Linking rewards to business results
The value of my work depends on improving the results of the clients for whom I work. I aim to be measured on these results and rewarded accordingly, for example being paid for improving the quality or quantity of leads received.
Sometimes linking rewards to results is very difficult to achieve. For example, creating a marketing strategy may have enormous benefits but these may bear fruit in the long term and I may not be responsible for their implementation.
However, whenever possible, I agree to work with clients using the principles of results based marketing, as set out below.
Results based marketing
Results based marketing ties the objectives and costs of marketing projects to measurable outcomes that make a significant difference to the profitability of the client.
- The ultimate results that the client requires are identified and quantified
- The impact that the project can have on achieving these results is assessed
- The time and resources that both client and consultant need to commit are calculated and agreed
- The uncertainties and risks are used to determine the contingencies to be included
- The charges for the project are linked to the achievement of the results
The benefits of adopting this approach include
- Clearly setting out the aims of the project at the beginning in terms of positive impact on the business
- Aligning the objectives of those doing the marketing with the business objectives of the client – each will share in the success
It is easy to implement results based marketing 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 produces a £5000 margin. 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 to the overall margin. The company and consultant then agree to a payment per new lead as a percentage of the margin 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.
Give and take
For results based marketing to work, there must be commitment by both the consultant and the client.
The consultant is only paid if the desired results are achieved.
The client, for his or her part, needs to commit to the agreed goals, must provide the necessary resources from their side (e.g. information, support to implement, access to systems) and must have available measurements of current activity and results as a baseline from which improvements can be measured.
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 can include
- 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:
- The contribution of the project to the overall measured results
- The skill required to implement the project
- The risk that other factors outside the scope of the consultancy could hinder the achievement of the required results
- The timescale for the results to be achieved
- 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.
Where uncertainties in terms of current measurements, outside variables or other client priorities, make a pure implementation infeasible, my policy is align the project to results as much as possible.
- Breaking the project down into steps, each with a fixed cost, and with a review of results after each step. The review allows the following steps to be modified, if necessary, to produce the required business outcomes. In this way the client is not committed up-front to a large project with uncertain results
- Linking payment to intermediate goals if the ultimate goals are difficult to measure e.g. payment for increased leads rather than increased margin on new sales
Discussing the goals and how to measure them as well as the marketing and other actions necessary to achieve them, is a key way to build the relationship between consultant and client, and to agree payment for the marketing skill and effort provided which both sides feel is fair.