Pay-Per-Result Cost Models Aren’t So Clear-Cut

No one wants to waste money. And no one wants that uneasy feeling that they aren’t sure whether they’ve wasted money. This is true for us as individuals, and is definitely true for businesses. More commonly thought of as “efficiency” in the business community, it can have the additional weight of directly or indirectly affecting one’s performance evaluation or bonus. With all that at stake, it’s no wonder that advertisers are asking for—no, demanding—cost models that reward demonstrable results.

Paying your ad agency on a pay-per-result model can be a good thing. While I believe that we’re working hard for our clients because it’s what we do, some agencies are only truly invested in delivering defined results when they have skin in the game, too.

Illustration of the pay-per-result cost model

With digital media, it is easier to show performance metrics than it was with former models such as phone call tracking (which can still be used as a metric), coupon redemption or other similar methods.

But like most things, it’s not all upside. If your cost model rewards campaign metrics, you will steer the media mix by giving credit to the facets of an integrated campaign that are “working” (such as paid search). If your cost model is based on larger-picture company results, such as sales, it adds the challenge of collecting accurate and timely reporting by your system. And like the stock market, this model rewards short-term performance versus long-term growth.

There are additional factors to consider. Is it worth allocating the time and cost of collecting, evaluating and reporting the data? Often the answer is “yes.” Can the performance metrics be clearly attributed to the advertising? That one is tricky…the advertising may have gotten a customer in the door, but closing the sale is up to the sales team.

Once the initial questions and contracts are settled, a pay-per-result model may be the right solution for you. Understanding some of the complexities and trade-offs will assist in making that decision, and in making it a smoother execution.

And we can help you make it! Find out more about how we can assist you with integrated media planning and buying.

 

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