• by John Nardone , Op-Ed Contributor, May 26, 2006

With all of the focus companies are placing on marketing accountability, it’s surprising how well agencies manage to avoid consistent quantitative evaluation of their performance. Agencies rarely advocate for econometric modeling to assess their work unless they believe the client has underspent; then they see modeling as a way to get more budget and more fees. Most of the time, though, they actively work against it.

It’s easy to understand why agencies resist modeling and measurement. If the client relationship is good, there is a risk that an unfavorable study could hurt the relationship. If the relationship is poor, a quantitative assessment is unlikely to fix it, no matter the results. Even in the best situation, when a model validates their previous work, agencies often fear it will curtail their creative freedom. So creative and media agencies work hard to convince marketers that their work can’t be fairly evaluated in terms of sales performance, and instead advocate softer measures that are more open to interpretation.

While agency resistance to modeling is understandable, client reluctance to force the issue isn’t. Particularly when multiple agencies are involved in the business, modeling might be the only way to tease apart the efforts that are contributing to results from those that aren’t. Yet many clients either believe the agencies’ defensive arguments, or would rather not rock the boat. They remain hostage to the agency, even as their own management holds them accountable for marketing performance.

Yet there is one point in time when the client and agency interest in modeling should be perfectly aligned: the beginning of a new relationship. When a new agency is hired, both the client and agency should insist on an econometric study of the previous agency’s work. For the new agency, this presents no immediate risk; it’s not its work that’s being evaluated. For the client, it’s the opportunity to establish metrics and a starting benchmark from which to evaluate the new agency. At this time, the new agency is unlikely to resist the effort. The relationship is new and the agency is eager to please, while the client has optimism and enthusiasm for the good work that will surely come.

A model of previous work can give the new agency a head start on success. It will understand what has worked in the past and what hasn’t, so it can avoid repeating past failures. It will be better able to manage client expectations because it will be able to define a reasonable improvement. And the agency will be better positioned to take risks in partnership with a client who shares a common view of the challenges.

Yet even with all these opportunities and advantages, rarely are modeling efforts coordinated with an agency change. Perhaps the process of running an agency pitch is so overwhelming that marketers can’t devote time and attention to modeling at the same time. Then, once the agency is chosen, it must be brought up to speed, and new work begins immediately. Somehow, the modeling effort, for all its advantages, gets pushed to the side, if it was ever really considered at all.

So let me propose a new best practice: As soon as a marketer begins to seriously contemplate an agency change, it should kick off a modeling effort. Given the slow pace of agency searches, the results might even be available in time to inform the evaluation process. Even if they’re not, the early start will ensure that the bulk of the marketer’s time commitment for modeling will occur before the management of the pitch process becomes overwhelming. And the results will be there in time to inform the relationship once the new agency is selected.

On the flip side, I suggest that every newly hired agency request the business be modeled during the transition and ramp-up period. Ideally, the request should be made during the pitch process, setting a common expectation for accountability and data-driven decisions. The enlightened agency might even build modeling into its process for new clients, and provide the service itself or through a partner.

However the effort is initiated, both the client and the agency have too much to gain to not include a modeling project at the start of their relationship. Eventually this won’t merely be considered a best practice, but a necessity for client/agency management.