Explain the difference between markups, commissions and fees as they are used in the advertising business world, and give several examples of each. b) Which do you think should be the most used way for the agencies to make their money?
Mark ups– Mark ups is the ratio between the cost of product and its selling price. It is the percentage of the cost. It is the fixed percentage on total cost or selling price. It is the difference between when company purchases goods at one price and then sell at another price.
Example- Cost * (1 + Mark up) = Sale price
Commission– This advertisement commission is provided by media and newspaper companies to the ad agency as ad agency handles and takes care of client’s advertisement and publish it in the electronic and print media. It is mostly used by the ad agency as they get commission from multiple firms.
Fee– It is the agency fee charged by advertisement agency. Fee structure depends on the size and frequency of advertisement. Agency also charges service fee that is based on the time spent on managing an account. They also charge handling fees.