Introduction advertising unit Structure

2. Fee System :
The fee system came into effect following a 
controversy between the advertiser and the advertising agency. 
The former argued that 15% commission was too high a rate, 
whereas the agency took the stand that it was unremunerative in 
view of many services rendered to the client by the advertising 
agency. Under fee system, the agency payment consists only the 
service charges which are to be computed on the basis of cost plus 
system. Under the system a certain fixed percentage (flat rate) on 
cost may be charged from the client as fee to be paid to the agency 
along with the bill. This system enables the advertising agency to 
make fair profits on services rendered by it and, in turn, the 
advertiser pays for what he gets - nothing more and nothing less. 
The fee system is generally used in radio and television-
advertising. 
3. Service Charges :
Under this method, service charges are 
added to the cost of materials and services bought by the 

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advertising agency for the client in art work, photography, 
typography, plates etc. Normally, it is cost plus 15%. 
In actual practice one of the above methods of compensation 
or a combination of the fee-and-media-commission plan or a 
method by which commission granted by the media are credited 
against profession fee, is used. When a new product advertising is 
involved, the advertising agencies are remunerated on a special fee 
basis. 
Check your progress: 
 
1) Give the chart of organisation structure of an Advertising 
Agency. 
2) Explain the following terms. 
a) Advertising agency 
b) Agency Accreditation
c) Client Turnover 
d) Copy Department 
e) Art Department 
f) Commission Method 
2) 
“Advertising Agencies relieves the burden of the Manufacturer 
or Trader”. Explain.