RESULTS-BASED MARKETING

Results-based marketing ties the objectives and costs of marketing consultancy projects to measurable outcomes that make a significant difference to the profitability of the client.

1. The ultimate results that the client requires are identified and quantified
2. The impact that the project can have on achieving these results is assessed
3. The charges for the project are linked to the achievement of the results.

This is easy to implement in some cases. For example, a client is looking to increase sales by acquiring more leads. Currently 10% of leads are converted to sales each of which contributes £5000 profit. The marketing project is set up to generate new leads of the same quality. If the company converts these new leads at the normal rate then each one will add £500 profit. The company and consultant then agree to a payment per lead as a percentage of the profit it should bring.

Please note that the above example is deliberately kept simple to illustrate the principle. In practise, incremental sales may produce higher or lower profit since the incremental costs may be vary and the payment per lead might be set on a sliding scale depending on the total number of leads generated. Also, the payment may vary depending on the quality of lead or the timescale in which they are brought in.

Most cases are more complex. For example, strategic marketing projects may have as one of their goals to determine potential impacts on profitability so the outcome of the project is more difficult to quantify. Also, in many cases, the consultancy will be only one factor leading to the required improvement in results. An example of this would be where the marketing project was to improve the company's messaging but where it would then be up to the management and sales force to use the messaging to increase sales.

Therefore in many cases the consultant takes a risk that, even if the work is done to a high standard according to an well-defined brief, the ultimate desired outcome may not be achieved due to other constraints within the client or may take a considerable time to achieve. For these reasons, the payment structure for the work includes

• A minimal time-based fee as insurance against change of priorities by the client or internal constraints preventing implementation
• A large reward for significant success to take into account the risk involved and the delay in payment until the impact on the business is assessed.

Five factors determine the ultimate payment for the project:

1. The contribution of the project to the overall measured results
2. The skill required to implement the project
3. The risk that other factors outside the scope of the consultancy could hinder the achievement of the required results
4. The timescale for the results to be achieved
5. The ultimate economic benefit to the client

While pure results-based marketing (which ties the fees for the project to increased profitability or growth) cannot always be implemented, it should always drive the way in which the project is set up

• Linking required results to ultimate outcomes for the client (increased profitability or growth) rather than intermediate steps
• Aligning the interests of the consultant and the client
• Setting measurable goals for all projects