Venture Description: Advertising Farm

RAB 8 Barisal

VENTURE DESCRIPTION

 

Nature of business

The small and medium enterprises (SMEs) in Bangladesh are the fastest growing part of the private sector and are a significant contributor to the country’s GDP. However, when it comes to advertising through a professional advertising agency, most of these marketers are unsure about the activities of the advertising agencies and little do they realize the importance of using these agencies for building up a sound relationship with target consumers.

 

Realizing this potential, Time Ad will be set up as an advertising firm, aimed at primarily serving the niche market of small and medium enterprises in the country. The reasons behind serving this sector through the business is twofold:

 

Firstly, though not as profitable as the large MNCs and local companies in the country who are the prime target of the advertising agencies, the small and medium enterprises are large in number and constitute part of many of the high growth industries like agriculture, real estate, manufacturing and hotels and restaurants. Therefore, with proper planning and with careful selection of potential clients, who have the money to spend on advertising but is not doing so at present, along with proper approach towards convincing them, these small industries will prove to be a profitable target.

 

Secondly, since BrandEdge aims to start off as a medium sized advertising firm, it will be difficult for it to snatch away the big clients of the industry who are already engaged with the big shots of the advertising industry. Not only will the firm initially lack the necessary resources and capital to compete with the big players in the market, but also it will be difficult to build up credibility among the big clients in a short time.

Time Ad will be set up as a partnership business, with the partners being Amira Al Muktadir, Nusrat Karim Elita, Fahmida Sultana, Tami Zakaria and Rafia Afrin, all of whom are business school graduates of IBA, University of Dhaka. Each of the partners will share the ownership of the business equally, and each is going to invest 300,000/- for the establishment of the business. The management of the company will be appointed by the partners, who will closely supervise the management. None of the partners will hold any executive position. For any decision to be approved, at least three of the five owners must agree.

Name and logo of the company

 

Our aim is to acquire and maintain a competitive edge for our brand and the name is hence aptly BrandEdge. However, true enough, it takes breakthrough innovation, breakneck speed, and naturally, the very best talent to outthink and outmanoeuvre the competitors.

That’s where we come in.  At Time Ad, we help organizations-

Innovate by successfully conceiving of and launching a new concept of advertisement
Differentiate
their products and services through pragmatic marketing strategies
Dominate
in their market and build brand equity and profitable growth

Innovate, differentiate and dominate is hence what we would help the firms do through their long term relationship with us. Accordingly, our logo, as shown on the top of the page, expresses this purpose of Time Ad.

 

Vision

 

ü  To become the small business hub for advertising within two years of inception;

 

ü  Use the success and the experience to spread operation to the large business sector after the first two years.

 Mission

 

ü  Having a proper approach towards choosing potential clients as ones who have the money to spend but needs the willingness to be build;

 

ü  Ensuring that these small businesses realize the importance of advertising and hiring a professional advertising firm;

 

ü  Provide the SME clients customized solutions to their advertising problems through designing reasonably priced yet effective campaigns;

 

ü  Ensuring that the number of SME clients be adequate to enable the company to run profitably;

 

ü  Designing campaigns that reflect the uniqueness of the company and compliments the company strengths.

 

ü  Having the obligation as brand custodians to ensure that the brand handled does not fall, because if they do, in the long run the company will not have a brand to be a custodian of.

 

Service offered

 

The following services will be provided to the clients at BrandEdge –

 

  • Market study and research – finding out the demographics, psychographics, social and cultural habits of the target market, in order to decide which campaign will be effective for the specific client problem
  • Media monitoring services – analyzing the media and deciding which media would be appropriate for the campaign
  • Brand promotion – Building a brand image through the advertising campaign.
  • Sales promotion – Promoting certain offers in order to induce immediate sales.    

 

Advertising media used for the above purpose would be both ATL and BTL. Above the Line (ATL) would include newspapers, magazines, radio, television, and satellite and cable television, among which print media and radio would be mostly used keeping in mind the nature of the target market.  Small businesses in need for Below the Line (BTL) services will also be served through outdoor advertisement (billboards, hoarding, neon signs, and bell signs), innovative activities (jatra, street drama) and advertisement on vehicle bodies or fliers.

 

However, PR and event management as well as internet advertisement are, for the time being, kept outside the scope of the service area of the company, since it is a medium – sized business, and would not be able to provide all the services that a big company can.

 
Competitive advantage
A market research conducted on 21 SME owners at various places at Dhaka city revealed that 90.5% of the SMEs have never hired any professional advertising agency, although all the 21 do at least some form of advertising, be it called direct marketing or leaflets and brochures in formal terms. However, most think that had they been able to do the same tasks at a higher volume and more professionally, they would have been benefited more. The competitive edge of BrandEdge therefore lies in the very fact that it is targeting a sector which has a high potential for investing in advertising, but in most cases lack the awareness or willingness of doing so. The number of competitors in this niche market are also quite low.

 

ENVIRONMENTAL AND INDUSTRY ANALYSIS

 

 Growth trend of the industry

The advertising industry is one of the fastest growing industries of the country. In the last ten years, the competition has increased substantially in this sector with new agencies joining the market; and former agencies expanding their services to meet new clients’ requirements, getting technical assistance from international advertising networks to set new standards for advertising in the country; and of course, technology offering more scope to the media. Moreover, informal advertising agencies are continually springing up in competition with formal ones.

