If You’re Not Being Paid For Performance, What Are You Being Paid For?

ROI, Strategy

Reward ResultsI came across a blog post last week making the case against agencies being paid according to performance. It’s well-written, but really just recycles the same claims agencies have been making for years – the same claims that, frankly, have given marketing agencies in general a bad reputation.

At its core, the argument boils down to one key question: Who should bear the risk?

Agencies argue that clients should bear the risk because they ultimately make the final decisions. Astute clients argue that agencies should bear the risk because they develop the campaigns. The problem is that both arguments are made assuming a traditional client-vendor relationship where each entity is looking out for their own best interests.

The key, in my experience, is moving from a client-vendor relationship to a true partnership. A partnership means shared risk and shared reward. Those are the relationships that are the most profitable and enjoyable for both the agency and the client. As an example, just a few weeks ago I had a client say, “I don’t care how big of a check I write to you if I know I’m getting results. At the same time, I’m never going to feel good about writing a check, regardless of how small it is, if I know I’m not getting results.”

That’s just good business – for the client and for the agency.

The days of companies paying agency invoices without considering the ROI are rapidly coming to an end. The recession is making certain of that.

Some agencies don’t like that because it threatens to undermine their bottom line. Forward-thinking (and truly effective) agencies should embrace it, though, because it opens the door to strengthening the bottom line for them and their clients.

What expectations do you have for your marketing agency?

  • Tom

    So, that begs the question how are you paid?