• by Steve McClellan  @mp_mcclellan, September 29, 2011

According to a new report analyzing marketer-media agency business relationships, the frequency of formal agency evaluations is increasing. At the same time, the report found, the shift in agency compensation toward more performance-based models is escalating.

The analysis, from the World Federation of Advertisers, reports that over half of the marketers surveyed -- 57% -- said they now conduct formal evaluations of their media shops twice a year. That's up from 54% in 2008, the last time the group conducted its media agency services survey.

And some agencies -- 13%, according to this latest poll -- are formally evaluated more than twice a year. That's up from zero in the survey taken three years ago.

Meanwhile, the WFA found that the number of advertisers that formally evaluate performance just once a year dropped below one-third of respondents -- to 30%, compared to 36% who said they did yearly audits in 2008.

Also, WFA found that more clients are using specialist financial auditors (rather than media auditors) to tackle the issue of hidden media rebates, where an agency buys advertising at a rate lower than agreed to with the client and then pockets the difference. This year's survey showed that 56% of respondents are now using financial auditors to assist in those kinds of investigations.

The WFA said that close to 30 advertisers, accounting for $30 billion in global advertising expenditures, participated in this year's survey, which was conducted online in May.

On the compensation front, the survey found that one-third of respondents now use some performance-based elements as part of their compensation model for traditional media. And 25% said they do it for online media as well.

And among the marketers that use key performance indicators in their compensation models, 82% cited sales as being an indicator that is part of the formula.

Commenting on this year's results, Stephan Loerke, WFA Managing Director, stated that the changes in the way marketers evaluate and compensate their media shops "indicate two on-going priorities for our members: transparency, which is driving more frequent performance audits and the use of specialist financial auditors, and the need to deliver real results, which is encouraging clients to give agencies a stake in improving sales."

The survey also found that marketers are conducting more media agency pitches that cover wider regions, as opposed to individual countries. The proportion of clients who appoint a media network regionally rose to 36% in the 2011 survey, up from 23% in 2008. The number of brands making global appointments remained steady at 36% during the same period.

The WFA says its membership represents 90% of global marketing communications spending -- some $700 billion annually -- and includes many of the world's largest advertisers such as Procter & Gamble, Coca-Cola and Johnson & Johnson.