 

However, the scenario was completely different even a few decades back. There was very little advertising practice in Bangladesh before independence. Due to inadequate industrialization, demand for specialized advertising agencies was very limited. It was only in 1967 that the industry saw the emergence of the pioneers in the field, such as Bitopi, East Asiatic (now Asiatic), and Interspeed, who entered the market almost simultaneously in the year 1967. At that time, their clientele comprised of multinational companies like Lever Brothers Bangladesh Ltd., which had started to increase the range of its products. This growth of the advertising industry since 1967 demonstrates a direct relationship between the economic growth of the country and purchasing power of the consumers. Other advertising companies started operating only after independence.

 

The sector had a fairly traditional approach to business until the early 2000s when the advent of satellite television forced companies to become more professional and local manufacturers of fast moving consumer goods demanded a more aggressive style. Advertisers began to realize that advertising is an enormous global business. As a result, annual expenditures on advertising has increased by more than 8 times from the early nineties till date. During the starting of the nineties, the total amount of advertising expenditure was around BDT 500 million, which jumped to almost BDT 1200 million in the year 2000, further increasing to BDT 4300 million for the current year.

Calculating the market share was a complicated thing, since the market itself is growing swiftly. In 1999, the market size of the formal advertising agencies accounted for about Tk 2 billion, while, in-house and outdoor advertisements by manufacturing or service providing companies and the informal agencies (non-registered agencies and individuals) accounted for about another Tk 1 billion.

Similar estimations of the market had been collected from the AAAB (Advertising Agencies Association of Bangladesh), and the figures are grossly, as follows:

Year

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2002

2003

2004

2005

2006

Annual Industry Turnover (in BDT)

1.8 billion

2.4 billion

3.1 billion

3.9 billion

4.3 billion

The following graph better illustrates the growth of the advertising industry:

 

Factors contributing to the growth of the industry

 

The clientele base of most of the advertising firms in Bangladesh is composed of three main sources:

 

  • Globally acquired multinational clients
  • Locally acquired multinational clients
  • Local private national companies

 

Globally acquired multinational clients constitute the revenue source of only those advertising firms that are affiliated with a globally recognized advertising company as its parent company. In this case, these clients are those which work with the global group of the advertising firm outside Bangladesh. When these companies come to Bangladesh, or in most cases when the ad firm starts operating in this country, these companies automatically seek service from the ad firm in Bangladesh.

 

Apart from this, in all other cases, the advertising firm has to compete with local advertising agencies in order to acquire a project. The clients of these projects could of two kinds.  Some are locally acquired multinational clients with which the global group of the advertising firm does not work outside Bangladesh, while others are reputed local organizations enriching the firm’s clients’ list.

 

Apart from these, non-government organizations (NGOs) and government also form part of many firms’ client base. However, MNCs and local companies are the major clients, as understandable by the fact that the MNCs comprise more than 60% of the media share followed by the private national companies comprising 25%.

Therefore, some very obvious factors that contributed to the development of the advertising industry of Bangladesh over the years are:

 

  • Increasing amount of MNC operations in Bangladesh.
  • Increasing number of local players in almost every sector.
  • Increasing number of international advertising networks’ affiliation with local agencies.
    • Growing competition due and declining monopoly businesses and brands.

Apart from these, several other factors also contributed to the development of this sector at various stages of time. More specifically, the advent of satellite television at the 90s increased the pressure of globalization, which made both the advertising and client firms realize that they had no other option but to improve the quality of their ads if they had to keep consumers’ attention away from the more alluring global ads on the satellite channels.  This made companies more willing to spend money on advertising, which previously constituted only a bare minimum of their budget. At the same time, advertising firms started to give more serious thoughts on ways to improve both the quality of the ads as well as the media itself in which the ads would reach the target market – hence the dramatic shift of the mostly ATL ads to a large number of BTL ads after the 90’s (to be further discussed in a later section).

More recently, the advertising industry took an impressive leap towards further development , thanks to the emergence of the telecom industries in the country. This shift started mainly from the year 2005 and has once again affected the conventional mindset of both the advertisers and advertising firms. The telecom companies, in a competition to outsmart each other, made a revolution in terms of both advertising budget and creativity, resulting in some very beautiful ads that people will remember for quite a long time. The spillover effect of such an approach of the telecom companies was in true sense a blessing for the advertising industry. The companies, which till now used to spend only moderately on advertising, had no other option but to spend more in order make quality ads, and advertising agencies now also opt for more creativity and ingenuity.

 Problems Faced by the Industry

 

In spite of the giant development that advertising industry in Bangladesh has gone through in previous decades, the industry is not devoid of hurdles that impede the growth of the industry. Some of the major problems faced by the industry are:

 

Government taxation

 

Advertising industry does not get any kind of incentives or privilege from the government. More than that, they have a bigger burden of taxation on their back. They have to pay a certain amount of money as the VAT; like other products they cannot charge this amount from the clients, so this is a deduction from their revenue. There is another expense called AIT (Advertisement In Transit). For transfer of technology and regarding transaction among borders, companies have to pay these fees. There is also a provision of double taxation. The organization has to pay taxes as an individual entity and the consultant has to pay his personal tax for the organization. So, as a whole the owner has to pay four different types of taxes; which cuts a significant amount of the earning for that person.

