All right let’s start with the obvious, if I worked at a different agency I would get fired for even talking about this subject. Performance based comp has become a huge topic of debate in the industry. Let me quickly end that debate… it makes a hell of a lot of sense for both sides period. In my opinion it protects clients from hiring stupid or complacent agencies, and protects agencies from wasting their time with stupid clients. Let me try to give you some examples of what I mean. At Sapient we are simply manic about “client success” it’s in our language, we measure the hell out of it, it’s even tied to our bonuses. Why not get paid for it?

Here is some food for thought. Two years ago we managed to hit our client’s yearly customer acquisitions goals in just two and a half months. Literally by early March we were done for the year. I would attribute that success mostly to the agency’s ideas. A performance clause would have been nice.

 This year again we helped raise over $14 Billion dollars in deposits for a leading financial services firm in less than six months. This one I would attribute partly to the offer, partly to a very media savvy client who was not afraid to take a chance, and lastly to our team who cranked out an unbelievable amount of work is such a short period of time. Clearly it would have been nice to partake in some of that bounty too.

In both of these cases we were on the phone with the client almost everyday (on big media days almost every hour) and the first words spoken on every call were “how are we doing?” “What are the results” – that’s a hell of a better lens to be aligned with than “I hope they like this creative as much as we do?” In these scenarios the client would be happy that the agency got a few extra bucks regardless of where the biggest contribution came from.

It’s a very different situation when things aren’t going so well, and here is where I hope to make my point that performance based compensation schemes drive all the right behaviors on both sided, and actually grease the wheels for client success.

A performance deal actually empowers the agency to be a true partner. It facilitates tough conversations that have to happen to change the course of the campaign. I now know better, but I can recall when in a previous life we would just  throw our hands in the air and say “well if that’s what they want” when we knew it was not what they needed. It gives the agency a voice at the table, which is sorely needed. “your pricing is wrong” “the call center process is broken” etc. there are many factors outside of creative and media that can effect success.

One major pitfall that is avoided though performance compensation is Agency complacency, meaning that after banging their heads against the political walls on the client side, the agency just stops thinking and does exactly what they are told. This creates little value for the client and completely squashes any appetite to innovate at the agency.

I also protect good agencies from bad clients, and bad clients from themselves.

 Not to long ago we were running a campaign (again an FS client) where they offered a competitive rate. The campaign was doing very well and then “the powers that be” decided to change the rate significantly for the worse. You can imagine what happened to the results, but the client insisted we come up with more compelling creative to get the numbers back up.  The right thing to do would be to kill the campaign altogether and focus on other initiatives. Imagine if you had a gas station as a client who decided they would sell their fuel for $1.00 per gallon more than the station across the street. Not too bright right? Well when they realize no one is buying fuel from them anymore – they decide to spring for a bigger sign in hopes of better results. Imagine this scenario when you are being paid on performance. Many agencies say this is why performance comp cant work, I say nonsense it would drive the right behaviors. In this situation the agency would fell more compelled (and financially motivated) to help the client change tactics, if that failed they get the hell out of that account. Both- better outcomes.

Many marketers who were early adopters of online advertising had become accustomed to being the heroes of their respective organizations for consistently wining the battle with that elusive monster called ROI. You brought home 5,000 new customers in one month for less than anyone else on your team and you were a “genius” , your boss was very impressed and consequently handed you a few more bucks and said “can you do 10,000” – you did it without breaking a sweat. You can guess what came next, a new goal 20,000. This time it was different, the most you were able to do no matter what was 12,000 – what happened? You did everything right, you applied everything you had learned; rigorous testing, constant optimization, and your go-to media placements and keywords were all covered.

Well there is a HUGE difference between demand generation and demand harvesting. Harvesting existing demand for your products or services is a hell of a lot easier than creating demand for them. That said I’ve learned that the magic sauce for scaling your business is doing both well and in concert with each other.

Very few marketers do this, in fact there seems to be some silly unwritten law in the marketing world that states you should choose a side - you are either a brand marketer or a direct marketer and these are mutually exclusive. Like being a Republican or Democrat, a sailor or a power boater. Even marketing organizations and agencies seem to come in two flavors. I say this is ridiculous. Why would you create demand for your product and not do a good job of capturing it, or conversely why would you expect to harvest more business than your brand commands.

I would attribute most early success in the online space to the inherent transparency and efficiency of the channel for harvesting demand. It suddenly became easier than ever to be a great direct marketer. You now had all the data and tools to be at the right place at the right time to capture demand. What could be more elegant than buying the keyword “purple couch” when you have a line of purple couches for sale this season? The beauty of the web is you now had the ability to reach “everyone” who had that want or need.

I’ll continue with the silly couch example. Sure before you started marketing online you typically sold 10-12 purple couches every month, and now you sell 100  - that’s real growth right? Yes, but you cant mistake that for creating demand. There were always 100 people out there (with very bad taste I may add) who wanted a purple couch; you just were simply not reaching them. Reality check - If you want to sell 100,000 of those purple suckers you’re going to need to get Opra or Martha to tell the world they have to have one before the holidays…that my friends is demand generation.