Ad Agencies: Loyalty, Value, and Long-Term Evolution

The nature of the advertising industry has changed over the last decade, although its role of communicating with and influencing customers remains unchanged. Advertising agencies offer solutions to marketing problems for businesses, not for profit organisations as well as government (Beverland et al., 2007; Turnbull and Wheeler, 2015). Many larger agencies have purchased boutique or specialist agencies, such as public relations agencies, website development, direct marketing and marketing research firms to ensure that they are able to provide a range of services that their clients expect through a one-stop-shop (Wilson, 2010).

Clients are time-precious and do not want to be briefing multiple service providers or negotiating how to divide up their marketing expenditure between the agencies. Hence they prefer to use one full-service agency. Clients seek solutions to problems but are often not sure where the solution lies and which are the most appropriate channels. The twentieth-century agency was focused on creativity, billings and retainers whereas in the twenty-first-century agencies need to work differently with their clients in order to remain relevant and add value.

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According to Wilson (2010) having a loyal client base is one of the key success factors for advertising agencies. Margins in the business are under continual pressure, and it is more profitable for an agency to have a high proportion of their business coming from existing clients which minimises the costs of sourcing and attracting new business. Several authors have empirically demonstrated that customer loyalty is a key factor in improving a company's economic and competitive position. Customer loyalty is important especially during times of economic austerity and increasing competition (Dick and Basu, 1994; Thaichon et al.

, 2014; Wang and Wu, 2012). This is one of the first studies to combine service quality and relationship marketing literature to develop a conceptual model to explore the drivers of loyalty.

As business decisions have to be rational, advertising agencies like other service providers need to deliver value to their clients. Perceived value drives satisfaction (Patterson and Spreng, 1997) and in turn, loyalty. Customers choose the product or service that offers the best relative value compared to others in their consideration set (Neal, 1999). Overall satisfaction is a cumulative evaluation based on total purchase and consumption experience with a good or service over time (Anderson et al., 1994; Thaichon and Quach, 2015). Satisfaction affects future buying decisions, and satisfied customers are generally loyal, which increases revenue and lowers operating costs. Therefore, higher satisfaction lifts return on investments, stock price and add market-value for service providers (Anderson et al., 2009; Bayraktar et al., 2012).

Belch et al. (2009) claim that the key reason clients use advertising agencies relates to the specialist knowledge and the objective market analysis they are able to provide, and their ability to draw on experiences gained whilst working for other clients. There is a heightened need for agencies to consider the whole client experience, focusing on understanding and responding to the clients' needs whilst displaying creativity. The relationship between advertising agencies and their clients is based on emotions and feelings as well as economic outcomes. There are agencies which are prepared to cut costs and provide discounts to get the job done, but these exchanges focus on shortterm results rather than long-term investments. The quality of the relational exchange between service providers such as advertising agencies and their clients is an important dimension which is likely to influence loyalty.

Offering cost-effective and unique services like direct selling, public relationships strategies, and performance-based marketing by advertising agencies is the key reason for clients' interest in them. Agency theory has its origins in the 1930s (Berle and Means, 1932) and was developed in economics research as a general theory of agency (Ross, 1973; Mitnick, 1973; Jensen and Meckling, 1976). Different studies have been conducted to identify the effectiveness of online advertising. Some scholars have focused on media and its nature and tried to recognize key features to increase the effectiveness of online advertising (Shamdasani et al.,2001; Ko et al., 2005). Some studies concentrated on the content of messages (Rodgers and Thorson, 2000; Kim et al., 2001). Another category of studies evaluated information processing in order to increase the consumer's involvement with advertising (Rodgers and Thorson, 2000). Moreover, some researchers addressed the variables of selecting appropriate agencies from client (Doyle et al., 1980; Cagley and Roberts, 1984; Cagley, 1986; Harvey and Rupert, 1988; Wackman et al, 1987; Verbeke, 1988; Dowling, 1994) and agencies point of views (Cagley, 1986; Fam and Waller, 1999). The key functions of advertising agencies have also been examined by another group of studies (Wills, 1992; Butkys and Herpel, 1992).

Wills (1992) considering 900 agencies, examined agencies' activities which are necessary for establishing new campaigns. Wills mentions activities viewed as core activities of advertising including positive recommendations of satisfied clients, personal contact with top management, and the publicity of recent successful campaigns (West and Paliwoda, 1996; Waller et al., 2001). Wackman et al.,(1987) conducted another study in the field of advertising agencies and considered relationship change in the course of time. They reported that the variable of relationship is a key concept, taking the time issue into consideration. Herpel and Butkys (1992) found that direct mails are seen as an appropriate tool for self-promotion goal of advertising agencies. Cagley (1986) by analyzing 69 clients and 76 advertising agencies, found that both parties agree that delegating the establishment of an advertising campaign to advertising agencies requires some observations. According to benet.com (2007), commercial companies in their pursuit to select an advertising agency consider the following features: agency approach, track record, accountability, strengths, staff, and active clients.

Therefore, the objectives of this research study are to develop and test a model based on service quality and relationship marketing literature to investigate how advertising agencies' creativity and inter-firm relationships influence their clients' value perceptions and overall satisfaction; and to examine how value perceptions and overall satisfaction influence the loyalty of clients towards their advertising agencies.