 

Lack of government regulation

 

As there is no regulatory agency, the companies (clients) are doing business freely, however they are personally benefited which in the long run is harming the total advertising industry. As per the international standard, the advertising agency should get 15% commission for each of their promotions designed. But, it is hardly maintained in Bangladesh. As there is no rule to regulate these matters clients do not agree to pay this percentage. They bargain between 5%-10%; in some cases even lower than that. The aware companies for their own business sake cannot even protest to these because there are a lot of companies offering service at this rate due to an unhealthy competition, whereby ad agencies look for alluring customers for a short term profit. There is no place even to complain against this practice.

 

Non cooperative seniors

 

These regulatory issues cannot be addressed because the prominent and powerful agencies are not concerned about others very much. Bigger and established companies get donation from many international organizations for working in development sector and they are the privileged part of the government. These companies mainly do social marketing like, SMC, awareness about AIDS, “Surjer Hashi”, “Send your children to school” etc. These projects are mainly sponsored by development organizations like ADB.  So, they do not feel the suffering of other smaller companies. Naturally they do not even bother to take any initiative against the current practice of the industry.

Primitive regulations

The most matured television channel BTV has some imposed rules, which does not contribute in the improved performance but act as hindrance to trendy and international standard ads. There are rules where using some specific words are banned; its not because they are some patented names of any company. It is just because they say so. There is also rule not to use any foreign models. Although there are nowadays many satellite channels to portray their creativity, all these factors do irritate the creative professionals and somewhat limit their horizon of innovation.

Saturation point

There are more than 150 advertising agencies in Bangladesh and their target market is very similar. Besides other marketing campaign their main source of revenue is that they are the official marketer of the big global companies. But there are very few such companies operating in Bangladesh. So the result is the advertising industry will be overpopulated without any good clients, at that point the competition is so fierce that the whole industry is devastated.

Clients opening in house ad units

In some cases clients are opening their own in house advertising units. They find it profitable because they do not have to pay any commission and it is less expensive. Although there is much difference in quality, companies seem to think that an in house ad unit can save a lot of their expense and thus make profit. For example, now a big name in the advertising industry, MediaComm, was initially the in-house ad unit of Square Group, which later parted from the company and started its own independent operation in the advertising field.

 

Analysis of market players

 

There is no formal way of tracking of advertising agencies in the country. However, there is an association, known as AAAB (Advertising Agencies Association of Bangladesh), which was formed back in 1977. Currently, 112 member-agencies are registered with the AAAB. AAAB decides on the membership application of the applicant based upon its qualification and capability. According to media sources, a total of 150 agencies are registered with Bangladesh Television, while the number exceeds 500 when both the formal and informal sectors are considered.

 

However, around 80% of the formal market share is held by the top 10 advertising agencies of the country. Other advertising agencies claim about 13% of the market share, while the rest is accrued to in-house advertisement of business firms and enterprises.

For the year 2006, the market shares of these top 10 advertising agencies, as well as their turnovers, as collected from AAAB, are given below.

Agency

Market Share

Annual Turnover
Adcomm Ltd.

10.1%

BDT 395 million
Asiatic MCL

9.48%

BDT 370 million
Bitopi

7.56%

BDT 295 million
Unitrend

8.58%

BDT 335 million
Interspeed

8.76%

BDT 342 million
Grey Advertising Ltd.

8.21%

BDT 320 million
Maatra Advertising Ltd.

8.1%

BDT 150 million
Benchmark Ltd.

6.9%

BDT 130 million
Roop Communications

6.2%

BDT 50 million
Beginning Production Ltd.

5.8%

BDT 10 million

 

Size of the Ad Agencies

 

Ad agencies come in all sizes. They include everything from one or two-person offices (which rely mostly on freelance talent to perform most functions), small to medium sized agencies, large independents, and multi-national, multi-agency conglomerates. The size of the agencies basically varies in terms of personnel strength. In Bangladesh, agencies having staff between 30-60 or more are classified as large agencies, 15-30 persons as medium agencies and 5-10 as small agencies.

 

Billing

 

The billing of the agencies in Bangladesh varies from Tk. 6 crores – Tk. 425 crores (as per AAAB, 2003). The top six agencies handle 58% of the total advertising budget of the country. The multinational Clients spend a substantial amount of money for advertising and communications. The bigger agencies handle the multinational clients by virtue of their affiliation. Worldwide these multinational Client works with the principals of these agencies. Agency commission varies from 3 – 15 %. The bigger agencies don’t compromise on the commission charged whereas the medium and smaller sized agencies charge commission as low as 3%.

 

Classification of advertising

 

Advertisement media in Bangladesh can be classified into two categories based on the placement strategy – Above the Line (ATL) category and Below the Line (BTL) category, each claiming about 50% of the total revenue. ATL includes newspapers, magazines, radio, television, and satellite and cable television. Placement strategies under BTL includes event management, in-house advertisement (company performing own advertisement) at point of purchase, outdoor advertisement (billboards, hoarding, neon signs, and bell signs), innovative activities (jatra, street drama), advertisement on vehicle bodies or fliers, stickers on apples in supermarkets, the opening section of streaming audio and video, and the backs of event tickets.

 

PEST Analysis

 

The Political Environment

 

Bangladesh has always been under some sort of political unrest and recently with the interim government; the situation has taken a violent downturn. Political instability is one of the biggest barriers in Bangladesh for any business venture. Frequent strike or siege activities hamper the daily activities and pose a great threat for any business to conduct their activities.

