11 Agency Payment Models That Make Sense In The Modern Marketing Landscape

Source: Forbes.com

Determining pricing structure is often one of the most difficult tasks for a service-based business. Product-based businesses can easily quantify the cost of making, storing, displaying and shipping goods, but the intangible nature of creative agency work often means that campaign metrics determine your firm’s value and worth to a client.

There are several different viable billing methods, including hourly rates, retainer fees and results-based payments. But which makes the most sense in the current industry landscape? We asked members of the Forbes Agency Council what they think is the most logical payment model for modern agencies. Their best answers are below.

1. Creative Payment Models Based On Campaign-Specific Metrics Different campaigns have different objectives, and based on these objectives, marketers measure success differently. Be objective and transparent while understanding your place in the market. If the campaign’s objective is to increase awareness, then impressions are a great way to measure success. However, if you are marketing to existing customers, success metrics differ. –Ahmad Kareh, Twistlab Marketing 2. Multi-Channel Attribution Last-click attribution models are obsolete. If you are providing value, you need to have a multi-channel approach and attribution model. Marketers should be paid for the quality of the execution of their services. If the results are there, you will retain their services. If they aren’t, you won’t. – Adam Stone, Octane Marketing 3. Cost Per Transaction (CPT) Tracking marketing dollars to sales dollars is the advertiser’s definite right. Phony metrics like CPM, PPC, CTR and CPA are wasting $37 billion a year, which, according to Proxima, equals 60% of annual digital marketing spend. We should leverage technologies that enable CPT. Last click destroys the top of the marketing funnel. –Susan Akbarpour, Mavatar Technologies, Inc. 4. Flat Rate For Defined Deliverables We charge customers based on a set of deliverables. Paying for results or by the hour would be outrageous for the client. We’re marketers, not contractors. A set of deliverables lays out the scope of work an agency is willing to do and what results should be expected. Any other payment system would see agencies completing work outside of their contract. –Kristopher Jones, LSEO.com 5. Flat Fee Based On Media Spend And Engagement At Wpromote, we want to be held accountable to the core metrics that drive the business that we can affect. We have found it simplest to be paid based on the size, scope and complexity of the client’s marketing efforts. This boils down to a fee based on the amount of spend in paid media, and flat engagement fees for earned and owned media. –Michael Mothner, Wpromote 6. Revenue Generated I would argue there’s only one metric for determining a marketing campaign’s success: revenue generated. The notion or expectation that all or even half of marketing campaigns will be successful is ludicrous. Behind every great marketing team, there are hundreds of campaigns that fell flat. There’s just as much value in learning what doesn’t work as what does. – Kyle Kramer, Huify 7. Flat Rate Plus Bonus Payments For Campaign Results Even the best campaign will not yield the desired results if there’s friction when a potential customer engages with a representative, or if there’s an unpredictable event that causes the market to shift. At the same time, not all revenue growth can be attributed to a single campaign. Ideally, clients should pay a bonus if a substantial lift in revenue can be directly attributed to the campaign. –Jessica Gonzalez, InCharged 8. Cost Per Lead At Best Company, we specialize in sending qualified leads to companies, and have found that a cost-per-lead model typically results in a win for both parties. We agree to target certain acquisition costs for clients, which also creates an incentive for them to convert because they’re paying us earlier in the funnel. –Jeff Grover, BestCompany.com 9. A Model That Works Backwards From Your ‘North Star’ Metric Pricing should be the last item to be reviewed. Define the campaign goals and North Star metric. When a goal is clearly defined (i.e., qualified leads, reach, links, etc.), work backward. Find costs involved with hitting that metric (i.e., landing page creation, paid content placement, coding). Determine what margins are necessary to be profitable as an agency. –Andrew Miller, WisePrime 10. Pricing Based On Full-Funnel Results It’s important to focus on the entire funnel: The bottom is short-term success and the top is long-term value. Focusing too much on direct response doesn’t give you the full picture, but ignoring conversion rates entirely is not the answer either. You want to find an agency that applies the right balance and determine a pricing structure from there. –Eric Dahan, Open Influence 11. Service-Based Payment Most agencies should be paid for the time that it takes to service a client account. Variances related to the value of the outcome derived from the service, or the skill sets associated with the service itself, should trigger a performance incentive or impact the rate associated with the time. –Mike Skeehan, Salted Stone, Inc.