Digiday Agency Summit: Pay-for-Performance Isn’t Just About Compensation, It’s a New Way of Operating

by Jason Wadler on October 24, 2012

This week I had the privilege to speak at the Digiday Agency Summit, along with the incredibly smart and enlightened Glenn Engler, CEO of DIG. We spoke about the shift occurring in the marketing industry around measurement, accountability and, ultimately, performance-based compensation. Digital marketing has largely changed the way businesses and consumers interact today; unfortunately many agencies, and even some marketers, are playing catch-up to adapt to this change—and doing it in a way to ensure they are aligned against the right outcomes.

Leapfrog believes pay-for-performance is about much more than compensation. Pay-for-performance is about how marketers and their partners interact and innovate to solve real business problems—how they use the incredibly high level of data and insights that marketers now have available to drive relevant consumer experiences and measurable impact. A performance-based model demands more accountability in marketing campaigns to produce outcomes that directly grow our clients’ business. That accountability shouldn’t be something to fear. It should be a welcome change from soft metrics that leave marketers grasping for ways to prove value, which ultimately do not build trust with either the marketer or their partner. Now that we have the ability to truly align goals and tie our success to the success of our clients, the level of trust is unprecedented.

This is likely a major sea change for agencies, and it will take time. But it’s not simply a “potentially” good idea, either—CMOs are being driven by CEOs and CFOs to ensure their agency partners have skin in the game. At the same time, agencies are questioning if their clients are willing to fairly compensate them for growth rather than pay-for-performance just being a way to reduce their costs. The reality is that there is a two-way trust that needs to be firmly in place, aligned to mutual success. As a marketer, if you have one agency that succeeds whether your brand does or not and another agency that only succeeds if your brand succeeds, there will logically be higher confidence in the partner whose compensation is directly connected to ensuring your business grows.

As digital continues to evolve, agencies must adapt to come up with new, innovative solutions. If they don’t, they risk being left behind. Shifting the compensation model is simply part of this evolution. The marketing industry is already displaying its own process of natural selection, with pay-for-performance becoming a trait of evolving marketers. It’s time for agencies to risk extinction by truly answering the hard questions that their clients are posing to begin moving toward more aligned models. The writing is truly on the wall, and the walls are closing in.