Question

Traditionally, the mass media has paid advertising agencies a 15 percent commission on all business brought to them. The advertising agency also represents a client and may receive fees from that client. Since the advertising agency receives a commission on the amount billed from a client from the mass media, some believe that a conflict of interest exists—two masters are being served. While the advertising agency is supposedly cutting the best deal they can with the mass media for their client in terms of media prices, they may also be receiving commissions based on billing where more money is made by the advertising agency as billing revenues for the agency and mass media increase.

After considering the ethics of this situation, take a position on the practice and make comments. Remember to try to see the issue from the viewpoint of all parties—the mass media, the client, and the advertising agency. Be prepared to discuss your thoughts and position.

Answer 1

Please rate this answer, I've answered from taking the position of the mass media, the client and the agency by considering the ethics. Please rate this answer positively and if you have any doubts please let me know through comments. Thank you!

Basic Introduction - Mass media traditionally paid a 15% commission on all companies that have introduced them to marketing organizations. Copywriting, Art Manager and accounting fees of the agency are included in the committee. This compensation model is less logical today, since many marketing services no longer include traditional media purchases. The 15% commission in some cases still applies, but some agencies charge less than 15% or have sliding scales based on the amount spent by the customer (the more money spent, the lower the rate). Some organizations provide flat-rate agreements agreed by customers and the organization, while others charge an hourly fee. Others are going to combine flat base fees with lower media percentages. Interactive media presently charge the largest commission because the agency staff need the most leadership time.

Opinion - Considering the facts of the case and the ethics of the case. The agency charges both from the client as well as the mass media @15% commission. Literally speaking in the business terms, this is what actual business is called and is not wrong. But speaking ethically, this is wrong because, charging from the client for the service as well as charging from the mass media for bringing the business would be immoral and unethical to deal with from the point of view of agency. Whereas from the view of the client, when he get to knows that the agency has been charging him from the inception from both the mass media and from his also, there is a chance that he might shift to another agency. From the point of view of the mass media which is paying commission to the agency @15% may stop having the clients brought by the agency and eventually stop the business with them after knowing that they are charging the client too. This may result in serious downfall for the agency.

Conclusion - Additional innovative designs include license charges or ideas royalties. Some even use executive charges, in which the cost of the agency depends on the campaign's achievement. Initially, the customer and the agency describe what they mean by "achievement" and can determine how well customers can recollect announcements or evaluate real product revenues. Agencies that use models based on performance can make significantly–or far less –a commission of 15 percent. However, the justification is that the compensation is linked to the value of thoughts.