As we approach the end of the year, many companies start gearing up for an annual ritual: evaluating their agency’s performance. This is a key opportunity to assess whether the agency is truly driving value and growth. But here’s the big question: Are we assessing them fairly?
Imagine this: a hospital decides to measure its surgeons’ success based on their surgery survival rates. But, eager to keep their numbers looking pristine, surgeons start selecting only the simplest cases. While survival rates soar, more complex and riskier surgeries are left to the side, and patients needing these essential but difficult procedures go untreated. This is a classic case of Goodhart’s Law: “When a measure becomes a target, it ceases to be a good measure.”
This dynamic can easily apply to marketing. When a single metric, like Click-Through Rate (CTR) or Cost Per Acquisition (CPA), becomes the focal point, it can lead to distorted priorities and unintended outcomes. Just like the surgeons in our story, agencies can end up optimizing only for these metrics, often at the expense of long-term growth, brand building, and customer loyalty.
Here’s how to ensure you’re getting the most out of your agency’s efforts, without falling into the trap of Goodhart’s Law:
1. Prioritize contextual KPIs
Metrics like CTR, CPA, and Return on Ad Spend (ROAS) are essential, but they need to be evaluated in context. For example, reducing CPA may seem like a win, but if it results in lower-quality traffic or fewer repeat customers, it could harm long-term growth. Consider broader KPIs, such as Customer Lifetime Value (CLV) or brand sentiment, to ensure the agency is contributing to sustainable success.
Example: If your agency slashes CPA by limiting ad exposure on quality sites, CPA drops, but so does brand presence, leading to slower growth down the line.
2. Focus on incremental gains, not just big wins
Big, bold wins like doubling conversion rates or halving acquisition costs look impressive, but they might come at a cost to long-term sustainability. Instead, focus on the agency’s ability to deliver consistent, incremental improvements that align with broader goals. This approach encourages strategic, data-driven growth rather than quick, surface-level wins.
Example: An agency might propose heavy discounting to drive sales at year-end. While this might hit revenue targets, it risks diminishing brand value and reducing long-term profitability.
3. Evaluate creativity and adaptability
Performance isn’t just about numbers; it’s also about innovation. Assess your agency’s ability to adapt to trends and bring creative solutions to the table. This is especially important in today’s rapidly changing marketing landscape, where new platforms, channels, and trends can impact strategy and audience engagement.
Example: If your agency suggests expanding to TikTok or testing branded content, it shows they’re thinking beyond just hitting existing KPIs and are considering new avenues for brand growth and engagement.
4. Avoid over-reliance on last-click attribution
Last-click attribution often favors channels that close sales while downplaying the role of channels that build awareness or nurture leads. Agencies focusing too heavily on last-click tactics might skew their strategy toward short-term conversions, ignoring the broader customer journey. To combat this, use multi-touch attribution models or Marketing Mix Modeling (MMM), which can highlight how each channel contributes to the final outcome.
Example: If your agency cuts back on awareness campaigns in favor of direct response tactics, you might see a temporary rise in conversions, but brand awareness and audience expansion will suffer over time.
5. Communicate long-term objectives clearly
Avoiding Goodhart’s Law means ensuring that your agency is aligned with your long-term goals. Rather than focusing solely on immediate KPIs, encourage your agency to align their efforts with your vision. This helps prevent the trap of optimizing for short-term metrics alone, keeping the focus on sustained growth.
By keeping these strategies in mind, you can evaluate your agency’s performance more holistically, ensuring they’re not just hitting short-term targets but driving real, sustainable success for your business.By keeping these strategies in mind, you can evaluate your agency’s performance more holistically, ensuring they’re not just hitting short-term targets but driving real, sustainable success for your business.
If you’re looking to set up a KPI framework that truly reflects what drives value—or if you want an expert assessment of your current marketing initiatives, whether in-house or agency-driven—GOMEDIA can help. Our team specializes in building tailored KPI frameworks and offering objective evaluations that align with your long-term goals. Reach out to us to ensure your metrics support real growth and actionable insights, not just numbers on a page.
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