Awards: one good year means nothing

The UK ad industry spends millions each year entering awards. But what do agencies get out of it? James Swift finds sustained success is money in the bank.

Credit: Getty Images
Credit: Getty Images

No-one still asks if award-winning ads are more effective. The answer is: yes, they are.

Donald Gunn was one of the first to prove it in 1996 with his Do Award Winning Commercials Sell? study. In 2010, Peter Field found campaigns that had won IPA Effectiveness awards were 11 times better at increasing market share for a brand than those that had won nothing.

But what do awards mean for the agencies that create the campaigns? Is there a direct link between a shop’s financial performance and the fullness of its trophy cabinet?

To find out, Campaign measured the financial results of a group of London agencies between 2000 and 2012 against their performance at the Cannes, IPA and D&AD awards.

Measuring the relationship between awards and financial performance is not the same as measuring the effectiveness of a campaign. An agency’s financial performance depends on many things. We are only looking for rough patterns here, but the assumption is that, after raking in awards, turnover and profit would rise as an agency’s services become more in demand.

So, does winning awards boost an agency’s profit or turnover? Well, no. Not in the short term, at least.

TBWA, for instance, won a large haul of gongs in 2004, but this did not mark a lift in its turnover or profit. Quite the opposite, in fact: it heralded a prolonged slump.

Similarly, Mother’s most successful years in terms of awards (2001 and 2006) did not coincide with any kind of spike in turnover. There was a pattern in some of Abbott Mead Vickers BBDO’s best period in awards terms, but the agency managed equally big leaps in turnover in the years when it had performed less well.

Fallon is the one shop whose sole turnover spike corresponds with its largest haul of awards. In 2008, the agency scored 30 on Campaign’s measurement of awards success, triple its next highest awards score. In 2008, turnover jumped 42 per cent from £18.5 million to £26.3 million.

But the two things were too close together to have a causal relationship. Fallon itself says profits jumped because it landed the Asda and Eurostar accounts – among others – in 2007 and Sony increased its spend the following year.

Indeed, the number of awards won by agencies each year is so volatile that the absence of any strong correlation in the short term is a good thing.

High profit margins do appear to go hand in hand with awards success, however. AMV and Bartle Bogle Hegarty both excel at winning awards. BBH, on average, scored 17 on Campaign’s awards scale between 2000 and 2012, while AMV scored 15.7. Over the same period, the two agencies had the highest average profit margin too, at 14 per cent and 17 per cent respectively. Similarly, agencies such as Grey and McCann scored low on both the awards scale and on average profit margin.

That said, there are agencies that buck the trend. M&C Saatchi scored low on the awards scale, but its average profit margin between 2000 and 2012 was a respectable 11 per cent.

Esther Carder, a partner at Kingston Smith (which provided the financial figures), says: "I would have perhaps expected more correlation between awards and overall margin – but then, of course, this is just one factor of success. Some agencies could be producing really great work at the expense of margins and just not charging properly for it, or just not very well-managed."

So, creative agencies will not live or die on a single year’s awards haul, but they are not throwing away their money by entering contests either, as long-term success looks linked to a healthy profit margin.

Ben Fennell, BBH’s chief executive, says: "Winning awards definitely attracts talent. It also builds profile, and agency and client confidence – all of which can drive improved performance." But he does add that the industry "still spends way too much time and energy awarding itself".

Fennell also warns of the separation between creative and effectiveness gongs and that, in some cases, awarded work has hardly even run in the real world, let alone helped a client boost business.

If all work that received creative awards also had to be proven effective, then we might start to see a clearer link to profit.