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But too many soft KPIs and “the wrong KPIs” are a rising concern
Agencies are increasingly comfortable with being honest with their advertiser clients when it comes to performance evaluation, according to new research from the World Federation of Advertisers and strategic partner Decideware.
Client-Agency Performance Evaluations 2022 finds that 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.
Agencies also reported a slight uptick in qualitative performance being evaluated (56% compared to 54% in 2020), again at least 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 $69 billion in global ad spend.
Nevertheless, the current mix of KPIs is causing dissatisfaction among both clients and agencies. 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 no. 1 concern. Agencies indicate the wrong things are often being measured.
The result is that 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.
Broken down by agency type, clients seem to be prioritizing media, full service and creative agencies for 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. 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.
As one advertiser respondent explained: “Our ecosystem is premised on cross-agency collaboration, with each agency bringing their unique specialist skills. It starts with clearly defined swim lanes and the quality of the collaboration is monitored.”
“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. This report highlights the No. 1 challenge faced by agencies is ‘conflicting needs/expectations across siloed client organisation’. Clients must get their houses in order and performance reviews provide agencies with an opportunity to help them on that journey,” said Laura Forcetti, Director of Global Marketing Sourcing Services at the WFA.
Other key findings include:
Key challenges for advertisers include the lack of hard KPIs: A lack of KPIs is the number-one concern clients had about performance reviews. The majority of clients indicate that they are incorporating ‘nuance’ into their evaluation process. While some agency types lend themselves to objective, measurable KPIs, others might not. When multiple agencies collaborate on a campaign, attributing success can be difficult.
A growing number of agencies share their performance bonus with the agency working team: The number of agencies indicating that these bonuses are shared with agency staff increased from 27% in 2020 to 46% in 2022. Linking performance to compensation and ultimately having that trickle down to the people responsible for the work is one the most effective ways to drive behaviour and shape partnerships.
Lack of alignment within the client organization impacts the client-agency relationship: Aside from the difference in focus between groups such as procurement, agency management and marketing, in large organizations multiple client teams might work with multiple agency teams. What works on Brand A might be different from Brand B due to market situation, personalities, etc. All of this can add up to different or conflicting expectations or feedback.
Performance-based remuneration is 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 organization or by supplying testimonials or quotes were the next most popular options.
“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.
The findings of the research will be discussed as part of WFA webinar on January 12th 2023, which is open to members and non-members. To register or find out more details please visit this link.