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10 Ways to Save Advertising Money in Korea

admin 2020-04-21 15:30:28 조회수 3,070

10 Ways to Save Advertising Money in Korea 

2017.01.02


Korea ranks around top 10 to 12 in the world for advertising spending, according to Zenith Optimedia. Just like other developed countries, the advertising industry in Korea is not much different, especially in terms of the work flow of advertising agencies. Interestingly, there are two unique types of top-tier advertising agencies in this market: local in-house agency and global agencies. All local advertising agencies are Chaebol’s family companies, such as Cheil (Samsung), Innocean (Hyundai), HSAD (LG), Daehong (Lotte), and SK Planet (SK). These companies have major family companies, so called captive clients. The other top-tier advertising agencies are global agencies, such as TBWA, GroupM, and Leoburnett. Unlike other Asian countries except Japan, local advertising agencies are positioned higher in ranking than global agencies in Korea. There are some important things to keep in mind when you work with advertising agencies in Korea, especially if you want to save on advertising budget in a period of slow economic growth.



 


1. Agency Fee

Traditionally, the international agency fee is around 15% of total media expenditures. In Korea, local agencies have similar rates, normally around 11 to 20% depending on the types of media. Terrestrial TV advertising is a little bit strict, which is around 11 to 12% rate due to The Korea Broadcasting Advertising Corporation (KOBACO) and Media Create by media law. Only KOBACO can sale KBS and MBC, two of the major broadcasters in Korea, and Media Create for SBS. Other media fees vary from 15% to 25%, depending on the media types and sales situation. If advertisers want to save on the agency fee, negotiation is also possible with their advertising agencies. Traditionally, commission has been a common reward system for agencies, but many advertisers have changed it to a fee-based compensation. Therefore, it depends on the conditions of a contract between the advertisers and agencies.


2. Media Bonus (Free Insertion)

Korea has been experiencing slow economic growth these days, and we can see media’s abundant advertising inventories. Surprisingly, some cable TVs provide around 1,000% free insertions (10 times more than contract spending) as bonus features. This means that advertisers can enjoy 1,000% or more exposures with their original budget. However, if advertisers do not check this carefully, there might be less bonus. If advertisers want to have their ads being exposed more frequently, then it would not be so hard to find free insertions. 

3. Media Performance Review

Until 2014, Korea was the only one among OECD countries that has no media auditing companies. Media Audit Korea is the only local media auditing company in Korea. So to speak, advertising agencies and advertisers are not accustomed to conduct media auditing to check their media performance. However, media auditing is essential to objectively analyze and check advertisers’ media performance, which cannot be fully done by advertising agencies’ post evaluation.   

4. Bribe 
The Korean government recently implemented a new law, called Kim Young-ran Act which bans bribery among certain groups including media companies. One of Korea’s deep-rooted issues is courtesy treatment between clients and agencies. It was well known that for their sales purpose, unpopular media companies had been sponsoring gifts, meals, golf, overseas trips etc. Advertisers must manage these kinds of illegal practices from media to avoid unnecessary media execution. As we know, there is no such thing as a free lunch in the business world.

5. Competitors & Market Best Practice Review

Globally, one big issue in the media data industry is measuring the accurate data for advertising expenditures. However, even in developed countries, it seems almost impossible to measure the exact data for advertising expenditures. Because there are so many types of deals between media verses advertising agencies verses advertisers, an official rate card is very different from the actual price, which is quite common in the advertising industry. Therefore, the comparison among competitors is meaningless based on these incorrect and inflated figures of advertising spending. That is the reason why advertisers need to have services from a third-party who has a reliable data pool and accurate figures of advertising expenditures. 

6. Key Performance Indicator (KPI)

There are many advertisers who do not have exact media KPIs with their agencies. Without KPIs, it is hard to evaluate performance of their own and the agency’s as well. Some of the reasons to do this are that advertisers do not have internal analysis function, and advertising agency’s analysis is self-evaluation. It is essential to have practical media KPIs which can save on an advertising budget. Strategically-planned KPI objectives effectively allow to secure stable advertising performance.


7. Compliance Review 
In media work, it is essential to have a compliance review in advertising related expenditures, which is hard to check by a finance audit. Because finance auditors have limited knowledge on analyzing media expenditures, it must be reviewed by media auditors. A compliance review will not only reduce past and future advertising expenses but it will also check potential risks as well.   

8. Agency Report 
Until now, advertising agencies in Korea have been working without media auditing services since there is no such service existing in the market. Of course, there are global media auditing companies providing services from overseas, but they experience difficulties in conducting media auditing without media data pool and staffs in Korea. Some of them are asking for media data from their clients or incumbent advertising agencies. In such cases, it is hard to check and evaluate the details of media performance objectively. Checking the agency report is one of the key things in order to reduce advertisement costs.

9. Teamwork 
It is highly required for advertisers and agencies to work harmoniously, especially in terms of the balance of a relationship between the two. Usually, the relationship between these two is not balanced, which is common worldwide, but it seems to be a more serious issue in Korea. It is normally observed that advertisers ask for a certain media plan and a decision, and the results would be agency’s bad performance. So, it is one key thing to manage this relationship effectively to avoid bad performance.

10. Return on Advertising Spending (ROAS) Analysis

The ultimate goal of advertising is to increase sales and revenue. Therefore, it is essential to analyze the impact of advertising spending based on spending contribution on a year-on-year basis. Accurate analysis on ROAS can help to optimize advertising budget and save on expenditures.