Long Term Value Of The Relationship:

A study by Dhalla, 1978 studied that to enhance the client-agency relationship it requires maximum communication, understanding and trust by both the parties. It requires strategic investment. As the advertising has long term benefits for the brand, the time and cost spent by the agency and client ultimately leads to the development of the brand over time. However, both agency and client face difficulty in maintaining the relationship because of the intangible nature of their benefits. The research studied that there is no certainty about the nature and duration of the benefits the brand acquires from the advertising.

The research by Newsome (1980: 26) studied that the process of switching and developing a successful partnership took up to two years. As per the research the switching process involves the new agency selection process, induction briefings, and the gradual development of rapport and trust with the new agency.

In the advertising sense, long-term relationships, when correctly handled, should provide the environment in which the best advertising product is developed. Through continuous monitoring and resolution of areas of dissatisfaction, both client and agency can benefit from strengthening and maintaining their relationship.

The author Joe Grimaldi (2003) in his book (Book name) states that to bring a brand to life, an agency must understand the client in every aspect, its company, products or services, and its customers, past, present, and futures. The agency must also have a strong rapport with its client.

There's an old agency saying that clients usually get the advertising they deserve, meaning that clients with a solid long-term view will get better advertising than the client that insists on short-term results without building a solid foundation. The book studied that the advertising agency has evolved ever since. The first and foremost evolution is the thinking behind the advertising. The concerned is taking that thinking to a new and more provocative level.

On the creative side, it's about how you create the most meaningful messages and how you send them out through advertising, direct marketing, Internet, and one-to-one sales engagements.

In the future, marketers, companies, and clients are going to be cautious about what they spend, what they say, and where they say it.

As per the author, good advertising should be self-evident. Agencies should not have to sell their campaigns to their clients. When an agency does its job on behalf of a client, the client brings it back to business.

The research by Sarah Turmball studies the association between an agency and the client has frequently been alluded to as a 'marriage' as a result of its closeness and life span, it is currently increasingly practical to anticipate that connections should last under 3 years. As seen in Sarah Turmball's study the shorter nature of client/ad agency relationships reflects the changing nature of the marketing communication environment and the increasing focus on return-on-investment from communications activity.

The study states that an intriguing thing happened to our industry in the late 70s or early 80s, when the middle of the agency hierarchy people like account supervisors, associate media directors and media supervisors vanished in light of the fact that the incomes weren't there to help them. These individuals resembled sergeants in the military, the ones who knew everything and could educate new enlists in a forceful, substantive way. They could likewise identify with senior administration and given an approach to individuals coming into the business to learn it well. It arranged them to turn into future pioneers' the ones who were sufficient.

Elizabeth Carmela Levin in her research noted that many interviewees spoke about the commitment of the agency to the client, rather than the reverse. The interviewees felt that the agency should be committed to the client and go above expectations to satisfy the client. Few interviewees stated that they continued to use the services of their agency as the agency staff understood their business, their brand, the brand image, the look, feel and tonality of their promotional materials. Several participants spoke of their agencies in terms of partnership rather than purely service provision. They felt they not only had a professional connection but also an emotional attachment with their agencies and agency people as they had worked very closely with them over years.

The research done by Katharina Boden (2009) studies that the worth of keeping a long-term relationship has increased even though research has shown that the durations of client-agency relationships tend to decrease. In times of the economic crisis a contract renewal is more compared to ever. The paper studies that it is vital to offer superior value to the client to create and maintain a long- term relationship. It also states that it is very important to evaluate the effect of agency work and that again raises pressure.

Constructs of Advertising

Loyalty

Loyalty is widely recognised as being one of the most important constructs in the marketing literature (Caceres and Paparoidamis, 2007; Shirin and Puth, 2011; Wang and Wu, 2012). The loyalty of buyers positively affects personal and non-economic satisfaction through ongoing social exchange with a vendor, and consequently, buyers find the overall experience with a seller more satisfying (Lam et al., 2004; Wang and Wu, 2012). Many authors have adopted the two-dimensional construct of loyalty, that is, the inclusion of both behavioural and attitudinal components. The behavioural component refers to repurchase behaviour whilst the attitudinal dimension relates to a commitment to the organisation (La et al. 2005). In this study loyalty, the principle measure of customer retention is conceptualised as being composed of reuse and advocacy.

Perceived value

There are many reasons why organisations enter and maintain business relationships, but it is unlikely that in a competitive marketplace, organisations would continue to use the services or products of a supplier if they did not receive value through this relationship (Shirin and Puth, 2011; Tam, 2012). The value in the current study is used to represent "client perceived value". Paulin et al. (2000) explain that marketing literature regards customer perceived value as: the fundamental basis for marketing (Tam, 2012), a key strategic variable to help explain repeat purchase behaviour, brand loyalty (Patterson and Spreng 1997) and relationship commitment (Thaichon et al., 2014), and a source of competitive advantage (Tam, 2012). Perceived benefits consist of a combination of technical support, physical and service attributes (Thaichon and Quach, 2015). Costs or sacrifices - 9 - include anything which is given up in order to receive the good or service provided and incorporates monetary value or price (Durvasula et al. 2004; Tam, 2012).