Different classes of mediums often grant the agency different commissions. Most newspapers grant fif teen per cent with an additional two per cent for cash, altho some allow only a ten per cent commission. The organizations controlling billboards grant six teen and two-thirds per cent. Some trade papers al low ten per cent. Until 1914, the standard basis of agency commission among magazines was ten per cent, with an additional five per cent for cash. This cash discount the agent was supposed to pass on to his clients when they discounted their bills. It was found, however, that the agency could not give sufficient service on the ten per cent basis, and that the agency, to make money, had to withhold part of the cash discount. To standardize the practice, as has been said, most magazines have now established thirteen per cent as the regular agency commission, and the exact amount of this discount for cash given to the agency by the publisher is in time given to the advertiser for the same prompt payment. This is usually three per cent in the agent's net.
While to one unfamiliar to the advertising busi ness, the agency's commission may appear to be in a very involved condition ; as a matter of fact it is less involved and rates are more rigidly adhered to than in almost any other class of business. An agent who cuts rates is regarded as an outlaw, and he may at any moment lose recognition from the publishers and will not be allowed membership (or will be expelled from membership) in any of the agents' associations.
The agency's commission, allowed him by those who control advertising mediums, pays for the ordinary agency service. Many agencies make an additional "service charge" to advertisers when the services ren dered involve unusual outlays of money. An elab orate market investigation, for instance, preceding a necessarily small investment in space, may be paid for by the advertiser. The advertiser also pays for the work of artists, for the electrotyped plates of ad vertisements sent to mediums, and for transportation charges on all advertising matter and cuts. These matters, of course, are all agreed upon between the agent and the advertiser before the accent undertakes the account.
12. The meaning of "recognition."—Several times in the preceding paragraphs we have referred to "recognition" of agencies by publishers. An ad vertising agency is "recognized" when the publisher grants a commission for advertising received from the agency. As advertising agencies began to increase in number and to demand of publishers statements of circulation and fixed rates for space, the publishers found it advisable to organize associations to investi gate the standing and responsibility of the agents in order that the publishers might be protected from the unscrupulous and the irresponsible. The news papers have performed this function thru the Amer ican Newspaper Publishers' Association, the maga zines thru the Quoin Club, and the farm journals thru the Agricultural Publishers' Association. There are some publishers who will not grant recognition until they, individually, have made a special contract with the agent. This is becoming the general cus tom among the magazines. Since 1915 the Quoin Club has no longer "recognized"; it has "recom mended." Without recommendation the magazine publisher will not consider an application for com mission from an agent. When recommendation is ob tained the publisher uses his own discretion as to rec ognition.
These associations demand of the advertising agent a satisfactory financial statement, a record of the past experience and accomplishments of the individuals in charge of the agency, an assurance that the agency will not rebate any of its commissions to the adver tisers, a list of the accounts, and in some cases a state ment of the volume of business which the agency is prepared to place. The number of accounts neces
sary to secure recognition varies. While the associa tions generally adhere to the rule that an agency must have at least three accounts, in some cases a pub lisher insists upon at least three accounts placed in his publication; and all now demand that the agency be entirely free, on a financial basis, from the adver tiser. In the old days, some large advertisers were known to finance advertising agencies of their own, to secure the commission from the publishers; just as today we find large retailers or a combination of retailers financing a wholesale business in order to save the wholesaler's profit for themselves.
13. How an agency secures recognition.—With so many organizations from which an agency must ob tain recognition before it can do business profitably, it is a difficult matter for the new agency to secure satisfactory recognition. When one considers the credit risk the publishers must take and the fact that an agency may be conducted with a very small amount of capital, it is right that an agency's ability should be carefully tested before recognition is granted.
From the advertiser's viewpoint, it is important that the advertising agent with whom he deals should be recognized by all classes of mediums. This arises from the fact that the agent's compensation comes chiefly in the form of commissions from publishers. If he were granted a commission by one publisher and not by another, he might be suspected of putting his own interests before his client's if he were to se lect the first publisher's periodical, and not the sec ond's, as a proper medium for his client's advertise ments. That most agents, however, do not let the matter of commissions influence their advice to their clients is indicated by the many cases in which con scientious advertising agencies have placed large vol umes of business with certain publishers who did not grant them recognition. Sothe accounts, in this way, are carried by the agent at an actual loss.
To insure to the agent proper compensation from all mediums that his clients' campaigns may require, as well as to avoid other difficulties in the methods of recognition in vogue in the past, a new plan of agency recognition was proposed by the Affiliation of Adver tising Agency Associations at the 1916 Convention of the Associated Advertising Clubs of the World. The plan comprehends joint recognition by all me diums, the recognition to be granted by a central body, one representative from each medium and one from the Agents' Association. This will give the new agency an opportunity to start on an equal basis with respect to all mediums, and will give each medium and the agents themselves an equal voice in the recogni tion of others to their ranks.
The advertising agencies are now formed in to associations—the New York Advertising Agents' Association, the Western Advertising Agents' Association, the Philadelphia Advertising Agents' Association, the Boston Advertising Agerits' As sociation and the Twin City Advertising Agents' As sociation. These associations comprise in their mem bership all the better agencies, and membership in them is usually considered as final recognition.
The new plan will do much to clear up the agency situation, and, while it may not be easier under it to secure recognition for an agency, it certainly will al low those securing recognition to do business on a more satisfactory basis; it should aid publishers, ad vertisers and agencies alike.