Tuesday, February 21, 2012

Pay For Performance For Creative Agencies

A few weeks back, Corey Treffiletti asked an interesting question.

Can a pay-for-performance model really work in the agency world?

My question is this. What kind of agency are we talking about? Media? Or, creative?

Mr. Treffiletti's column goes on to talk about how the Emerging Media Lab within IPG is going forward with such a model. The Emerging Media Lab is the innovation wing. So to encourage media innovation from their clients, they're agreeing to be paid only if it works.

Makes sense.

But how about for creative agencies? Why aren't they going to pay-for-performance models? I think the answer is fairly simple.

What is the performance that they would be paid for?

In the past, the answer was always sales. But because today we have much more granular measurements of an individual agency's contribution, sales should no longer be the basis on which performance is initially measured.

It's a foregone conclusion amoung CMOs that if choosing between a commercial that is watched and a commercial that isn't watch, the commercial that is watched will be more effective.

So the act of watching a commercial, or, a viewer's engagement in a commercial, can be considered a performance measure.

Fortunately, we can now measure, and know exactly how much of a commercial was watched by viewers. Whether this leads to sales or not, is not the point of this performance measure. First things first.

And the first thing is, was the commercial watched? And, if so, how much of it was watched?

Sales are due to an accumulation of factors. The effectiveness of a commercial produced by the creative agency is just one of those factors. That effectiveness is subject to the commercial being watched.

If the marketer knows that viewers are actually watching the commercial, then the marketer knows that message has a good chance of being received by those viewers.

Which is why it's on this basis, the basis of creating engagement in a commercial, that creative agencies can be measured.

And, as is the case with all measurements, this will allow their performance to be monetized.

Potentially, the greater the nunber of consumers that consume the commercial, the greater the number of sales. But the job of how many get exposed to the commercial, that's the media agency's job, isn't it?

The job of how long those that are exposed to the commercial engage in it for, is the creative agency's job. So, to answer Mr. Treffiletti's question, yes, a pay-for-performance model can work in the agency world.

The question, you see, isn't if it can work.

The question is, when?

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