Posts Tagged ‘busienss development

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?

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11
Dec
08

web site hurting your sales effort?

by Pete Monfre

When many companies talk about marketing, they inevitably end up focusing myopically on their company web site.  Do a search in any search engine for “marketing” and the vast majority of topics will be on-line marketing. It’s as if the web has become the singular representation of  of marketing and sales tactics.

While your web site is important, it is a mistake to consider it as the only factor in reaching prospects and converting them to customers. For most companies the web is a critical focal point during the early stages of your sales process for prospects. The trouble arises when the we attempt to make the site everything to everyone. I’m not saying there are many different uses for a corporate web site (service, support, education, social interaction, etc.) but most of my clients expect their site to primarily help drive sales. Whatever you are trying to achieve with your site, the key is to have a clear understanding of what it the end game is and then focus your efforts accordingly.

If you want your site to contribute to successful sales, you have to understand how it functions in the sales cycle, align the content with how you sell,  and take into account customer evaluation and buying criteria.

This is not as easy as it sounds. One thing that makes this idea difficult to implement, and indeed one of the main reasons most sites are deficient in this area is that the wrong people control the content on the site. Most companies put the marketing or I.T. department in charge of the company’s web site. Neither of these groups typically have any incentive to collaborate with the sales team so the content of the site often conflicts with how sales functions. A better method is to assign someone who can lead a cross functional team in a strategic process to determine the optimum approach. My process creates a collaborative environment between sales, marketing and I.T. to first establish a foundation of requirements and desired outcomes. Then, we work to align these requirements with how prospects typically use the web to vet potential suppliers.

In the majority of B2B and B2C selling environments, the web site is the primary tool a potential customer uses to decide if you qualify for their business. Once a buyer is aware of your company (either through search engines or via referral or other demand generation work) the first thing they do is check your site. My research indicates that customers visit potential suppliers sites initially with three primary questions in mind:

Do your company’s capabilities match my needs?
Is this company capable, credible and trustworthy?
Should I include them on my short list of potential suppliers?

If you pass these initial tests, you will make the short list. If you don’t, you’ll never know because the prospect won’t inform you of your failure. They will simply move on to your competitor.

The typical B2B buyer spends only minutes at your site with the vast majority never making it past your home page. You need to make sure you’ve at least answered the above questions and offered some incentives to invite the visitor deeper into the site or to contact your sales team. One way you can do this is to offer special reports or other valuable information in return for revealing the visitor’s identity (usually in the form of an email address or other contact information). Many of these people won’t be ready to buy yet, so offering a subscription to an electronic publication is effective to maintain an ongoing conversation with people who have shown some level on interest in what you offer.

At the same time, your site must be attractive, professional and easy to navigate. Visual organization is key – if the visitor is presented with a chaotic layout of graphics, text, widgets and other elements they will simply determine that it is too much work to evaluate your company and with a click of the mouse, they are gone. This is where a professional designer is worth his or her weight in gold.

If your site aligns with your marketing and sales processes and delivers the right messaging at the right time, you will pass more buyer’s tests, make more short lists and, ultimately, more sales.

18
Jul
08

The Way Not To Sell

I got this email today. It’s important that you know I’ve never talked to this person. I have heard of the company (who’s name has been changed because I’m feeling charitable at the moment) but this was sent to me cold. I’ve added my comments. The original email is in yellow. (I’m just sharing this with you – I didn’t respond to the email. Yet.) And, before you comment, yes, I’m a big jerk.

Dear Pete,

Thank you very much for the opportunity to speak with you regarding Acme Business Services.

I haven’t given him the opportunity – I’ve never spoke to him or heard of him. Nice trick though.

I’m happy to introduce myself as the Regional Director of Business Development for your area.


Good for you. I’m glad you are happy. Do you want a cookie?

I have been serving the market research industry for over a decade and am well acquainted with our services and how they might align with your particular service needs.

I’m glad he’s well acquainted with his own services. How could he know what my “particular service needs” are? We’ve never met or talked. He probably doesn’t know that all my clients are sky diving nuns with eating disorders.

Please review the attached marketing information and be sure to contact me if you have any questions. I will follow up this email with a phone call within the coming weeks to explore in detail how Acme Business Services can be positioned as a valuable partner.

Oh, boy! I can’t wait to read your marketing doublespeak about why you are so great. I can’t wait for your call so you can tell me even more about your company – in detail!

I look forward to serving you with enthusiasm and passion,

Is he hitting on me?

making our commitment of world class service a top priority.

Uh, what? You want to make your commitment a top priority? I’m totally committed to my top priority of giving up donuts but that doesn’t mean I don’t keep horking them down. I bet you offer excellent excellence too.

Thank you very much.

Don’t mention it.

Warmest regards,

John Smithe
Director, Business Development
Acme Business Services

This email violates everything I know about selling. It starts with a trick – implying that we’ve spoken and I “gave him the opportunity”. I’ve given you nothing and it’s unlikely that I will once you’ve insulted my intelligence.

Next, the message jumps right in talking all about the sender. How happy he is to have a job and to tell me about it. He goes on to say how smart he is about what his company does. I don’t care how much you know about YOUR business – tell me how much you know about MY business!

It just goes downhill from there.

My point is not to be mean to the well meaning sender of this email. My goal here is to help you see a better way to ignite a potential relationship.

In fact, I wouldn’t even send a message like this. I would make a personal phone call and ask permission to take 30 seconds to find out if the person is even remotely interested in talking to me. And if he or she is, the conversation will be all about his/her needs. Then, together we can decide if there is any point in starting a relationship.

And you would never hear me talking about my passion, commitment to excellent excellence or my stupendously superfluous synergy.

That is all.




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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