Pay for Performance Marketing. Is It Right For Your Business?

Pay for performance marketing (pay for leads, pay for performance, pay for performance model, pay 4 performance marketing model) is a digital marketing pricing model where the marketing agency receives compensation from a business for each new lead it obtains for the business. The agency creates marketing campaigns and promotions to garner and convert leads. Thus getting paid for the lead when it is passed onto the business.

Simply put, pay for performance marketing is payment for getting results. This shift in marketing is already happening and is being embraced by such industries as home services (contractors, roofers, windows, dumpsters, tree services) manufacturers, and distributors. 

A marketing agency that offers this pay-for-lead service means they have to put their money where their mouth is. They're paid on performance rather than the traditional agency model of a monthly retainer fee. This means the agency better have some serious chops when it comes to marketing or else it won't survive.

Is pay-for-performance marketing a good model? It reverses the traditional model of a marketing agency where the business is required to pay for the creative/video/marketing work of the agency regardless of the return on investment. Most businesses have been burned by a marketing agency promising success at some point or another. Because of this business owners are starting to shun marketing agencies, which has turned marketing into an unreliable word and marketing professionals into an untrustworthy profession. The pay-for-leads model means companies need to invest little or no money upfront, but must benchmark and measure marketing campaigns with a close eye to work out fair compensation for the agency.

The model is advantageous for the business because there is little or no risk for them compared to the huge undertaking for the marketing agency. Creating a successful campaign and getting the leads is the sole responsibility of the agency. This means the agency must be good at what it does and understand the marketplace to get paid.

 The pay-for-lead marketing model is great for a business such as tree services.

Though it seems one-sided and in favor of the business, it often contributes to a better understanding and closer relationship between the agency and the business. 

Whether a local small business, a franchise owner or a global enterprise, the pay-for-performance model can work and scale with you as you grow. Although not every business and industry will be a fit. The best partnerships are formed when the businesses possess specific and unique qualities such as:

•They are a growth-oriented company?
•They have a sales process in place?
•They can handle a high volume of calls and appointments?
•They can fulfill the additional workloads?
•They take reputation & customer service seriously? 
•They have a dedicated person to answer the phone?

Are there any disadvantages to a pay-for-performance marketing model? 

Presuming your business qualifies the only disadvantage might be long-term costs. It might be less expensive to pay several thousand dollars a month for marketing services than to pay a percentage on leads. But, this is a good problem to have - you're getting more leads. The agency is motivated (perhaps more so than the traditional model) and wants to get you leads so they can get compensated. Plus, your business might be seasonal, meaning there might be some months you can scale back the lead generation efforts and pay less. You'll also of course have to take into account how good your agency is. For instance, an agency that provides video production, video marketing, and video SEO along with traditional SEO will probably be able to get you far better quantity and quality of leads than an agency just doing traditional marketing tactics like print, advertising, and PPC.

Most times with this p4p model all the media created as part of a partnership, including websites, videos, graphics, call-to-actions, Internet ads, whitepapers, etc., is owned by the agency. Whereas in a traditional arrangement, the media properties are purchased and owned by the client.

It's important not to confuse pay-for-performance with pay-per-click (PPC). PPC is a web advertising medium that can get highly ineffective and expensive if you don't know what you're doing. Whereas p4p marketing is usually risk-free to a business, a PPC campaign means a business is taking the risk of converting a customer between a click, a visit, and an actual lead or sale.

To give you an example and perspective, Avanti Vision offers pay-for-performance marketing to qualified businesses. Our "pay for performance partnership" means a business will pay nothing upfront but will benefit from our knowledge, skills and experience in lead generation. Avanti Vision will market and promote your business to generate leads and sales, then take only a percentage of the leads generated as compensation.

Here's what you should look for when hiring a pay-for-performance marketing agency.

Performance marketing is a hot topic among agencies. Some say it’s the future of marketing, while others insist that change is not a good thing. If you're a business that has been burned by the antiquated ad agency fee structure in the past, then the pay-for-performance marketing model could be for you. Sure it might be new and different, but that might be what you need at this juncture to grow your business.