Formal Agency Evals Conducted by 82% of Marketers

The vast majority of client-side marketers (82%) report that their companies regularly conduct formal agency performance evaluations, according to a survey conducted by the Association of National Advertisers (ANA), in partnership with marketing services firm ‘mktg.’ 

The establishment of a formal evaluation process/program is near-universal among larger firms with annual revenues of $5 billion or more (92% vs. only 74% of smaller firms), the study found.  Similarly, formal evaluation programs are more common among firms with marketing/advertising budgets of $50 million or more vs. firms with smaller budgets (96% vs. 71%).

Identifying Laggards and Rewarding Stars

The top benefits derived from a formal agency evaluation process are identifying and improving under-performing agency relationships (92%) and identifying and recognizing high-performing agency relationships (85%), according to the results.

In terms of the ways agencies are scored, the research found that qualitative performance criteria carry much more weight in agency performance evaluations than do quantitative communications criteria (e.g., media cost savings, media buying goals) or business metrics (e.g., sales, share). Some of the specific qualitative performance criteria commonly used in agency evaluations and the percentage of marketers they’re used by:

• Innovation (85%)
• Strategy (82%)
• Implementation/follow through (82%)
• Fiscal stewardship (81%)
• Ideas (77%)
• Teamwork (77%)
• Meeting project objectives (77%)

Evaluation Goes Both Ways and Sideways

Two-way, or 360-degree, evaluations in which the agency also evaluates the client are used by a majority of firms (59%). Additionally, 13% of marketers identified a new practice in which the evaluation processes allows for several of their company’s respective agencies to evaluate one another.

Agency performance evaluation are rated as “extremely” or “very effective” in maintaining the client-agency relationship by 58% of marketers and “somewhat effective” by 38%. Only 3% rated their programs as “not too effective” or “not at all effective.”

Types of Agencies Evaluated

Identifying the specific types of agencies for which formal evaluations are conducted, 76% of marketers report that their firms have a formal evaluative process in place for their traditional creative ad agencies. Other agencies most likely to be subject to an evaluation are:

• Traditional media agencies (68%)
• Digital agencies (47%)
• Direct marketing agencies, public relations agencies and multicultural agencies (25%).

In general, for virtually all types of agencies, formal evaluations are conducted annually by about two-thirds of the firms while about one-third evaluate their agencies more frequently than annually, the ANA said.

Agency Best Practices

After analyzing the results of the survey, the ANA compiled its list of top agency-evaluation best practices:

• All marketers (even those with smaller budgets) should conduct formal agency performance evaluations on a regular basis.
• Companies should assign a trusted, neutral point person (could be internal - for example procurement - or an outside consultant) to stay focused on objectives and metrics vs. personalities.
• Companies should consider having a more informal “mid-term review” to avoid surprises at the end of the year.
• Using consistent format for all agencies is helpful, although specific questions can be varied for different agency types.
• Using technology to facilitate adoption, ease of implementation, and analytics is also beneficial.
• Marketers should consider 360-degree evaluations to get the perspective of the agency.
• Company representatives should strive to present results in person.
• Marketers should have clear corrective action plans with due dates and owners.

“Having a formal agency evaluation process is always imperative but even more so at a time of heightened focus on marketing accountability,” said Bob Liodice, president and CEO of the ANA. “The companies that plan regular assessments are likely to identify successful and under-performing aspects of their agency relationships leading to constructive dialogue and exchanges. This will productively support collaborative integrated marketing and brand building strategies in the long run.”

About the survey: The survey, fielded in July 2009, was completed by 117 marketers, 96 of whom reported that their firms have a formal agency performance evaluation program. Full survey results will be presented at the ANA Agency/Client Forum taking place September 24 at the Grand Hyatt in New York.