Posts Tagged ‘austin b2b marketing

19
Sep
09

Pay for Performance. Bring it on if you dare

Over the years I’ve been a big proponent of pay for performance when it comes to engaging clients as a marketing firm. What could be better? Clients love the concept because both parties have skin in the game and we get paid according to how effective our work is. The assumption is that we’ll do better work, go the extra mile and deeply care about the client’s success. Everybody’s happy.

However, the reality is not so simple. There are a number of issues that raise their ugly heads every time I’ve attempted to implement such a compensation strategy.

Issue #1: Most clients and agencies don’t really understand how pay for performance (PFP) works.
Most expect the firm to work for free and then be paid only if the work delivers some predefined performance – usually revenue. If the goal is met, the client will then pay the firms normal rate. Why it doesn’t work: The problem here is that no company can stay in business working for free. The other issue is that there needs to be compensation for risk – above and beyond what a firm would earn if they weren’t taking on the risk of the client (plus their own company’s risk).

The solution: The service provider agrees to a specific scope of work at a rate that covers it’s overhead plus out of pocket expenses. This would give the client a significantly lower rate for the work. If the agreed upon metrics and milestones are met, the agency would receive their usual profit margin PLUS a bonus to cover the risk incurred. This is not unlike what an investor requires. In effect, the agency is investing in the client’s business (taking on the client’s risk) and should be compensated above and beyond it’s usual “no-risk” rates. The greater the risk, the higher the compensation.

Unfortunately, clients don’t like this idea even though they are still coming out way ahead and have significantly reduced their risk. The choice is to simply pay the agency and shoulder the risk that the effort may or may not work or transfer the risk and pay a premium.

Issue #2: Metrics and goals not within marketing’s control
Most clients demand that an agency gets paid when they get paid. In other words, if an increase in revenue can be tracked directly to the agencies work, the agency gets paid. The problem here is that there are a myriad of variables that effect the realization of revenue. For example, the sales team is less than effective, the product isn’t good, lousy customer service prevents repeat buyers, market conditions change, supply chain problems, etc.

The solution: The client and agency need to agree on metrics that are measurable and tied to agency performance overall. Often, “leads” are the preferred metric. However, there are often arguments over lead quality, suitability and viability. Another challenge is tracking leads to specific activities – did the lead come from an ad? A press release? The web site? The reality is that an integrated marketing program should be measured as a whole and with a few exceptions (Pay Per Click) cannot be tracked to individual tactics.

Issue #3: Handing over the keys to marketing to the agency
More often than not, clients pick and choose what they want the agency to do allowing only certain activities to be performed by the agency. For example, the agency may insist on doing research to ensure a positive outcome (what everybody wants) but the client doesn’t think it’s worthwhile. Or the agency may build a campaign with certain response mechanisms that the client later changes. From planning to research and implementation, the agency works on a piecemeal basis with little control over the work.

The solution: The client must follow the agencies process and recommendations – including budget. The agency must also be allowed to work long enough for the strategy to work – even if the first six months don’t produce results. If the agency is going to take on risk, the client must do what the agency says. If the client doesn’t trust the agency to work in its best interest, they shouldn’t engage them in the first place. Effective marketing and promotion almost always takes more effort, money and time than any client prefers.

Again, this issue is usually a deal killer for the client. They typically refuse to allow the agency to do what it knows works. The result is a less than effective effort and everybody loses. Issue #4: Disclosure Tracking financial performance (or other metrics) takes time, money and effort. Many clients are uncomfortable sharing financial information or doing costly research to confirm that the agencies work is having a measurable impact. PFP also requires extra legal fees to create and enforce the agreements – thus raising costs even more.

The solution: There needs to be transparency and trust for a PFP arrangement to work. The process of disclosure and confirmation should be spelled out in the client/agency agreement at the beginning.

The above issues are only the tip of the iceberg when it comes to PFP. Any marketing firm or agency that’s any good welcomes a fair PFP agreement because we know our work is effective. In my experience, it is usually the client who ultimately decides that PFP won’t work.

Please post your comments on this topic. I welcome disagreement from my peers and from client organizations. How can we bring agency compensation into the 21st century?

24
Aug
09

Ask for advice then go with your gut

Research or Gamble?