Any business requires the use of trade license to prove its legitimacy. Rely School Transport Service (RSTS) will have to acquire a trade license from the City Corporation. Getting a trade license is not a hassle free job. One has to go through heavy bureaucratic pressures to get a trade license in Bangladesh. Sometimes heavy bribing is required.

The Economical Factor

Bangladesh has been maintaining a good GDP over the last few years and the GDP will expected to grow at 6.5% in the year 2007. This is a positive indicator for our business because an increase in GDP usually raises the standard of living of the people. This increases their purchasing power, and companies are more willing to spend on advertising to attract these customers.

The Social Environment

Changing attitude of people towards SMEs is a prime factor which can influence them to get interested in hiring a professional agency like BrandEdge. SMEs are no longer neglected but considered an important contributor to GDP.

Technological Change

The world is changing fast and one of the reasons behind these fast changes is technology which has been changing the entire world of business and creating new icons. For any market, the target audiences are becoming increasingly sophisticated, cynical, better informed and thus empowered and thus the advertising industry is also becoming much more complicated day by day. The reasons behind this complication lie in audience fragmentation which means it has become very difficult to find consumer in the right place with the right frame of mind. Therefore, with the motto of innovation, differentiation and domination, and a creative genius team, BrandEdge plans to adopt the best of technology and focus on the target market accordingly.

Legal aspect

The legal aspect of advertising is controlled by the government through a requirement of the media to sign contracts with advertising agencies or the advertiser for all types of advertisements. The general terms and conditions of the contract are to conform to laws and regulations relating to printing, publication and mass communication. The Ministry of Information is the primary controlling authority and may decide to change all or a part of the terms and conditions of contracts with the advertising media. The media in general is expected to abide by social norms and moral value, refrain from direct attacks on any religion, person or organization, as well as from obscenity and vulgarism, and from using historical leaders and political leaders in advertisements.

 

SWOT Analysis

Strengths:

  • Focus on an almost unexplored market – the SMEs
  • Partners are young, enthusiastic and ready to innovate, differentiate and dominate the market
  • Marketing minor partners have a fair knowledge of advertising and the advertising insustry
  • The partners are relatively inexperienced and has to more or less depend on the management for running of the company.
  • The recognition of SMEs as major contributors to GDP means that they can be a good target market.

Weaknesses

Opportunities

 

  • Less number of competitors
  • The SMEs are not much aware of the advertising benefits

Threats

 

§  Government taxation makes the operation of ad agencies less lucrative

 

  • Competitors may have an upper hand due to their years of operation in the market

 

§  Primitive regulations

 

§  Lots and lots of ad agencies opening up pushing it to the saturation point

 

§  Clients opening in house ad units

 

OPERATIONAL PLAN

Company location and facilities

 

The company will be opened at a rented floor of 2,000 square feet area at SMC tower, Banani Commercial Area, Dhaka – 1213. The reasons behind opening up the advertising firm at this place are:

 

  • Good roadway facilities
  • Adequate parking facilities
  • The status linked with Banani area will have a spillover effect on the status of the company
  • Banani and Gulshan are the hubs of most of the corporate houses, be it large or small. So it will be easy to maintain a constant chain of communication with the clients.

 

The office will be decorated with quality furniture and fixtures. Fully air-conditioned office will be well furnished to meet the multiple requirements and provide favorable working environment for research, data processing, visualization, design, artwork and all other pre-production activities. The office would be equipped with several fixed and mobile telephone lines, fax and email facilities. All the PCs would be internally connected to the internet and would be able to send/ receive emails and large size documents including big size images and PDF file.

 

Service process

 

The main departments that BrandEdge will have, apart from finance, marketing, HR and operations, are:

 

  • Account Management
  • Creative Department
  • Market Research and Monitoring
  • Media Planning

 

Details of the roles and responsibilities of employees in these departments are provided in the organizational plan. However, an overall idea of how BrandEdge will provide superior client service through the collaboration of the above departments, can well be understood by considering how the agency will handle a piece of client work.

The Client Problem

Within BrandEdge the account manager will be tasked with handling all major decisions related to a specific client.  The account manager would work closely with the client to develop an advertising strategy for the specific client problem.  For relatively larger SME clients, such as large consumer products companies, BrandEdge may assign an account manager to work full-time with only one client and, possibly, with only one of the client’s product lines.  For smaller accounts an account manager may simultaneously manage several different, though non-competing, accounts. The client would state his problem to his account manager.

The Internal Activities

The account manager would then brief the members of the account team who work on the client’s business. The brief is about what the client needs to communicate to his target audience. The market research and monitoring cell would then implement heavy-duty research to judge the mindset of the target audience. Target audience is categorized according to their income, consumption, purchasing power etc. Once the target audience for a particular product is identified the creative team would take off.

The creative team would then take on the task on how best to communicate the necessary information to the common people. The creative department then gets into the thinking mode. They think out of the box. They try to come up with something that is never done or seen before. Smart headlines, attractive visuals are then brainstormed among the creative personnel. Finalized ideas are given birth to on paper, which are then presented to the client.

 

Once an advertisement is created, it must be placed through an appropriate advertising media. The media planner would then be responsible for recommending an appropriate media strategy and ensuring media is bought cost effectively. He will look for the best media match for a client and also negotiate the best deals.

