Can an agency make more money with a pay-for-performance model than they can with a costs-based model?
According to Jacki Kelley, CEO of UM, Interpublic’s Group of Cos’ media agency, the answer is yes.
According to Ms Kelley, “The current (fee) model is not sustainable when you think about the level of analytics and investment that needs to be made to deliver what clients want.”
In other words, the more knowledge the client gets through analytics, the more obsolete the fee system becomes.
Agencies know this. Advertisers know this. So why isn’t pay-for-performance being adopted more broadly?
One reason is that it’s difficult to change the status quo. Another is that clients want their marketing budgets to be fixed, not variable.
But the main reason is that pay-for-performance is difficult to implement without a degree of uncertainty.
Advertisers don’t deal well with uncertainty. Instead, they would rather overpay for certainty.
Even when the only certainty they can be certain of is failure in the marketplace.