 0.468 0.194
VAR00006 0.000 0.005 0.219 0.873 0.163 0.008
VAR00007 0.140 0.245 0.428 0.248 0.668 0.060
VAR00008 0.105 0.081 0.232 0.164 0.887 0.125
VAR00009 0.724 0.049 0.060 0.213 0.050 0.312
VAR00010 0.881 0.035 0.021 0.150 0.018 0.063
VAR00011 0.838 0.028 0.007 0.081 0.053 0.185
VAR00012 0.170 0.163 0.750 0.000 0.057 0.388
VAR00013 0.062 0.051 0.829 0.141 0.030 0.220
VAR00014 0.034 0.141 0.017 0.066 0.011 0.854
Note: Extraction Method: Principal Component Analysis; Rotation Method: Varimax with Kaiser
Normalization; a Rotation converged in 7 iterations.
Component
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73Advertising Decision-Making Process
in India. Hence, a question has been posed to the respondents on how often
they change the agency. The results are shown in Table 10.
It can be seen from Table 10 that 80% of the advertisers either change their
agencies sometimes or rarely. More than half of the respondents (51.5%) said
that they change the agencies once in 5-10 years; 28.5% of them said they rarely
change their agencies and 20% change their agencies frequently. This could bebecause the switching costs are quiet high. The table also shows that it is a myth
that the organizations never change their advertising agencies, as it shows 0%
against the column.
Reasons for Changing the Agency
There are various reasons for the client switching over to the other agencies.
Some of the common reasons are: The agency might have been acquired by
international alignments, management and staff changes; product conflicts
because of mergers and take-over of new product interactions; brand failure ordiffering perceptions of agency and the advertiser about an advertising strategy.
Table 11 summarizes the relative importance of reasons for the change of agency.
Tenure No. of Respondents Percentage
0-5 years (Frequently) 7 20.0
5-10 years (Sometimes) 18 51.5
10-15 years (Rarely) 10 28.5
Never Change 0 0.0
Table 10: Tenure of Client-Agency Relationship
A overwhelming majority 80% of the sample firms changed their agency due
to the management changes in the agencies. From this, it could be concluded
that advertisers go to an agency not just by its name or size, but the people
working in it. 8.6% of the respondents changed their agency due to brand failure
and meager 5.7% of the respondents due to international alignment and product
conflicts. It means, by and large client-agency relationship is cordial.
Cause for Change of an Agency No. of Respondents Percentage
International Alignments 02 5.7
Management Changes 28 80.0
Product Conflicts 02 5.7
Disenchantment with Each Other 0 0.0
Brand Failure 03 8.6
Table 11: Reasons for Changing the Agency
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The Icfaian Journal of Management Research, Vol. VIII, No. 6, 200974
Relative Importance of Key Factors in Agency Selection
The advertisers are asked to compare the five key factors in selecting an
advertising agency based on their preference level of one factor over the other.
Table 12 presents a pair-wise comparison of different factors.
The numbers in each cell represent the percentage of respondents who prefer
the factor given in the row to that of the factor given in the column.
Table 12: Pair-Wise Comparison Matrix of Key Factors
Strategic Planning 14.3 0 57.1 57.1
Media Ability 85.7 0 57.1 14.3
Creativity 100.0 100.0 100.0 100.0
Service Level 42.8 42.8 0 28.6
Cost Consciousness 42.8 85.7 0 71.4
Key
Factors
Strategic
Planning
Media
AbilityCreativity
Service
Level
Cost
Conscious-
ness
With 100% respondents preferring creativity over all the factors, it could be
said that creativity is most expected from the agency. 85.7% of the respondents
preferred media ability over strategic planning, 57.1% preferred it over service
level and 14.3% over cost consciousness.
Strategic planning is more important than service level and cost consciousness
to 57.1% of the respondents. Service level over strategic planning and mediaability is preferred by 42.8% of the respondents. An overwhelming 85.7% of the
respondents are price sensitive as compared to media ability and 71.4% to that
of service level. Thus, though all the key factors are essential, creativity is
considered to be the very essence of advertising.
