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Pay-on-Results Marketing: The Pros and Cons

Posted by Will Williamson on 20-Jan-2016 09:33:00
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In a competitive marketplace with many different agencies competing for your marketing budget, ‘pay on results marketing’ is a new and, on the surface at least, attractive proposition offered by some suppliers. It is important before making any investment to carefully consider all the options available to you, and then make an informed decision based on what is likely to give you the best return.

We need to state from the outset that pay on results marketing is not a service we provide – and we will go into the reasons why below. However, if this is something you are considering, or you are thinking about partnering with a marketing agency for the first time, then read on for a breakdown of the pros and cons of this kind of marketing arrangement.

The Pros: The allure of pay-on-results marketing

The most appealing part of pay on results marketing is the apparent lack of risk. On an emotional level, it works the same way as ‘no-win no fee’ solicitors. For businesses who are sceptical that marketing will not deliver results, it allows them to dip their toe in the water without risking any real investment. The idea that the agency fees will pay for themselves if and when results materialise. What could be fairer than that? Pay on results marketing has a strong appeal for businesses who are new to marketing, or who have a very small marketing budget. For a director trying to put through a new idea to a team of doubtful colleagues, a pay on results agency may look like a less risky proposition to a supplier working on a monthly retainer.

The Cons: Why we don’t believe in pay-on-results marketing

Unfortunately for the pay on results agencies, this is where, in our opinion, the benefits end. There are a number of serious downsides to paying on results marketing which on balance outweigh any perceived gains from only having to pay when the results come in.

Where is the risk?

The idea that pay on results marketing reduces your level of risk is unfortunately not true. While you may not pay an up front agency fee, there is no denying that every service costs money. The agency is taking on more risk by changing a non-payment for their work if results are not forthcoming. So for this model to make sense for the agency, they will need to cut costs at source as much as possible, and focus on quick results in order to get paid.

This may mean they outsource elements of your work to suppliers you may not have chosen yourself, or they strictly limit the time spent working on your contract. There is also the temptation to use ‘off-the-shelf’ marketing solutions to secure quick wins, without any real creative consideration given to your brand. These concerns lead directly onto our next point.

Hard to hold the agency accountable

A pay on results agency will want to get you visible results as soon as possible. Note that visible, quick results do not always translate into real ROI. The old ‘black hat’ SEO techniques, for instance, were great at getting short-term search engine visibility, but there was an inevitable backlash when the search engines caught on. Furthermore, these techniques did absolutely nothing to increase a website’s conversion rate once visitors actually arrived.

Time is of the essence for a pay on results agency, so they will not have the luxury of carefully planning your campaign and persisting with a method until it works. Instead, they are likely to attempt a number of techniques in rapid succession, and it will be hard to hold the agency accountable for the methods they are using. As the agency will be trying a number of different messages and techniques, consistency will become an issue. They may start off using one message and then abruptly abandon it if it does not garner immediate results. The results of this can only be confusing for your target customers, as they receive multiple, often contradictory messages from your agency. This risks diluting your brand identity and making your target market less receptive to marketing efforts in the future.

The cocktail of different methods used by pay on results agencies may bring you a spike in search results or a flurry of new leads but it is likely to be short-lived. As soon as the agency has your money, don’t be surprised if the spike drops and things return to normal again.

You pay more for results

The increased level of risk taken on by the agency means that if you do get results, you will pay a heavy premium for them. Thus, pay on results marketing often works out as more expensive than a standard contract with an agency. In terms of ROI, you may end up with less value for money from your marketing.

No results lead to a self-fulfilling prophecy

The flip side of this coin is that if you fail to see results, then it may simply confirm what you felt all along. A pay on results agency may give you an impressive sales pitch, but ultimately they fail to convince businesses that marketing actually works. A traditional inbound marketing agency, on the other hand, will have more time to invest in you, to explain how marketing works, the expected timeframe to get results and why your investment is worth the capital you invest.

While the idea of no payment until results come in has its appeal, essentially this model holds up a false hope. It means that any results you get will cost you more than they would otherwise have done, and you also risk setting yourself up to fail by going into a new venture with no expectations of success. To talk with one of our marketing experts about real inbound techniques that gain results over time, please give one of our team a call for an informal chat on 01332 343281.

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