Even though pay-for-performance may sound great in theory, contributor Stoney deGeyter says the reality is that the marketing provider ends up getting burned.
Let me start off by saying that I absolutely love the idea of performing web and digital marketing services on a pay-for-performance basis. But some things that sound good in theory have disastrous consequences in their execution. [Insert political joke of your choice here.]
Many business owners look at the pay-for-performance model as a reasonable way to do web marketing. I mean, why pay if you don’t get the results you want, right? Usually these business owners are wary of the amount of investment needed for success, or they’ve been burned by unscrupulous SEOs.
I get it. But companies can’t just turn over their digital marketing success to a marketer and walk away. It’s a team effort.
Digital marketing is like politics health care. Your doctor can only tell you what you need to be doing to maintain your health or recover from a disease, surgery or sickness. They can’t do it for you. They can give you prescriptions, put you in physical therapy — heck, even hold your hand if necessary. But no matter what, there are no guarantees of success.
This analogy has one major flaw, though. There are no losers for the sake of winners in health. In health, everybody can win. In online marketing, however, there are only so many top 10 spots in the search results. So maybe a political analogy is better here, because in web marketing, there will definitely be some losers.
Everyone has the potential to win, though. It’s just a matter of doing what it takes, and hoping Google rewards you for a job well done.
Pay-for-performance models that don’t work
Before I discuss the problems with pay-for-performance at-large, let’s look at some specific pay-for-performance models that don’t work. Or at least, don’t work anymore.
Pay-per-ranking
Assuming that there is such a thing as a universal search engine ranking anymore, pay-per-ranking is probably the worst possible pay-for-performance metric. The model usually goes something like this:
Google positions #1 SERP:
$x when position achieved + $x to maintain this position / month
Google positions Top 3:
$x when position achieved + $x to maintain this position / month
Google positions Top 10:
$x when position achieved + $x to maintain this position / month
I haven’t seen anyone trying to use this model for over 10 years, but there was a time when it seemed to be pretty popular.
One of the problems here is that it’s not scalable for long-tail, low-volume or low-value search phrases. Websites can rank for hundreds of phrases, but many of them will provide little value. Who determines the cost of each specific phrase?
But the real reason this model doesn’t work anymore is that there is truly no such thing as a top search engine ranking anymore. Search results are personalized for each searcher to the point that everyone gets a different set of search results.
And even if you could find a way to make this model work, I wouldn’t suggest it. The focus is too much on search engine rankings instead of creating a website that provides value to the searcher. The rankings game is a losing game. It’s all about the customer.
Pay for traffic
Another mechanism used for tracking performance is to pay for traffic. With a measurable baseline, any increases in traffic can be measured with a dollar amount attached to percentages of increase.
This model gives the SEO free reign to go after both long- and short-tail keywords and keeps them focused on those that are likely to produce the most traffic. The problem, however, is that the focus, again, is on the wrong thing.
Sure, traffic is good — you can’t succeed online without it. But targeted traffic is more important. There are plenty of ways to drive traffic to a website, and most of them will have little impact on business growth.
But even targeted traffic isn’t all it’s cracked up to be. Blogs and content marketing are great ways to bring new, interested visitors to your website. But most of those visitors are interested in information, not in making a purchase. At least not today.
Don’t get me wrong, brand building is an important part of your digital marketing campaign. But it’s a much longer play than even on-page optimization, which can take a year to produce stellar results.
Pay based on revenue
Okay, those two were easy to swat down because they’re really not viable. I was just trying to reach the minimum 10,000-word requirement for this article. (Kidding!) Now, let’s take a look at a performance-based pricing model that is probably the most workable of any: revenue.
This is probably the most reasonable and fair pricing model. The idea is to pay the web marketer based on measured increases in revenue on a year-over-year basis. This allows the web marketer to apply their trade in any and every area of web marketing, but also keeps them focused on what is most likely to produce the results that get them paid.
I love this model because everybody wins!
How SEOs get burned by pay-for-performance
But if it’s so great, why don’t I like it?
The short answer is because the marketing provider inevitably gets burned. And it usually happens in one of four ways.
- The client decides to “go a different route,” only after the agency does all the work necessary to get results. The client takes all the work with them, and the provider is left with nothing. The only way to compensate for this is if the contract states that the provider is guaranteed to be paid for a certain number of years after the contract is terminated.
- The client makes changes to the work the web marketer has done without discussing it with the marketer first. This frequently has the effect of undoing their efforts or further complicating them.
- The client won’t implement the marketer’s recommendations. It’s true, not every recommendation a web marketer makes is the right thing for the business. Some recommendations stem from the “this is what usually works” pile, but we know that not everything works for every site. Usually, though, the web marketer has a good reason for a recommendation, and dismissing it out of hand can be problematic to the success of the campaign.
- The marketer has no input in other areas of the business. Some businesses just don’t succeed, despite the best web marketing efforts. What happens once the transaction moves offline is just as important to the business’s revenue as the marketing is. All the processes put in place, from answering phones to fulfilling orders or services, can make or break a company, and even the best web marketing can do absolutely nothing to fix that. Nothing short of an equal partnership in the company can remedy that.
As I said, I love the idea of pay-for-performance. In a perfect world, everyone benefits. The marketer will do nothing short of investing everything he’s got to achieving success, and the company is rewarded with a growing business.
But that perfect world doesn’t exist.
A real-world example
Years ago, a friend of mine asked me to help out with a project he was working on for a client. He was being paid based on performance as the designer and wanted our team on board for the marketing. It sounded like a great opportunity.
We spent many hours, weeks and months performing research, implementing SEO strategies, fixing problems and slowly getting the site to a place where the search engines would find it valuable. This was a startup, so we understood that it would take some time before our work would produce strong revenue.
Then one day, the owner of the site decided to switch to another back-end system which he was convinced would generate more business for him. In doing so, a large chunk of the work we had done was made obsolete. We told him this, but he didn’t care. The system was superior.
That would mean we would be starting over from the ground up. But even worse, there was no guarantee the same thing wouldn’t happen again. And again. I couldn’t afford to invest my time without having some input or control over how the business was being run.
Who really controls the outcome?
I cut our losses and ran away, learning a very valuable lesson. Web marketers cannot be held responsible for what they do not control.
- They are not involved in customer service or how the business owner or employees interact with potential customers on the phone.
- They can’t act as a salesperson for the company.
- They are not responsible for the quality of products or services sold.
And all of these impact revenue and success.
Does the SEO being paid for performance have the right to tell the site owner how to run their business? Can they dictate the design of the site, forcing the client to make whatever changes are deemed necessary, regardless of cost? Do they have permission to toss out all the content, train the sales staff or educate the team on customer service all the way down to how to respond to emails? Can the SEO veto product selection or have a say on quality, pricing and profit margins?
Most business owners would find this ludicrous, and rightly so. But it’s no more ludicrous as a pay-for-performance pricing model in web marketing when the SEO doesn’t have that kind of say.
Pay-for-performance sounds good in theory, but not all theories prove true.
Some opinions expressed in this article may be those of a guest author and not necessarily Marketing Land. Staff authors are listed here.
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