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A portfolio is vital in any business and this is certainly the case when viewing an advertising agency. If the agency has worked with many clients previously and can demonstrate the success their campaigns brought to the company then it is much more appealing.
Other criteria to look at:
Rates they charge
Talent and Functional Expertise
Size of the agency
How personal is the service
Industry/Category Expertise
Creativity
Innovative and/or Technologically Advanced
NICE ANSWER BY SMART MAN PATEL............AGREED