Why Direct Marketing Agencies Don't "Put Skin In The Game"

Some prospects ask whether we'll work on a contingency basis: If the stuff we create succeeds, we get paid, and if it doesn't, we get zip. Or they ask us to take a big reduction off our usual fee up front and receive the balance if the campaign is profitable. Here's why we turn down those offers:

1. We only control some of the variables that contribute to the outcome -- We don't have anything to do with product quality, the competitive situation, price, sales team quality, customer service, the economic climate, the location, or weather conditions. And believe it or not, some products don't have enough of a natural pulse to ever fly.

2. It could be tough to get accurate results reports -- Some clients don't have systems in place to thoroughly track results. And will 100% of clients supply accurate results data in these cases? You tell me.

3. Agencies have an inconvenient item called overhead -- Like our clients, we regularly pay salaries, rent, insurance, and other expenses that keep a business running. If we get paid many months after we incur the costs, we dig ourselves a financial hole.

4. Prospects that make these requests aren't true marketing advocates -- They're usually sales managers who don't understand marketing or believe in its potential. The non-believers tend to be among the worst clients.

5. There's no rational economic reason for clients to operate this way -- For 100+ years, clients have paid marketing services firms for their effort and received valuable services in return. If the campaign doesn't produce, fire the agency. But don't ask professionals to work for free. 

6. Agencies shouldn't enter into win/lose relationships -- Many of these offers involve huge upside potential for clients and no significant financial incentive for agencies. I've asked prospects to give us an appropriate bonus for transforming the bottom line in exchange for a modest reduction in our fees. I've never had a single taker.

7. Awesome agencies have other options -- For every prospect that asks an agency to put skin in the game there's another willing to pay the agency's going rate.

8. We already have an incentive to do awesome work -- If our work succeeds, the client is likely to keep working with us. That's a pretty powerful incentive.

9. Agencies are stocked with highly trained, skilled, accomplished professionals -- Would you ask your doctor to put skin in the game?

Comments

[Jim Logan]

Great list Robert! And excellent points. As a direct marketer and copywriter, I'm occasionally asked if I'd forgo payment for a share of pending success. I politely answer "No" and offer a number of things you mentioned in your post.

However.

A couple times I have agreed to provide my services for a percentage of gross revenue. And I've made some terrific money as a result. The key to success in doing this is qualifying my client more than they qualify me and controlling as much of the process as possible.

I wouldn't and don't (read extremely rare) exchange my services for future results as a routine part of my business. I'd go broke if I did.

But I've done it before and will probably do it again. If the deal is "right."

[Adelino de Almeida]

Great post, this is one of the clearest arguments about the topic I've read in a long while