The Client Presentation

Once the team have worked on the client brief and are happy with their response to it, the account manager will present the brief to the client. Examples will be shown of how the final advertising execution, personal selling drive, sales promotion campaign, using rough visuals or storyboards explaining the rationale for the ideas presented. If the client approves of it, then the ad is finalized, fine tuned and sent to the media department who gets a good quote after negotiations with the publications. Sometimes rework is demanded, sometimes corrections are given until the ad is finalized.

Production of advert and outsourcing

In case of producing advertisements, BrandEdge will carry out some simple advertising executions almost entirely in-house. For more complex executions, the agency will buy in specialized functions on behalf of the client. While working with most of the BTL media, e.g. Small businesses in need for Below the Line (BTL) services will also be served through outdoor advertisement (billboards, hoarding, neon signs, and bell signs), innovative activities (jatra, street drama) and advertisement on vehicle bodies or fliers.

BrandEdge plans to outsource part of the advert production in case of the following advertising media.

 

  • TV commercial – The agency would do the filming of a TV commercial in house if the client requires normal shooting. However, if the client requires film shooting (shooting using special cameras that are used in films for a higher quality picture), a production company would be outsourced to work alongside the agency in the filming of the TVC. During this stage, continuous liaisons would be kept between the account executive and the client. The client is likely to attend some of the key production stages such as filming or photography of the commercial.

 

  • Print ads – BrandEdge will have special business relationship with the leading and reputed printing houses of Bangladesh. This will enable the agency to undertake printing of all types at very competitive rates. BrandEdge will thus outsource the printing tasks, e.g. giving print ads in magazines, newspapers, or printing calendars, diaries, labels, folders, magazines, posters, cartons, stationeries, etc.

 

  • Outdoor advertisements – Outdoor advertisements, e.g. billboards, hoarding, neon signs, and bell signs, will be outsourced 100% of the times. It is too costly, even for the big firms in the advertising industry, to build a billboard itself and then rent it to a client. Rather BrandEdge would buy away billboards in attractive positions, and rent them to the clients. The print on the outdoor displays require special machinery, and so would also be outsourced.

The Campaign Appears

The time span between the briefing of the account executive by the client and the campaign appearing can be as little as six or eight weeks for a simple photographic newspaper execution, to twenty weeks plus for an animated TV commercial. Once the campaign has appeared, BrandEdge would properly evaluate it against the objectives initially set.

 

Equipments and machinery

 

As could be well interpreted from the above section explaining the production of an ad, most of the ultimate production will be outsourced. Equipment and machinery that will still be needed for the amount of production carried in house are for some simple TVCs, and would include not much technical cameras.

MARKETING PLAN

 

Target market

 

BrandEdge initially aims to target the small and medium enterprises (SMEs) in Bangladesh, who are the fastest growing part of the private sector and are a significant contributor to the country’s GDP. The Industrial Policy of Bangladesh 1999 describes small industries as those employing less than 50 persons and having a fixed capital investment of BDT 100 million ($1.69 million). Medium industries were defined as those employing between 50 and 99workers and requiring investment between BDT 100 and 300 million ($ 1.69-5.07 million).

 

However, when it comes to advertising through a professional advertising agency, most of these marketers are unsure about the activities of the advertising agencies and little do they realize the importance of using these agencies for building up a sound relationship with target consumers.

 

Realizing this potential, BrandEdge will be set up as an advertising firm, aimed at primarily serving the niche market of small and medium enterprises in the country. The reasons behind serving this sector through the business is twofold:

 

Firstly, though not as profitable as the large MNCs and local companies in the country who are the prime target of the advertising agencies, the small and medium enterprises are large in number and constitute part of many of the high growth industries like agriculture, manufacturing and hotels and restaurants (as shown by their quite significant contribution to GDP in the following table). Therefore, with proper planning and with careful selection of potential clients, who have the money to spend on advertising but is not doing so at present, along with proper approach towards convincing them, these small industries will prove to be a profitable target.

Secondly, since BrandEdge aims to start off as a medium sized advertising firm, it will be difficult for it to snatch away the big clients of the industry who are already engaged with the big shots of the advertising industry. Not only will the firm initially lack the necessary resources and capital to compete with the big players in the market, but also it will be difficult to build up credibility among the big clients in a short time.

 

Therefore, BrandEdge plans to define a unique competitive space as the high-service, low-cost provider of advertising and advertising services for small businesses. It will position itself as the reasonably priced, convenient, high customer service center for small business. However, after two years of operation, the company plans to expand its horizon to serving other large industries as well using the expertise and experience gained in the first two years with the SMEs.

 

Competitors

Though BrandEdge would be serving an almost unexplored sector – the SMEs – the company would not be devoid of competitors. The competitors of the company would include not the topmost tiered ones in the industry like AdComm or Bitopi, rather the lower tiered ones like Beginning Production, Strategica and Universal Media, whose annual revenue is less than BDT 10 million.
Compared to BrandEdge, the weakness of these companies is that they do not focus solely on SMEs, but on any company they get at hand. So BrandEdge might create a strong niche in SMEs provided it succeeds to convince its customers into the benefits of advertising. However, the strength of these companies is that they have been in business for quite a long time, and so have a built-in credibility and reputation, which might act as a threat to BrandEdge if they try to capture the SME market.

