Sponsor (Jan-June 1956)

iPiit tv casts farce new services an agencies ? YES: services are move to JUSTIFY HIGH PROFITS TV BRINGS NO: AGENCIES CHANGED WITH GROWTH IN NATIONAL ECONOMY • Composite viewpoint quoted below is based on thinking of admen from client side who view marketing services as growing out of client tv-sparked desires. "I believe agencies had to go into broader marketing services. Television forced it. All agencies haven't broadened their scope. But the move is on. "Television put the finger on the agency. Ten years ago the big shops were heavily in print, same in radio. Then came tv. The pattern changed — is changing. Billings jumped sky high. This meant agencies had to add personnel. Early tv was trial by error. More people were needed to take care of mistakes. "With more people came a certain direction as to where the agency was going. The area of marketing was the logical place. Reason? Simple. The more an agency is integrated into management, the more it has a hold on the account. Marketing — actually, you could give it 10 other names — became the base. More research, more merchandising, more counseling on everything from employe salaries to • Composite viewpoint below reflects thinking of agency executives who say it's not tv profits but changes in economy which underlie expansion of agency services which were reported in this series. "There's no doubt but what television changed the agencies' operation. Agencies were hit broadside with tv. They had to change or lose out. It's just that simple. Tv budgets are high. No denying that. So are the results tv gets. But simply because the budgets are high doesn't mean agency profits are the same. A lot of people assume, clients among them, that so-and-so show costing, say, $300,000 for a one-time shot puts $45,000 right into the agency's profit column. "There's no denying that you make more on some accounts than you do on others. What's wrong with that? Not a thing. All business follows the same practice. But one thing's sure: It takes more to get more. Same since time began. "Figures say so-and-so agency did $150,000,000 :/s how big a manufacturer's field force should be. "But that's only part of the setup. Tv represents anywhere from 40 to 65% of the total billings of a vast majority of agencies. Most of this money comes from the networks. Now, the networks pretty much control what they produce. This means a lot to the agency in terms of profit. "The agency needs only to provide commercials for these shows. It gets 15% on top of the production cost plus fees for out-of-pocket expense. Then it gets 15% on time and the high-priced networkcontrolled program. When a client spends $5 million in tv and the agency gets 15% or roughly $750,000, you can see where the client begins to wonder. "That's where marketing stepped in. The client pays more, but gets more. It's the Madison Avenue baker's dozen. "And there's one more thing. The 15% may have outlived its usefulness. Tv may have changed this. But maybe it can stay the same with marketing tossed in, "One thing is sure. The greater number of services didn't just spring from kindness. Once they're there, though, you can be sure they'll stay. No one ever punched Santa Claus in the nose yet." in billing. Yet their net profit is about 1.5%. How does this compare with, say, General Motors or a lot of the hot-shot tv operations. As I said before, it takes more to get — and hold — the big ones. And I'm not being snide either. "The greater the billings on one account, the more the problems. They go hand in glove. Tv forced more activity and the agencies expanded services. But it was a natural expansion. The talk is that the agencies resorted to some sort of cloak and dagger stuff. Nothing further from the truth. "The very nature of tv forced better research, stronger merchandising, greater counseling with management on the whole business function. With this came more people, more activity, more depth, if you will, to the whole advertising effort. "There's one more thing. Advertising today reflects the tremendous economic tempo of the country. Advertising is bigger, broader, more intense and more selling. If advertising seems hypoed, it's just joining the throng. A marketing revolution? No. It's just an economic evolution with the agencies going along with the act. And forget about the theory that agencies are reaping high profits on network tv. We only wish it worked out that way." 28 For editorial presenting sponsor's own view on the question, see page 108. SPONSOR