Is client still king? Agencies now more comfortable being honest with clients

“Wrong KPIs” are a rising concern, as agencies don’t believe compensation should be linked to performance, WFA research reveals.

Agencies are more comfortable with being honest with their advertiser clients when it comes to performance evaluation, found new research from the World Federation of Advertisers (WFA) and strategic partner Decideware.

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 small uptick in the evaluation of qualitative performance (56% compared to 54% in 2020) for 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 Client-Agency Performance Evaluations 2022 findings are based on advertiser respondents responsible for more than $69bn in global ad spend: 49 clients and 33 agencies all from global companies. 

No.1 concern is lack of objective KPIs

The current mix of KPIs is causing dissatisfaction among both clients and agencies, the research found. 

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 number one concern. 

The wrong things are often being measured, agencies indicated, whilst a lack of KPIs is the top concern clients had about performance reviews. The majority of clients indicated that they are incorporating ‘nuance’ into their evaluation process. 

“Advertisers need to work harder to become the client of choice by actively nurturing agency relationships,” said Laura Forcetti, Director of Global Marketing Sourcing Services at the WFA.  

“Doing this means starting ‘at home’ and looking at their own performance before blaming their partners. This report highlights the number one challenge faced by agencies is ‘conflicting needs or expectations across siloed client organisations’. Clients must get their houses in order and performance reviews provide agencies with an opportunity to help them on that journey.”

“Cracking the code of defining the right KPIs for the specific relationship seems to be the next challenge,” commented Ed McFadden, Chief Growth Officer, Decideware.

Compensation shouldn’t be linked to performance 

Broken down by agency type, clients seem to be prioritising media, full service and creative agencies for the 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.

However, agencies feel pay based on performance is not always appropriate. Mirroring the previous study in 2020, less than half think their compensation should be linked to the results of their evaluation. 

Despite this, a growing number of agencies share their performance bonus with the agency working team, with those that do increasing from 27% in 2020 to 46% in 2022. The research concluded that 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. 

Is the client still king?

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.  

But, 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 that won’t change”. 

More than half (53%) of advertiser respondents say they now test collaboration, reflecting the need for campaign integration and the fact that the execution of a modern campaign takes numerous skill sets. Such efforts signal to 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.”

“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,” concluded McFadden.