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Performance Based Marketing - Digital Marketing Show 2014

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How marketing agencies can increase profits and keep clients happy using performance-based pricing.

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Performance Based Marketing - Digital Marketing Show 2014

  1. 1. Performance Based Marketing John Courtney, Executive Chairman Strategy Digital © Strategy Digital 2014 1
  2. 2. Quantifying Marketing Services Pricing is a powerful factor in your decision to buy: it defines the relationship with your agency assigns the level of risks and reward sharing sets the level of incentive (or non-incentive) pits you against other clients for attention impacts your bottom line …so how to get the right deal? © Strategy Digital 2014 2
  3. 3. Pricing Models From various pricing models available across Digital Marketing services depending on the type of services provided – within SEO, content marketing & Social, the traditional and most prevalent one is FIXED FEES. In the following we’ll look at the merits & challenges of: Fixed Fee Performance Based Pricing © Strategy Digital 2014 3
  4. 4. Monthly Fixed Fee Pro’s Tailored to overall budget available Straight-forward invoicing (both) Straight-forward resource allocation (agency) No risk for agency Challenges Lack of incentive Resource allocation fixed – no incentive for over-servicing Additional work = additional costs Less flexibility to play with budgets (e.g. seasonality) Price comparison of services – instead of performance evaluation © Strategy Digital 2014 4
  5. 5. Performance Driven Marketing Or: Are you paying for bad ideas? “The biggest problem with fees is that marketers end up paying as much or more for bad ideas as good ones.” Avi Dan, Avidan Strategies, Marketing Consultant © Strategy Digital 2014 5
  6. 6. Performance Driven Pricing: Tying Compensation to Performance Performance Driven Marketing is enabled through a remuneration model that considers performance foremost of everything. Performance-based pricing is linked to results that actually matter to your business, be that increased traffic, sales, conversions or leads. Therefore this model has traditionally been used in PPC and Affiliate Marketing, but Strategy Digital first coined the Pay-On- Results (POR) model for its SEO services back in 2006 © Strategy Digital 2014 6
  7. 7. How Does It Work? While performance driven pricing is not suitable for every business, it can be highly tailored to suit your business model and objectives. The pricing elements agreed between both parties are:  Relevant success metric(s)  Fee structure (percentage or cost per conversion)  Agreeable baseline for performance element calculation © Strategy Digital 2014 7
  8. 8. eCommerce Sites  The price element may be a percentage on extra sales generated – based on a pre-agreed baselines.  Baselines usually based on previous year, which allows to account for seasonality.  A cap or staggered percentage brackets may also be applied. © Strategy Digital 2014 8
  9. 9. Traffic Focus  A brand looking to attract more visitors, would link fees to increased high quality traffic.  This could also be tied in with specific traffic sources – e.g. organic traffic and/or referral traffic © Strategy Digital 2014 9
  10. 10. Lead Generation  Where focus tends to be on lead generation, a set rate could be applied per completed online form  A baseline against the previous year could be set or a static monthly target © Strategy Digital 2014 10
  11. 11. Performance Based Pricing Pro’s Agency invoice reflects income which helps with client’s cash flow Monetary incentive for agency to drive results No remuneration for non-effective work Greater flexibility in resource allocation to suit actual requirements Challenges Invoice values will fluctuate (versus set marketing budget) Requirement of reliable data and set up of correct tracking Risk of external factors outside of clients or agencies control © Strategy Digital 2014 11
  12. 12. Conclusion Performance Driven Marketing may not always be a suitable solution but the dialogue about it should be opened up as it can offer a great and mutually beneficial alternative through:  Wealth of data available within digital marketing  Offers an incentive to drive the most effective campaigns  Rewards great ideas and motivates your agency  Allows greater flexibility through adaptable resources that are in line with your business requirements  Can help with cash flow and increase budgets as costs are linked to income © Strategy Digital 2014 12
  13. 13. Any questions? john@strategydigital.co.uk @strategydigi 0845 838 0936 © Strategy Digital 2014 13

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