Research or Gamble?

How many times have you reached out to friends and business partners to get advice about a marketing or branding concept? And how many times have you received fifty different opinions leaving you more confused than you were when you started? Over my two decades of marketing consulting, I’ve seen this situation play out over and over. In fact, I’ve fallen into this trap myself.

It’s a good idea to vet ideas, concepts and designs with people who fit your target profile. Their advice and input can in invaluable. But you need to look at it as research – not as a substitute for making a decision. In other words, there are things to be learned during this process – things that you may not have considered before you asked. However, ultimately you need to make your own decision as to which direction to go. Only you have enough information to make these decisions and only you will bear the consequences if you get it wrong.

The problem with vetting marketing and creative decisions with a group of “outsiders” (people who are not trained in marketing) is that they will not understand the criteria used to develop the concept or approach. They will simply make a knee-jerk comment or reaction (which has some value) but keep in mind that most people feel that they must “critique” the effort – finding something wrong with it is part of their perceived responsibility. It is almost impossible to put your approach in context for them.

Another issue that skews this sort of advice is that people generally prefer concepts and approaches that are safe, familiar and predictable. They will invariably suggest you remove any aspects that create tension, that are interesting or provocative. This is death for effective marketing. “Safe”, “Familiar”, and “Predictable” equals weak “me-too” marketing.

On the other hand, if everybody simply loves your approach this is a clue that you haven’t pushed it far enough to be compelling. Effective marketing takes measured risks. If you are slightly uncomfortable about your approach,you are probably on the right track.

Now, I’m not saying you should go nuts and be offensive. The key is to find enough edge to be interesting and stand out of the clutter. Marketing by committee is well known to kill good strategies. Bouncing ideas off of your peers is not a bad idea. However you need to be careful not to base your ultimate decisions on this input alone. It is a great way to bring additional data into your process. But at the end of the day, your gut will tell you if it’s right. I don’t know about you but my gut is almost always right.

If you need some objective input on your marketing approach, message or brand, I’m happy to help. Contact me at http://www.claritymarketingsupport.com and I’ll give you my opinion as a professional marketer. Just take it with a grain of salt.

10
Jun
09

Is Coaching Right For You?

I admit it. I’ve finally engaged a coach. I know what you are thinking. “Pete Monfre, the guy who has been self employed his whole life, founded and grown his own companies, consulted with the best and brightest of corporate America needs a coach?!! Say it isn’t so!!!”

The reality is that even I need some outside, objective advice and a sounding board for my ideas (I’m full of ’em). My coach, Rafe Beeson, is helping me prioritize and focus on the key issues that will help me grow my company. The sessions are short, weekly and to the point. I would say the sessions are even pretty fun. But most importantly, it is a very affordable way to get the support I need.

Coaching is a widely misunderstood concept. Coaches are not consultants but they do offer ideas, suggestions, connections and clarification. Sometimes they play devils advocate, other times they just listen. They always hold you accountable.But the most amazing thing about it is that somehow, someway things become clearer. It’s just that simple.

I’m so convinced that coaching is a great value that I’m offering it to a very limited number of clients (NIA members get a hefty discount) who need marketing advice but can’t afford to bring in consultants, ad agencies, design firms, etc. They can do most of the work themselves but need some guidance as to what to do and how to do it. The bottom line is high end expertise without the sky high fees. It’s no wonder so many people have coaches.

For me, I really enjoy helping business leaders hammer out their marketing challenges. It doesn’t seem like work to me. I have an uncanny ability to see through complexity and get down to the real issues and solutions.We still do projects and hefty strategic planning but coaching is my way of offering some help to smaller companies and organizations who normally couldn’t afford to engage my firm in a full service capacity.

Learn more about my coaching program here: http://budurl.com/8pzk or call 512-663-7393.




Who is Pete Monfre

CLICK HERE to visit my web site

I'm a serial entrepreneur, marketing and media guy, raconteur, writer, producer and consultant. I write this little blog to help you unravel the mysteries of marketing and selling, to expose the silliness that masquerades as marketing and help you make better decisions that will grow your business. And I have fun with it. Why not comment? That way we can have a conversation. Or better yet, hop on over to my web site and drop me a line.

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