 

Pricing Strategy

Amount charged

Time Ad would make the bulk of the dough from media commissions, which is the most common source of revenue for advertising agencies. Most media, including the major ones like press, TV and  radio, allow the agency to keep 15% of the gross amount of money placed in their medium by the client. According to market research with experts, like any other start-up company, out of this 15%, Time Ad would be able to retain around 90 percent as the profit margin. The remaining 10 percent would be used up in serving the client.

 

The tariff structure of advertisement varies depending upon the type of media and the time or space used. A 30-seconds advertisement on Bangladesh Television is charged Tk 9,450 at peak hours (7 PM till the end of day’s transmission) and the amount increases by surcharge (50% for fixed time, 70% for immediately before or after the news, 80% for mid-breaks in films and 100% for mid-break in news). In this case, had BrandEdge been the advertiser, it could have received media commission amounting to15% of Tk. 9,450 every time the ad was aired on BTV.

Rates are almost half during transmission hours before 7 PM. The commercial time allowed to a sponsor in a 60-minute programme is up to 180 seconds and the rate charged per episode or programme is Tk 80,000 early time, Tk 100,000 for peak time.

Rates charged by the Bangladesh Radio are much less: Tk 600 for each transmission of a 15-seconds advertisement from 1st to 51st time. Bangladesh Radio charges Tk 45,000 for sponsorship of a cricket match and Tk 30,000 for that of a football match.Advertisement tariff for newspapers varies between Tk 400 and Tk 800 per column inch in inside pages; it is about three times higher in back pages.
However, since Time Ad plans to serve the SMEs and not the whales in the market, and more importantly, since it initially has to obtain business, the company plans not to charge the maximum agency commission of 15%. Rather, Time Ad would settle at around 10-12% agency commission for the initial customers, and once they like the work of the ad firm, and realize that a long term relationship with Time Ad is only going to benefit them, the agency commission may be increased with mutual understanding.

4.3.2 Mode of payment

The mode of payment would be to offer 30 days’ credit facilities for press advertisements to clients who would avail the company’s services at an almost regular basis. However, new clients are to either pay in advance or give a Bank guarantee from a reputed Bank. Full advance payment has to be made by the client for television, radio and cinema publicity as per rules of the respective media.

Promotion

Since this is a Business-to-business service, with the advertising agency providing service to the client companies, direct communication to prospective clients through personal sales staff is what Time Ad. plans to do to promote itself to the prospective clients.

 

However, the company realizes that it is going to be a tough job to explain to potential marketers, who might have, in fact, no idea about an advertising agency, that how it is going to benefit them through working with Time Ad. Therefore, the company would never go to a client empty handed to give the company profile and ask for work.

 

Rather, proper planning and approach would be the key to success for Time Ad in persuading its customers. Therefore, full market research would be done on any potential customer, whom the company wants to approach, and an advertising campaign would be designed for the company in details.  So a pitch is prepared where the agency would go to the makers of the product and pitch for the account. Ideas and processes would be thrown across as to how the product will be made the best seller. This will impress the potential client and increase the chances of the agency’s getting the contract.

 

As for clients with whom a relationship has been already formed, it would be maintained with constant social interactions. The account management department should constantly keep an eye on whether the client is having any sort of problem which the agency can possibly solve, or whether an opportunity exists whereby the client has a better chance to capture the market through advertising, although he himself has missed to see the opportunity.

Distribution

Distribution of the service to the client is done once the campaign has been prepared and launched in the appropriate media. As already explained in a previous section, Time Ad plans to outsource most of the services and distribute them in the appropriate media, as decided by the company’s media planner. Constant service in terms of keeping track of all the needs of the client company when it comes to advertising through Time Ad, is also distributed to the client through the assigned account manager.

Sales forecasts

Assumptions for the first year (2008):

1. Number of clients obtained – 35

2. Agency commission charged to each client – 10%

3. Number of clients doing TVC – 5

4. TVCs are all 30 –second ad aired at peak hour (Rate – Tk. 9,450)

5. Number of clients giving radio ads – 30

6. Radio ads are of 15 seconds (Rate – Tk. 600)

7. Number of clients giving print ads – 28

 

8. Print ads are 1 column at inside pages (Rate – Tk. 650)

9. Telecast frequency of each kind of ad – 500 times per year

Assumptions for the next years:

10. Rate of increase of sales per year – 20%

                    Schedule of projected Sales      
                 

Source

Rate

Commission

Each client

Total for 2008

2009

2010

2011

2012

 

 each time

 

 

 

 

 

 

 

 

 

TVC

9450

10%

945

2362500

2835000

3402000

4082400

4898880

Radio

600

10%

60

900000

1080000

1296000

1555200

1866240

Press

650

10%

65

910000

1092000

1310400

1572480

1886976

Total

 

 

 

4172500

5007000

6008400

7210080

8652096

 

 

 

 

 

 

ORGANIZATIONAL PLAN

 

Company ownership

Time Ad will be a partnership business formed by 2 (two) graduates, having their minors in marketing, and therefore, having a fair idea of the advertising industry. The names of the partners are:

  • Abu hena Mostafa Zaman
  • Md. Delwar Hossen

Each of the partners will share the ownership of the business equally, and is going to invest 500,000/- each for the establishment of the business, with the total size of the business being BDT 10,00,000 (10 lacs). The partnership will be formed after obtaining a trade license from Dhaka City Corporation.

