• by Jack Loechner , Staff Writer @mp_research, September 22, 2009

According to a survey conducted by the ANA (Association of National Advertisers), 82% of marketers report that their companies regularly conduct formal agency performance evaluations. The establishment of a formal evaluation program is near-universal among firms with annual revenues of $5 billion or more (92% versus only 74% 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% versus 71%). 

The top benefits derived from a formal agency evaluation process, says the report, are identifying and improving under-performing agency relationships (92%) and identifying and recognizing high-performing agency relationships (85%),. 

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%)
• Strategy (82%)
• Implementation/follow through (82%)
• Fiscal stewardship (81%)
• Ideas (77%)
• Teamwork (77%)
• Meeting project objectives (77%)

59% of firms conduct two-way, or 360-degree, evaluations in which the agency also evaluates the client. Additionally, 13% of marketers identified a new practice in which the evaluation processes allows for their respective agencies to evaluate one another. 

58% of marketers rate agency performance evaluation as "extremely" or "very effective" in maintaining the client-agency relationship, and 38% rate their agencies "somewhat effective." Only 3% rated their programs as "not too effective" or "not at all effective."

Bob Liodice, president and CEO of the ANA, says "Having a formal agency evaluation process is... more imperative at a time of heightened focus on marketing accountability... 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 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, in person, with clear corrective action plans with due dates and owners

76% 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%)
• Digital agencies (47%) 
• Direct marketing agencies, public relations agencies and multicultural agencies (25%)

In general, formal evaluations are conducted annually by about two-thirds of the firms while about one-third evaluate their agencies more frequently than annually.

For more about the ANA and this study, please visit here.