Tag Archives: Performance Based Pricing

Pay for Marketing Based on Performance


I’m sure you remember in school the preoccupation everyone, including your parents had with grades.  Everything you did from homework, to studying for exams, to extra credit projects, or in rare cases the decision to cheat, was based upon making the grade.  Your entire future, you were told, hinged on your ability to achieve high marks.  And even though it may have seemed arbitrary, it was the teacher who determined if you had accomplished what they wanted and that you deserved a high grade.  Didn’t really seem fair?  It was our first real taste of life, now wasn’t it?

Advertising has traditionally been priced based on the model of how many eyeballs are estimated to actually see an ad.  The model of CPM (cost per thousand impressions) is the foundation for determining the value of ad time, placement, geography, location, space and medium.  But as David Koretz says, this form of pricing is doomed, in favor of a performance based model such as a cost per action (CPA) or a cost per conversion (CPC).  Although there are many arguments on either side of this debate, and this is good fodder for another blog, the concept of performance based pricing is not going to go away.

The marketing industry has struggled a long time with the concept of payment for performance.  The idea that the marketing firm should take the risk rather than the client is rather terrifying because it feels like too many things are out of the direct control of the marketing company.  What if the product being marketed isn’t that great and people don’t buy?  What happens when the economy goes into a tail spin and sales fall?  What if the CEO gets into trouble by doing something unethical or illegal?  What if……….  All of these are great questions.

My opinion, and I know it’s not going to be popular with others in my line of work, is that marketing companies and consultants should be paid (and fired) based upon their ability to perform.

This is my take and how I conduct my business.  I am going to make sure that there are clearly defined goals and expectations for all parties involved and that sound methods are in place for measuring progress.  I am going to put into place contingency plans just in case something unexpected happens.  And, I’m going to make damn sure that the product or service being offered by my client is good enough to be successfully marketed.  Lastly, if I am successful, I should be paid handsomely for that success.

Can you think of other products or services that we should pay for based only on performance?