Terms of partnership:

  • Owners will take every major decision for the company.
  • For any decision to be approved, at least three of the two owners must agree. Otherwise, the decision will not be accepted.
  • For the better management of the company as well as for the communication and decision making process to be flexible enough, the owners will possess the power to nominate a single owner to supervise the overall activity of the company.
  • Owners will share the profit or loss of the business equally.
  • None of the partners will hold any executive position.
  • The management of the company will be appointed by the partners, who will closely supervise the management.
  • Overall, Time Ad will be a simple partnership business with equal authority of the partners in every aspect of the company

Human Resource Planning

The hierarchy, as shown above represents all the available positions at the company. The company is a medium sized one, with the total number of employees being 30. The number of job vacancies for each position, along with the department in which each position falls is provided below.

 

 

Position

No. of person

 

Top managerial level Chairman

1

 

Chief Executive Officer

1

 

Chief Creative Officer

1

 

Account Management Account Director

1

 

Group Account Manager

1

 

Account Manager

1

 

Account supervisor

1

 

Account Executive

1

 

Creative Department

Creative Director

1

 

Copy Director

1

 

Art Director

1

 

Desktop Publisher

1

 

Animator

1

 

Copywriter – Bangla

1

 

Copywriter – English

1

 

Research and monitoring cell

Research & Monitoring head

1

 

Field worker

2

 

Data analyst

2

 

 

 

Media planning Media Director

1

 

Media planners

2

 

Finance

Manager-Finance

1

Officer-Finance

1

 

Human Resource Manager-HR

1

 

Officer-HR

1

 

Production Manager- Production

1

Officer- Production

1

Liaison maintainer with subcontractors

1

 

Roles and Responsibilities of the personnel

The services provided to the clients would be provided by various departments as has been already outlined in the description of venture. A detailed look into the roles and responsibilities of each department would reveal the following functions of the company personnel.

Account Management

The account management department will be the linchpin between Time Ad and its numerous clients. The role is to maintain liaison with client staff and to brief, supervise and co-ordinate the appropriate agency staff at appropriate times.

Apart from all major decisions related to a specific client, the responsibilities of the account management also include locating and negotiating to acquire clients. This is part of the agency’s marketing, and hence no separate marketing department is needed to acquire clients for the agency.  Once the client has agreed to work with the agency, the account manager works closely with the client to develop an advertising strategy.  For very large clients, such as large consumer products companies, Time Ad may assign an account manager to work full-time with only one client and, possibly, with only one of the client’s product lines.  For smaller accounts an account manager may simultaneously manage several different, though non-competing, accounts.

Creative Team

 

The principle role of account managers is to manage the overall advertising campaign for a client, which often includes delegating selective tasks to specialists.  For large accounts one-task account managers routinely delegate involves generating ideas, designing concepts and creating the final advertisement, which generally becomes the responsibility of the agency’s creative team.  The creatives focus their talents into the art of taking strategic insights and turning them into advertising ideas that touch the hearts and minds of consumers all over the world.

 

Researchers

Market researchers assess a client’s market situation, including understanding customers and competitors, and also are used to test creative ideas.  BrandEdge would carry out research and market surveys on reasonable scales to analyze market conditions for consumer products or test concepts for ads. This would help it in formulating correct strategies and implementing effective advertising campaigns. The Agency also does pre- and post-testing of advertising material, logos etc. and conduct focus group discussion for its clients. Researchers will also used following the completion of an advertising campaign to measure whether the campaign reached its objectives.

 

Media Planners

Once an advertisement is created, it must be placed through an appropriate advertising media.  Each advertising media, of which there are thousands, has its own unique methods for accepting advertisements, such as different advertising cost structures (i.e., what it costs marketers to place an ad), different requirements for accepting ad designs (e.g., size of ad), different ways placements can be purchased (e.g., direct contact with media or through third-party seller), and different time schedules (i.e., when ad will be run).  Understanding the nuances of different media is the role of a media planner, who looks for the best media match for a client and also negotiates the best deals.

 

Background of the personnel

 

The total number of employees other than the Chairman, CEO and CCO is twenty-seven. The directors should have job experience in the related field for more than five years. Managers should have experience of more than three years. Officers, supervisors and executives, should have more than two years experience. In case of the other positions, experience would be preferred but young, enthusiastic and willing to work hard personnel will also be recruited even if they are at the preliminary stage of their career.

 

Executives in the account management section should have academic background in business administration and related subjects. Employees in the technical sector should be computer science graduates and graphic designer. Employees may have a varied educational background but the main point of similarity among them would be the sense of creativity and enthusiasm.

 

ASSESSMENT OF RISK

 

The foreseeable barriers of the company are:

 

  • The SMEs are not much aware of the advertising benefits

 

Government taxation makes the operation of ad agencies less lucrative

 

  • Competitors may have an upper hand due to their years of operation in the market

 

Lots and lots of ad agencies opening up pushing it to the saturation point

 

Clients opening in house ad units

 

The unforeseeable barriers of the company are:

 

  • Government legislations

 

  • Political instability

 

  • Risk of entry by large players like AdComm and Bitopi into this sector in an attempt to diversify their product.

