August 16, 2009

The vast majority of marketers (82 percent) report that their companies regularly conduct formal agency performance evaluations according to a survey conducted by the ANA (Association of National Advertisers), in partnership with marketing services firm ‘mktg.' The establishment of a formal evaluation program is near-universal among firms with annual revenues of $5 billion or more (92 percent versus only 74 percent of smaller firms). As a corollary, formal evaluation programs are more common among firms with marketing/advertising budgets of $50 million or more than among those with smaller budgets (96 percent versus 71 percent).

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. 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 include:

* Innovation (85 percent)
* Strategy (82 percent)
* Implementation/follow through (82 percent)
* Fiscal stewardship (81 percent)
* Ideas (77 percent)
* Teamwork (77 percent)
* Meeting project objectives (77 percent).

Two-way, or 360-degree, evaluations in which the agency also evaluates the client are used by a majority of firms (59 percent). Additionally, 13 percent of marketers identified a new practice in which the evaluation processes allows for their 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."

"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."

Best practices that were identified from the survey include:

* All marketers (even those with smaller budgets) should conduct formal agency performance evaluations on a regular basis.
* Assign a trusted, neutral point person (could be internal - for example procurement - or an outside consultant) to keep focused on objectives and metrics vs. personalities.
* Consider having a more informal "mid-term review" to avoid surprises at the end of the year.
* Use a consistent format for all agencies, although specific questions can be varied for different agency types.
* Use technology to facilitate adoption, ease of implementation, and analytics.
* Consider 360-degree evaluations to get the perspective of the agency.
* Present results in person.
* Have clear corrective action plans with due dates and owners.

Identifying the specific types of agencies for which formal evaluations are conducted, 76 percent 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 percent)
* Digital agencies (47 percent)
* Direct marketing agencies, public relations agencies and multicultural agencies (25 percent)

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 survey, fielded in July 2009, was completed by 117 marketers, 96 of whom reported that their firms have a formal agency performance evaluation program.

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