In today’s fast-paced tech landscape, creative agencies are indispensable partners for technology companies and startups looking to build powerful brands and engage target audiences effectively. However, when marketing budgets are under scrutiny, CMOs and marketing leaders must justify every dollar spent. The big question is: How do you evaluate the return on investment (ROI) of your creative agency?
In full disclosure, we’re a creative agency, but having personally been on both sides, and still doing some in-house marketing work for tech companies, I know how important it is to be able to show the benefit an agency brings. As an agency owner, I want our clients to see tremendous value in our work and on the other side as a marketing leader, I want to be able to retain and secure budget for agency use when it’s providing value and ROI.
Below is a comprehensive guide and a few tips to help you assess whether your creative agency is delivering measurable results and driving value for your business. Sometimes this can be hard because often “brand” and “creative” aren’t necessarily tied to specific metrics. Plus, a lot more goes into campaigns that you’re measuring, besides the creative.
1. Define Clear Objectives from the Start
Before you can assess the ROI, you need to set clear, measurable objectives for your creative partnership. Are you looking to increase brand awareness, drive qualified leads, or boost product sales? Your agency’s effectiveness should be tied directly to how well they help you meet these goals.
- Examples of KPIs: Increased website traffic, improved conversion rates, growth in social media engagement, higher brand recognition.
- SMART Goals: Ensure your goals are Specific, Measurable, Achievable, Relevant, and Time-bound. This will allow you to track progress more efficiently and evaluate success.
2. Measure Tangible Outcomes
ROI isn’t just about creative output; it’s about business impact. Analyze key performance metrics in the context of your agency’s campaigns.
- Lead Generation and Conversion Rates: Track how well creative assets like landing pages, videos, or ads drive leads and convert them into customers.
- Sales Growth: If a campaign’s goal is to increase sales, compare pre- and post-campaign revenue data.
- Sales Usage: If your agency is creating content for use in the sales cycle, track usage of these materials and gather feedback from your sellers. While the content may not have been written by the creative agency (often we see that happening on the product marketing side), this can still be a useful metric to look at.
- Customer Acquisition Cost (CAC): Measure how much it costs to acquire a new customer as a direct result of the agency’s work. Has their contribution reduced your CAC or increased the lifetime value (LTV) of customers? This can be a tough one depending on your business model and how involved the agency is. As a CMO, I don’t know that I ever included this in CAC or LTV calculations, except in the context of overall marketing spend. But if you have the means to do this, it could be an interesting piece to evaluate.
3. Evaluate Brand Value
While harder to quantify, evaluating the growth of your brand’s value is crucial. A great creative agency doesn’t just boost short-term performance; it should also enhance long-term brand equity and customer loyalty.
- Surveys & Customer Feedback: Use surveys or focus groups to measure how customers perceive your brand before and after an agency-led campaign.
- Brand Recognition & Sentiment: Track mentions, press coverage, and customer sentiment using tools like Google Alerts, Brandwatch, Sprinklr, whatever your tool of choice is. The rise in positive mentions could be attributed to the agency’s work and ladder back to ROI.
4. Examine Efficiency and Adaptability
Another critical factor in evaluating your agency is how well they use resources and adapt to change.
- Timeliness and Budget Adherence: Has the agency consistently delivered on time and within budget? Delays and budget overruns can erode ROI quickly.
- Agility and Innovation: In the tech industry, speed and innovation are key. Assess whether the agency can quickly pivot and innovate based on new data or changing market conditions. A more agile agency is often more valuable in the long run.
5. Compare Agency Fees to Market Standards
Your ROI evaluation should consider whether the fees your agency charges are in line with industry benchmarks. Compare your agency’s pricing model with similar service providers to ensure you’re getting competitive value.
- Hourly Rate vs. Project Fee: Some agencies charge by the hour, while others operate on a project basis. Depending on the scope of your needs, one model may be more cost-effective.
- Retainer vs. Projects: Some agencies may offer both a retainer model and a project-by-project model (with different pricing options as stated above). This often comes down to your budget and how much ongoing support you may need. A retainer may get you a little better pricing and allow for more budget consistency. If that’s a lot to commit to in the beginning, especially with a new agency, you can start with a project, see how it goes, and move to a retainer model after.
6. Track Creative Quality and Innovation
The effectiveness of your creative assets is often seen in how well they resonate with your target audience. High-quality, innovative campaigns can significantly elevate your brand’s profile and increase customer engagement and loyalty.
- Audience Engagement: Measure social media engagement rates (likes, shares, comments), video views, and content shares. These metrics give you insight into how well the creative resonates with your audience.
- A/B Testing: Run A/B tests to compare different creative approaches and analyze which yields better results. This provides direct insights into the agency’s creative effectiveness.
7. Account for Long-Term Impact
ROI is not always immediate, especially with brand-building efforts. Some of the most valuable returns may come months or even years down the line. Ensure your ROI evaluation takes into account long-term value.
- Customer Retention and Loyalty: Measure whether your creative campaigns are fostering stronger customer loyalty, leading to better retention and repeat purchases.
- Increased Market Share: Are you gaining ground on competitors as a result of your agency’s work? An increase in market share can indicate strong ROI, even if the immediate revenue boost is less apparent.
Conclusion
Evaluating the ROI of a creative agency is a multifaceted process that goes beyond initial costs and short-term results. While creative and branding may be more difficult to track, coming up with a few tangible outcomes, analyzing brand value, and comparing fees with industry standards, CMOs and marketing leaders can ensure they are getting the most from their agency partnerships. Creative agencies are invaluable in the fast-moving tech space, but their true value is in how well they align with your business objectives and deliver measurable results over time.
If you’re considering an agency for your creative needs, let’s have a commitment-free conversation!