Agencies are becoming more honest with their clients when it comes to performance evaluation. However, the KPIs they are measured on is still causing dissatisfaction amongst both clients and agencies.
According to new research from the World Federation of Advertisers and strategic partner Decideware, while the top KPI for clients – client satisfaction – aligns with agency desires, advertisers also added that the lack of “measurable or objective” KPIs is their number one concern. Agencies indicate the wrong things are often being measured.
Interestingly, performance-based remuneration is also not always seen as appropriate by agencies. Agencies with the clearest KPIs (media and digital) are the most likely to have some level of incentive compensation but agencies also welcomed other forms of incentivisation, ranging from long-term engagements and not having to pitch for work led the way.
Assisting with new business opportunities either within the client organisation or by supplying testimonials or quotes were the next most popular options.
As such, agencies do not always find it appropriate to be paid based on their performance. Mirroring the previous study in 2020, less than half of agencies think their compensation should be linked to the results of their evaluation. Nevertheless, 68% of agencies are now comfortable telling their clients the majority of the time what needs changing at their end, compared to just 45% two years ago. The Client-Agency Performance Evaluations 2022 report by Decideware also found that agencies reported a slight uptick in qualitative performance being evaluated (56% compared to 54% in 2020) a majority of the time.
While this was not a significant increase, holding steady might be viewed as a win and the vast majority of agencies now receive some level of performance feedback. The findings are based on more than 90 respondents from 82 multinational organisations (49 clients and 33 agencies), with advertiser respondents responsible for more than US$69 billion in global ad spend.
Who are clients prioritising?
Broken down by agency type, clients seem to be prioritising media, full service and creative agencies for the most regular evaluation. In at least three out of four cases, media agencies receive compensation based on the results of evaluations as KPIs tend to be more objective and measurable.
Digital (35%) and production (44%) partners indicated they are most likely not to get any opportunity to receive structured feedback.
Overall, almost one in three agencies surveyed said they still didn’t have any opportunity to evaluate their clients, with a further quarter having to do it in an unstructured way. Nevertheless, rising agency satisfaction with improved client processes is illustrated by the drop to 13% (from 38% in 2020) in agencies agreeing that “no matter the feedback, client is king and won’t change”. Such additional improvements in the investment to debrief and create action plans to address feedback makes it more meaningful and will encourage respondents on both the agency and client side to provide meaningful feedback.
Another more positive result is that more than half of the client respondents currently evaluate the collaboration between agencies. Around 53% of advertiser respondents say they now test collaboration, reflecting the need for campaign integration and the fact that the execution of modern campaign takes numerous and varied skillsets. Such efforts signal to the agencies that “playing well together” is a serious expectation.
“Advertisers need to work harder to become the client of choice by actively nurturing agency relationships. Doing this means starting ‘at home’ and looking at their own performance before blaming their partners” said Laura Forcetti, director of global marketing sourcing services at the WFA.
“Clients must get their houses in order and performance reviews provide agencies with an opportunity to help them on that journey,” she added.
“It is gratifying to see the continued evolution of evaluations as part of a comprehensive agency management strategy. More opportunities for agencies and clients to have constructive conversations will result in better work, stronger partnerships, and less agency churn. Cracking the code of defining the right KPIs for the specific relationship seems to be that next challenge,” said Ed McFadden, chief growth officer, Decideware.
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