Agencies say wrong KPIs and cost-focused evaluations are limiting opportunities for improvement
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Brands are missing a major chance to enhance their relationships with agency partners around the world and deliver smarter communications, according to new research from the World Federation of Advertisers (WFA).
Poor processes, few face-to-face meetings, a lack of focus on how clients can improve and the dominance of ‘cost-only’ KPIs mean that many agency performance evaluations are less effective than they should be.
The study completed in May this year in partnership with agency management software specialists Decideware asked 60 senior global agency leaders across 36 different agencies about the evaluation process and whether it added value. Respondents came from a wide variety of agency types and included both network and independent agencies representing clients with a cumulative global ad spend of roughly US$69bn.
The study follows previous work in 2019, which found that advertisers need a smarter approach to agency management if they want more productive and longer-lasting relationships. Both surveys aimed to highlight the power of client-agency performance evaluations as a tool to improve relationships and performance. The best evaluations provide clear and honest feedback so agencies can deliver better outcomes and clients can improve too.
The agency responses from 2020 highlight a missed opportunity to deliver on this shared goal in three key areas:
Firstly, agencies want more face to face and open discussions with clients about what can be done better once evaluations have occurred. While 31% of clients say they conduct face-to-face discussions around the results of evaluations, the reality is that 7% of agencies get a phone call, 5% hear by email, 14% discover the results via an evaluation tool and 2% say they get no feedback at all.
Many agencies are also not comfortable in providing honest feedback with 43% citing this as the biggest barrier to effective evaluation. Thirty-eight percent add that they do not believe clients will change as a result of feedback and 34% say there is little leadership engagement with the process.
Agencies also get fewer opportunities to provide feedback. So while seven out of 10 advertisers provide feedback on their agencies at a least once a year, just four out of 10 agencies get the same chance. Twenty-nine percent of respondents said the majority of their clients didn’t ask them for feedback at all.
Secondly, agencies want clients to think more carefully about the KPIs they use, rather than rely on cost only KPIs (mentioned by more than 30 respondents), KPIs which the agency has no control over such as NPS or share price (mentioned by more than 15 respondents) or subjective KPIs such as enthusiasm (mentioned by more than five respondents).
Many argued that new KPIs should be explored citing potential measures such as proactivity and speed, efficiency, contribution to business strategy and capacity to add value and enrich the brief.
In the main, agencies prefer such ‘soft’ metrics, partly because they are fully in their control to deliver but also because economic uncertainty – as emphasised by the impact of the current pandemic – can make it impossible for them to impact on delivery.
Many also perform their own self-evaluations of performance but these are not always shared with clients. While 29% do this almost always and 16% do it the majority of the time, others are more reticent with 24% sharing half the time, 14% one in four times, 16% say they almost never share these results. This creates another missed opportunity to rectify perception gaps when it comes to performance.
Finally, agencies want clients to recognise positive work rather than take it for granted. This they argue should be incentivised. Accepting that at a time where an extra financial bonus may not be possible, this could include ideas such as investments in training and development, recognition across the company and investment in new opportunities.
Many see linking the evaluation to Performance By Results payments as inappropriate and the results of the research indicate that it should be kept as small percentage of total remuneration. Seventy-one percent of respondents think it should be below 15% of total remuneration and a quarter of respondents suggested it should be less than 5%.
“Agency evaluations are a key tool for advertisers to ensure they get the very best from their agency. The effort they make in this area will be more than repaid in terms of better work, greater efficiency and effectiveness and business results. Action plans that result from these evaluations must be followed through, however, to ensure those positive impacts are delivered,” said Laura Forcetti, Global Lead of Marketing Sourcing at WFA.
“The client / agency relationship, like any valuable relationship, has two sides and this concept should be reflected in the performance review process. The client and the agency should have an equal opportunity in providing objective feedback about the relationship, they should both have an opportunity to review and analyse the results and they should both play an equal part in developing, implementing and monitoring action plans for ongoing improvement. Both parties have a vested interest in the success of the relationship and therefore should also have a vested interest in the review process, that helps to strengthen the relationship for long term mutual success, “ said Steven Wales, Chief Revenue Officer at Decideware.
The full report is available for WFA members here