Tuesday, October 28, 2014

Don’t Sell A Service. Sell An Outcome

When agencies sit down with their clients to figure out what their fee should be, it is most frequently based on what services will be offered, and how much time it will take to fulfill these services.

Agencies are used to selling a service, pricing it, and being paid accordingly.

So what if agencies based their fee on outcomes versus services?

I recently asked the heads of a few agencies this question.  Their answer?   Are you nuts?  

"Don’t you understand,” one said.   “By selling a service, we get paid whether the advertising works or not.”

What went unsaid was that most advertising doesn’t work. 

Agencies know it.  Advertisers know it.  And yet, the fee structure doesn’t change.

Perhaps it’s because we don’t know which outcome to base fees on. 

Sales? 

In most cases, it’s difficult to correlate one particular action to sales increases.  In the past, when an advertiser had an agency of record, it was easier.  But today, when each advertiser has a record number of agencies, it’s more difficult.

But certainly, there must be an outcome that advertisers and agencies can agree is necessary for the selling process to have a chance of occurring.

Take the thirty-second TV commercial.  Which do you think would be more indicative of a sale occurring?  If only ten seconds of the commercial is watched? 

Or, all thirty seconds? 

Every advertiser I talked to said the latter.  Every agency head I talked to said the latter.

If there is industry-wide agreement that view duration impacts sales, then why aren’t agencies held accountable for view duration in the commercials they create?

Why aren’t we measuring and monetizing a commercial’s ability to hold an audience?

Why do advertisers allow failure to continue to be lucrative for agencies?

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