FINANCIAL PLAN

Pro forma Income Statement

 

Assumptions Required to Make the Financial Plans:

 

  • Direct cost would be 10% of sales.
  • There are no indirect costs
  • The debt and equity ratio will be 50:50, which means that the company will take 50% of the total investment as loans from different financial institutions.
  • The equity will be provided by the partners.
  • The loan will be repaid in a total time of 10 years on a monthly basis.
  • The machinery will be depreciated using a Straight Line method and the machinery will be depreciated fully in 15 years with a salvage of BDT 500,000/=
  • The bank loan repayment calculations will be made using 16% as the interest rate, and the payments will be EMI’s (Equal Monthly Installments).
  • The inventory at hand will be calculated in the statements
  • Wages and other expenses (e.g. utility) will be incurred on a monthly basis
  • Maintenance expenses may vary from a month to another; therefore we will assume an average maintenance expense for every month.
  • The prices and other calculations will be changed every two years to match with the inflation rate and to respond to the changes in the market
  • Demand and supply calculations will be based on assumptions as there is not much historical evidence on the changes in demand and supply
  • The wages and other benefits will be increased every two years
  • The tax calculations will be made once a year, at the end of the fiscal year.
  • The international exchanges, including the machinery procurement will be mainly done using US Dollar, and the BDT/US $ rate that we will use is Tk. 71/ US$.
  • Every year, the company will retain 30% of it’s profit as retained earnings.
  • Insurance expenses will be calculated at the rate of 7% on a yearly basis and the insurance will cover the plant, building and the inventory.
  • The company will not make any credit sales and the vendors will be paid in fifteen days after the delivery has been made.
  • The increase in sales will be 20% per year.
  • The increase in expenses and price will be approximately 7% and will be adjusted every two years.
  • The forecasts will be made for 5 years.
  • The income tax will be calculated at 40% on the Earnings Before tax.

Budgeted Income Statement

2008

2009

2010

2011

2012

Sales

4172500

5007000

6008400

7210080

8652096

Direct cost

417250

500700

600840

721008

8652096

Gross Profit 3755250 29,228,400 35,962,944 41,357,385 50,869,722
General and Administrative Expenses
Office Salaries 1,378,000 1,378,000 1,467,040 1,467,040 1,577,672
Rent 360,000 360,000 385,200 385,200 412,164
Utilities 3,000,000 3,450,000 4,245,552 4,882,380 6,044,544
Transportation 780,000 900,000 1,091,400 1,284,000 1,580,100
Depreciation 1,133,333 1,133,333 1,133,333 1,133,333 1,133,333
Other Overhead Costs 50,000 50,000 53,500 53,500 57,245
Insurance 1,260,000 1,260,000 1,260,000 1,260,000 1,260,000
Total Expense 8,659,221 9,243,304 10,415,156 11,264,512 12,944,563
Earnings Before Interest &Taxes 16,756,779 19,985,096 25,547,788 30,092,873 37,925,158
Interest Expense 3,015,240 3,015,240 3,015,240 3,015,240 3,015,240
Earnings Before Tax 13,741,539 16,969,856 22,532,548 27,077,633 34,909,918
Tax @ 40% 5,496,616 6,787,942 9,013,019 10,831,053 13,963,967
Net Income 8,244,923 10,181,913 13,519,529 16,246,580 20,945,951
Retained Earnings 2,473,477 3,054,574 4,055,859 4,873,974 6,283,785
Equity 5,771,446 7,127,339 9,463,670 11,372,606 14,662,166

Pro forma Balance Sheet

 

Notes:

 

  1. The cash entry is the calculated cash at hand at the end of every year
  2. The insurance premium is assumed to be paid at the beginning of every year
  3. The building and machinery also includes the assets in the head office (eg computers, fax machines etc)
  4. The depreciation has been calculated on a straight line method.
  5. The loan amount has been calculated as interest + principal and the payments are made at BDT 3,015,240/= every year on a monthly basis and this payment covers the principal and interest.
  1. Retained earnings have been calculated to be 30% of the net income.

 

Cash flow projections

 

           
  2008 2009 2010 2011 2012
Cash Flows From Operating Activities
Cash Received From Customers 31,296,000 35,990,400 44,283,648 50,926,195 62,661,997
Cash Paid For Merchandise (5,880,000) (6,762,000) (8,320,704) (9,568,810) (11,792,275)
Cash Paid For Operating Expense (8,659,221) (9,243,304) (10,415,156) (11,264,512) (12,944,563)
Interest Expense (3,015,240) (3,015,240) (3,015,240) (3,015,240) (3,015,240)
Tax 5,496,616 (6,787,942) (9,013,019) (10,831,053) (13,963,967)
Net Cash Provided By Operating Activities 19,238,155 10,181,913 13,519,529 16,246,580 20,945,951
Cash Flows From Investing Activities
Purchase Of Asset (23,000,000) 0 0 0 0
Cash Flow From Financing Activities
Proceeds Of Long Term Debts 15,000,000
Add Opening Balance 2,000,000 11,238,155 21,420,068 34,939,597 51,186,177
Net Increase (Decrease In Cash) 11,238,155 21,420,068 34,939,597 51,186,177 72,132,128

 

CONCLUSION

 

This company is a highly profitable venture provided things go well as planned. SMEs remain a largely unexplored sector in terms of advertising, and hence targeting these SMEs rather than the big whales in the industry who are already flooded with the brochures and leaflets of several ad agencies, is supposedly a venture worth pursuing. This will not only benefit the entrepreneurs as being part of a successful venture, but also take SMEs to new heights both by increasing their popularity among the target market, and also by inspiring them to further chase their goal of success. And only then will BrandEdge – an advertising agency opting to serve the small and medium industries in Bangladesh, consider itself to be aptly called a success story.

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