Question

What if a marketing firm offered to have a variable fee schedule for services based on results gained from the solutions they implement? Compare the benefits vs. the cost of this for both the buyer and the seller. What measurement for success would you recommend for this offer?

Answer 1

Compare the benefits vs. the cost of this for both the buyer and the seller.

Costs and benefits of the purchaser: The buyer has less ability to anticipate costs in a fixed fee schedule because fees can fluctuate. The key benefit, though, is that the fees paid are directly linked to market performance movement. This should result in money being well spent as long as the metrics are correctly defined.

Costs and benefits of the seller: The purchaser also has little ability to anticipate risks in a fixed fee schedule. To meet the desired thresholds, it may take five hours, or it may take fifteen hours. In any case, the vendor is liable for the shipment and will be paid only if they do so. The main benefit to the seller is the potential to capture additional revenue if the seller is able to deliver above-and-beyond the anticipated metrics.

What measurement for success would you recommend for this offer?

The performance metrics are important when contemplating an adjustable fee schedule. If the metrics are not correctly defined, or if they do not meaningfully move the enterprise forward, the project will not achieve the desired end result. In the case of recruiting a marketing company, the customer will need to understand thoroughly what they want the marketing company to do and how this will lead to increased revenue. Few examples of metrics may include: produced leads, closed market, participation of social media, and more.