Paying For Marketing By Results

Traditionally, companies centered their marketing plans around their products, sacrificing focus on the customers who would be buying and using it. But we exist in a customer-centric era: understanding and knowing customers, offering them what they want in the way they want it, and providing them

with the right level of service and at the right time. This cycle, which we call Closed Loop Marketing, makes it easier for customers to relate with an organization, and averts unresolved issues and questions. It also enables businesses to reduce customer defection rates and instead, focus on building stronger customer relationships.

But the challenge of making this model work lies within the need to understand, predict and proactively respond to the dynamics of customer relationships. In theory, we know how to address these challenges. But in reality, we are faced with having to deal with opposing strategies from within an organization’s sales and marketing departments.

As your marketing department may only be focused on lead generation, all the responsibility for qualification and closure is passed on to sales. With an emphasis on quantity not quality, your sales department is likely overwhelmed and spending more time qualifying leads than actually closing deals. And as a reseller, your sales commitment goes beyond your own organization to that of the vendors you are representing, making it more important than ever to bridge the gap between your sales and marketing operations.

To overcome these types of challenges, you need to implement a closed loop marketing strategy that not only focuses on acquiring new customers, but also effectively brings together your sales and marketing operations as a single team. But if this is an approach you have tried in the past, and find that history is just repeating itself, you may want to enlist the help of a marketing agency.

An agency can work with you to implement a closed loop marketing strategy. An outside agency will offer valuable objectivity, have a neutral stance on the existing relationship between your sales and marketing departments and work seamlessly with both. But more importantly, an outside agency may also represent an opportunity to share some of the risks involved with closed loop marketing. Increasingly more marketing agencies are open to discussions with resellers about sharing the risks (and rewards) of acquiring new customers.

Traditionally, the onus has been on the reseller to extract maximum benefit from a marketing agency while bearing the associated costs of a marketing program—whether it fails or succeeds. But with a Payment by Results (PBR) approach, the marketing agency has a vested interest in increasing your revenue.

This system of agency remuneration includes a fixed payment, which is used to cover agency costs, plus an agreed level of profit margin. You and the agency also agree on a set of measurable objectives, and a system for tracking the progress of the program. Based on performance against target, the agency is able to earn additional bonus payments.

However, PBR is not purely a system of goal-based remuneration. It is also a working methodology. At the heart of PBR is the concept that you and the agency share knowledge for mutual benefit. If your objectives and goals are clear, the agency will quickly become an integral part of your marketing process. If the relationship is rewards-based, the agency contribution is more effective and cost-efficient, and you don’t have to wonder if you are getting the most benefit from the relationship with your agency. The trend towards PBR is motivated by the demand for continuous improvements in productivity. With PBR, you can expect some of the following benefits:

  • Better mutual understanding of goals and corporate cultures
  • Greater cost efficiency and accountability on both sides
  • Attraction of top class talent, due to committed relationship & clear goals
  • Improved effectiveness of marketing communications product and process
  • Superior quality of work.

However, for a PBR relationship to succeed, both parties must be prepared for compromise and a change of mindset. You must be prepared to pay for results and your agency must be prepared to assume risks. The following factors must be in place:

  • Full support at the most senior levels of the your organization.
  • Agreement on the goals set and the measurements to be used.
  • Acknowledged understanding of the Agency contribution to the your goals.
  • Partnership and trust between you and the Agency.
  • Awareness of the roles, responsibilities and accountabilities on both sides.
  • Goal alignment between marketing and other parts of your organization.
  • A broad understanding of the Marketing Agency’s business.
  • A deep agency understanding of your business.

 

This more entrepreneurial style of partner relationship may not be for all resellers, but if you commit yourselves to making it work, the payoff can be substantial and realized.

Chris McCarten is president and CEO of Myriad Marketing Inc, an integrated marketing and corporate communications firm, specializing in Closed Loop Marketing strategies. For more information, please visit myriadinc.com or contact Chris McCarten at chris@myriadinc.com

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