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How NOT measuring your agencies’ performance is costing you money

The subject of regular agency performance measurement can polarise clients into two camps.  The advocates speak of the benefits of having their finger on the agency’s pulse, the benefits of spotting problems early, being able to track performance over time – and for two-way evaluation programmes – of giving their agencies a voice to feedback on the client team itself.

The detractors complain of the complexity of the available systems and see performance evaluation tools as yet another cost for the client to bear on top of the fees they are already paying the agencies.

However, at The Observatory International, where over the years we have worked with both advocates and detractors, and across several performance measurement tools, we have identified five clear hard costs to an organisation of not measuring your agencies’ performance.   They include:

The downward spiral to expensive re-pitching

Lack of regular performance measurement and the chance it offers to “course correct” can lead to expensive re-pitches if the client organisation has to replace the agency.  The average self-managed pitch consumes around 44* client days in needs assessment, market trawling, RFI assessment, agency meetings attendance plus commercial and legal considerations.  Indeed, the first commitment of the recently launched Pitch Positive Pledge by IPA and ISBA is ‘Be positive a pitch is required.’  Spotting problems early and fixing them in real time, before they become major problems will not only keep the quality of the agencies’ output high but save the cost of a pitch process, and the risk it can put your business or brand at during that period of distraction.

The cost of managing a ‘bloated’ roster

When your rostered partners aren’t performing well (and it’s not being measured and resolved) there can be a temptation to go off-roster and work with other agencies to deliver short term solutions.  This has the potential to create inconsistencies in terms of brand and campaign quality, as well as add to the organisational cost of agency management (multiple touchpoints, contracts etc.)

Inefficient Campaign Performance

‘Test and Learn’ is an attitude that can be applied to agencies as well as to the campaigns they produce.  The speed of change in the communications agency landscape means you need real time monitoring of your resource – is that agency still the best fit to deliver the task at hand?  Your PR agency may have got that social campaign out of the door, but was it done as effectively and painlessly as it could have been?  Has your Digital Agency delivered social better and faster?  Should you make the switch?  Your choice of agency needs to be fast, flexible and adaptable, as does their output. Without more than an accidental water cooler conversation about which of your many agencies are doing well, you could continue to deliver campaigns inefficiently, and the campaigns will likely deliver inefficiently too.

Only measuring your retained agencies can mean a large, leaky bucket is left unchecked

The move by many businesses to project-based fees for their agencies means many business-critical agency relationships are no longer considered “strategic” and worthy of performance measurement.  It can be considered an unnecessary expense to monitor project-based agencies.  Yet this ‘long tail’ of unchecked project specialists may be delivering a high volume of critical work.  Many small increments of inefficiency will be adding up to an expensive pot of money.

Potentially paying too much in bonus payments

How many times have you wrangled with the agency at year-end over whether, or how much of, their annual bonus they are due.  If the Payment By Results (PBR) bonus is correctly structured around the three typical measures of Business, Brand and Agency Performance measures will be easy to reconcile at year end, but without robust Agency Performance metrics in place you could end up paying too much in bonuses, perhaps as much as 30-40% of the bonus.

In Summary

The very real costs of not evaluating your agencies’ performance and course correcting any issues by far outweigh the barriers to putting a system in place.  And The Observatory International has created a performance evaluation tool that addresses the barriers of complexity and cost.  Agency Performance Tracker (APT) is a light touch tool that surveys your team at a frequency of your choice to monitor your agency relationships.  It measures client and agency performance across four core relationship areas: Team, Strategy, Deliverables/ Evaluation and Feedback, and Operational, plus optional bespoke questions.  It provides a visual snapshot of the results compared against industry performance benchmarks.  Suitable for all types of client:agency partnerships with no set-up cost and from as little as €740 for an annual licence fee to review one Agency on a quarterly basis.  See agencyperformancetracker.com for more information.

 

Lucinda Peniston-Baines, Managing Partner, The Observatory International, London

* Based on projected timeburn of a blended marketer and procurement team across the full stage-gates of a traditional pitch process

 

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