Agencies Must Adopt Performance Pay Models

Cass Baker is executive vice president of Leapfrog Online, an independent performance-based digital marketing firm.

Value or performance-based compensation is no mirage. Tt’s what businesses of all types expect and need to compete. As today’s brands face heightened competition, declining brand loyalty and a more informed and empowered consumer base than ever before, it’s what all agencies and consultancies should expect of themselves.

Though some may perceive the risks to be higher, brands today require results from every one of their partners, regardless of the compensation model. By building these goals directly into fee structures and client agreements, you bring instant clarity to the relationship, opening the door for higher levels of trust, faster innovation and an assurance on both sides that everyone’s rowing in the same direction — both for short-and long-term success.

Value-based performance means taking the time to understand specifically what the brand must achieve as a result of its investment, which may be new sales revenue, but could just as easily be the launch and awareness of a new product, service or market opportunity — and then committing, even guaranteeing, that your team will do whatever it takes to deliver predefined results.

It’s an approach that consistently opens the door for candid discussions with CMOs and market leaders, who never have to question whether the team’s motivations are in sync. When executed successfully, it also paves the way for redefined client relationships, a new way of budgeting — as defined not by hard costs but instead by market share opportunity — and a critical seat at the table.

This can work in categories as diverse as automotive, consumer packaged goods, financial services, and telecommunications, and it’s clear that defined business results that can be projected and delivered by a partner matter more than ever, and a financial model tied to market share gain and efficiency can be as close as you can get to guaranteeing that success at every level of the organization.

By going beyond advertising and marketing challenges to reach into the business itself, value- or performance-based models create an opportunity for partnering organizations to draw stronger links between their initiatives and the client’s hard business metrics. In today’s highly measured, highly informed business environment, how could this be a bad thing?

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