The Performance Pay Challenge

Marc Fleishhacker is managing director of True Action, a performance marketing agency that is part of the eBay family .

So many agencies still don’t have skin in the game. We are well into the era of big data — everything is digital and measurable. Agency clients don’t just demand comprehensive and pinpoint accountability; they expect it.

Is there something wrong with us? Have we not preached about the promise of performance-based measurement for years and years? Let’s take a look around. Most big-brand agency assignments are still based on the retainer formula: fundamentally unaccountable, diminishing in value and just plain old. We are at the cutting edge of communications, yet we charge like ancient relics. We allow a massive disconnect to persist between what most companies say about agency compensation and what they do. We thrive on inexpensive talk and expensive inaction.

Given that our sole mission as marketers is to enable brands to sell products and services as profitably as possible, should not our compensation in turn be based on actual results? Yet this rarely happens, and here are the top five reasons why.

Metrics Reloaded
Compensation based on performance is dependent entirely on precise metrics. We work in a digital age where it’s far easier than ever to attach specific metrics to marketing initiatives, yet we can’t seem to close the circle. To this day — more than a decade after the mainstream adoption of the Internet, well into the second generation of digital media, with big data firmly established as a key pillar of the marketing universe — most companies fail to attach dollar amounts to the impact of specific campaigns on the value of their brands and their customer base. This is a huge hurdle, and without resolution, this challenge is a showstopper.

Single Silo, Single Channel
In our omni-channel world, it’s nothing short of amazing how many companies still have full-fledged departments dedicated exclusively to a single channel. We constantly live the conflict between in-store and online commerce and the value diminishment that occurs when these two fundamentally connected areas lack necessary integration.

Fragmented Accountability
Just as separate departments and a lack of an integrated view hinders clients, the same holds true when multiple agencies are asked to execute against an excessively narrow piece of the puzzle. Consumers do not live in silos and performance accountability brings with it the necessity for broader control and responsibility. The ultimate customers don’t live in silos; they interact with content across multiple channels. The absence of broad-based control and end-to-end responsibility makes it even harder to measure performance accurately.

Cost Control vs. Managed Growth
Cost control is no doubt critical, but when it becomes the primary measure of a campaign’s success, it negates a comprehensive analysis of performance and growth. Smart marketers are able to manage the budget and still weigh other variables when striving for the best MROI.

Fear Factor
In an ultra-competitive marketplace, the single biggest marketing challenge is often just breaking through noise. Bold, innovative thinking carries with it a level of risk, and both clients and agencies need to account for that without constantly placing reciprocal survival in question.

But performance-based compensation doesn’t have to be the rare exception. To counter the five top problems, there are five simple but potentially far-reaching guidelines that can change the game.

Decide What Matters
Set clear objectives and keep the focus on them. That’s the best — and perhaps only — way to get results.

Agree on Metrics
Marketers need a thorough understanding of brand and customer value metrics and keep track as they evolve. There’s no room for compromise here.

Exchange and Analyze Data in Real Time
Speed is the lifeblood of relevancy in the digital world. Optimizing content and channels against clearly defined customer segments requires constant evaluation and rapid adjustments.

Test Often, and Budget for It
Innovation requires frequent analysis to identify potential speed bumps. Factor this in.

Share Risks, Share Rewards
Partnership can’t just be a noble ideal; it’s vital for performance-based compensation. Work together.

The phrase “skin in the game” was coined by super-investor Warren Buffett, who combines folksy charm with steely resolve to insist that high-ranking insiders use their own money to have a real stake in the companies they run. As professional marketers, we have the charm and the resolve. Let’s ensure that our stakes are equally shared.

Image via Shutterstock

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