Clients devise models to track return on agency investment

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As pressure is brought to bear on marketers to show return on investment for their marketing programs, many are developing models to prove ROI on agency performance as well.

"We are struggling over it," said Tom Insprucker, VP-marketing, North American operating division of Schneider Electric, a Palatine, Ill., manufacturer of electrical distribution and industrial control products. "We are attacking it as enterprise marketing management. As a single entity, the asset we manage the most is our agency."

Enterprise management method

Schneider recently completed a new process for agency selection, using an enterprise marketing management methodology. Bader Rutter & Associates, Brookfield, Wis., won the account, and Slack Barshinger, Chicago, was the runner-up.

Now, Schneider is developing a model to measure agency performance.

It is currently on the second round in the development process, with a deadline of June, which will be the one-year anniversary of its agency relationship.

The model will incorporate metrics across 14 areas, including communications planning, client knowledge, creativity, production management and fiscal responsibility. Each area will have three to five granular metrics, which Schneider is still in the process of defining.

Novell, which recently selected Philip Johnson Associates as its agency of record, measures agency performance on two levels, said Philip Juliano, VP-global brand management and corporate communications at Novell.

"The first level is blocking and tackling; how do they perform functionally? Do they return phone calls, are they responsive, do they get campaigns out the door in time?" Juliano said. "The second part is how successful are they at moving the needle with regard to our image, being perceived as a leader in the open enterprise space, intent to purchase and building market share."

Juliano said Novell has a detailed list of metrics it uses to evaluate agency performance on everything from account management to media planning.

"We judge the agency and ourselves as a team in terms of ultimate results," he said.

So far, compensation is not tied to agency performance, but that is something Novell is exploring, Juliano said.

"As we evolve the relationship, we'll probably look at certain components that could be performance-based," he said. The agency currently uses a retainer-based compensation model.

Evaluation negotiated

McClain Finlon, a Denver-based agency, tries to lock down evaluation criteria and an evaluation process during the contract negotiation.

"We try to take the lead with our clients on it," said Cathey Finlon, chairman-CEO of McClain Finlon. "We agree ahead of time what the evaluation criteria are, and we agree to quarterly evaluations."

Finlon added: "The very best clients are those that sit down and permit a safe environment for the agency to talk about what things could be done better."

McClain Finlon has a performance-based compensation agreement with one client, Qwest Dex, under which it is paid based on hitting certain metrics, including time saved in project development and cost savings through purchase negotiations.

"There is a huge amount of responsibility in managing an agency relationship," Finlon said. "On the client side, people aren't as well trained to manage and lead their end of the relationship to get the work they want out of their agency."

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