Sub-Factors of Key Factors of Selection
The key factors which are discussed in the above paragraphs have been
sub-categorized, so as to have a clear idea about which sub-key factor is most
preferred by the advertisers. Table 13 presents the ratings given to differentsub-criterion by the respondents. The respondents have rated them on a 5 point
Likert scale, where 5 represents the highest significance and 1 the least
significance.
The creative work that sells under the criterion creativity is the most significant,
compared to any other factor. Business understanding, media planning and media
buying are given an equal importance with a rating of 4.5 each. The next two
important factors are holistic planning and market research. Advertising awards
is the least significant factor to the advertisers.
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75Advertising Decision-Making Process
Key Factors Sub-Key Factors Average Rating
Strategic Planning a. Market research 3.0
b. Holistic planning 3.5
c. Business understanding 4.5
Media Ability a. Media planning 4.5
b. Media buying 4.5
Creativity a. Creative work that sells 5.0
b. Advertising awards 1.0
Table 13: Rating of Sub-Key Factors
Generation of New Ideas and Concepts
Advertising agencies are hired for their creativity in generating new ideas and
concepts. How far this capability is demonstrated by the advertising agencies has
been enquired into. In order to know how frequently the new ideas and concepts
provided by the agencies are, the respondents are asked to select the most suitable
alternative according to their view (Table 14).
Frequency No. of Respondents Percentage
Always 0 0
Most of the Times 14 40
Sometimes 14 40
Rarely 7 20
Never 0 0
Table 14: Generation of New Ideas and Concepts
Forty percent of the advertisers said that advertising agencies provided new
ideas most of the time. An equal number of respondents felt that they are
provided new ideas sometimes. Only 20% of the respondents felt that they are
rarely provided with new ideas. This shows that most of the times agencies
support the advertisers by providing them innovative ideas and concepts, and
thus, fulfilling the purpose for which they are engaged.
Autonomy for the Advertising Agency
Companies are demanding more from the agencies and there is always a conflict
between the client and agency regarding the autonomy or freedom given to the
agency. The agencies feel that they are not given full freedom and they are
working under pressure. On the other hand, advertisers feel that they are giving
a free hand to the advertising agencies. Advertisers opinions regarding the
autonomy extended are given in Table 15.
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The Icfaian Journal of Management Research, Vol. VIII, No. 6, 200976
Majority of the advertisers (94.3%) felt that they are giving moderate
autonomy to the advertising agencies.
Choice of Single or Multiple Agencies
Some of the companies choose more than one agency. For example, they may
choose one agency to make the advertisement and the other for media planning
and buying slots. Table 16 presents the survey results of whether a single agency
or multiple agencies are chosen.
Extent of Autonomy No. of Respondents Percent
Full Autonomy 0 0
Moderate Autonomy 33 94.3
Partial Autonomy 2 5.7
No Autonomy 0 0
Table 15: Autonomy Given to the Agency
According to the survey, majority of the respondents (60%) prefer to go for a
single agency rather than multiple agencies. This may be because they do not want
to run from pillar to post and control costs and time.
Conclusion
To sum up, it can be said that the main objective of advertising agencies is to
build the brand image, closely followed by the objective to inform. As far as the
method to determine advertising budget is concerned, the most preferred method
is objective task method, followed by percentage of sales method and competitive
method. As far as the basis for determining advertising budget is concerned, equal
importance is given to all the factors, i.e., determining the budget is based on
the need. Most of the advertising appeals are rational or sensory. Televisionhappens to be the most preferred media, closely followed by print media. Most
of the advertisers go for advertising agencies. The relationship shared by the
advertisers with agency according to their view is very strong. Creativity and
media ability are rated the highest by the advertisers. Building the brand image,
personal working in the agency, cost-effectiveness are some other factors which
advertisers look for in an agency. Advertisers switch their agency, if at all, for
reasons like, the management changes in the agency. Advertisers opine that they
are provided with new ideas and concepts by their agencies most of the times
and they also give autonomy to them in their sphere of work.
No. of Agencies No. of Respondents Percent
Single 21 60
Multiple 14 40
Table 16: Number of Agencies
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77Advertising Decision-Making Process
This study has also some limitations. The sample being small relative to the
number of advertisers and the advertising agencies in India, and also due to the
contingent and situational nature of the advertising.
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