Now that you’ve settled into your comfort zone of 12 month retainers the world is going to change again. As we get better at generating leads, inbound marketing agency owners need to consider shifting their engagements to more “pay for performance.”
In 2016 clients are going to be asking more aggressively for pay per lead engagements. Meaning, you cover your costs and potentially make a small profit with a base retainer and then you get paid for every lead generated by your program.
This type of program configuration presents a whole host of challenges but as 2016 gets closer you and your agency are going to have to start getting comfortable with this approach. Clients are going to be asking for it, you’re going to have to deliver it and if you can’t or won’t—potential clients are going to look at that as an indication you’re not confident in your own lead gen abilities.
Here’s how to get ready for the coming change in compensation for inbound agencies.
Get Good At Inbound Marketing
Another reason to go all in. If you’re running a handful of inbound engagements right now then you’re getting a handful of experiences using inbound to get leads for your clients. If all your clients were inbound engagements then you’d be getting twice, three times or more of the experiences and your ability to feel comfortable delivering would be accelerated. You just can’t be an inbound agency in 2016 unless all you do is inbound.
If you’re doing 50% website design and 50% inbound marketing, you’re still a website design firm. Sorry, but no-fluff here. It is what it is.
Help Clients Understand The True Value Of A Lead
This is a major challenge around pay per lead programs. First, you need to get clients to agree to a definition of what is a lead. Since we’re not offering “a chance to win an iPad” then anyone who converts on your website is technically a lead. Leads come in for all stages of the sales funnel, so no matter what level they’re in on their buyer journey—they’re a lead.
You could get paid less for a top of funnel lead than a bottom of the funnel lead, but that would be up to you and how you configure your program. The other end of this conversation is the actual value of that lead and this technically has everything to do with the lifetime value of a new customer. This is a difficult number for a lot of businesses to get their heads around.
For example, if you sell implementation services for SAP software and one client is potentially worth $1 million dollars over the course of the engagement then you should get paid accordingly for those leads. If your client sells HVAC services and the average revenue per client is $250 then that per lead program will look much differently. If you can’t have this conversation with your client then they’re not a good fit for a pay per lead program.
Understand Your Fully Allocated Costs
When it comes to configuring a program like this you have to make sure it works for you and for your client. The only way it works for you is if you get enough retainer to cover your costs with perhaps a small profit and then risk the rest of your profit on your ability to generate leads. Since this is a pay for performance program, if you generate a lot of leads you should make a lot of money—much more than you would have made on a straight retainer program. Remember you’re shouldering a lot of the financial risk and with that should come a higher reward.
Put Together Some Sample Pay Per Lead Programs
A great way to get ready for the coming changes is to create a sample program. Start working on this now so by the time a prospective client asks about this you’re already prepared with some of the basic numbers. Build this out in an Excel spreadsheet and model a sample client program.
Take your costs, create your monthly retainer, factor in your per lead fee, either all leads equally or a different number for different types of leads. Then model out each month based on projected performance and make sure your monthly income works for your business. This doesn’t have to be perfect but by going through the exercise you’ll be much better prepared should you be asked to consider this in 2016.
Test It With A Client Or Two In Early 2016
One of the challenges with this type of program is it only works when you’re in the optimization stage of the engagement. So planning and building still require a more traditional monthly retainer but when you get into the optimization stage and you’re comfortable with your program’s ability to deliver leads—then is the time to consider pay per lead.
This points to pay per lead as a retention strategy. After you’ve spent 12 months with a client and they’re getting ready to renew and you feel comfortable that you know how to get them leads on a predictable basis—now you might want to introduce the idea of pay per lead.
As you get ready for year two recommendations for a client or two consider proposing a pay per lead program with one or two clients in 2016. Contentious clients are not good candidates, immature businesses and clients who are overly involved are not good candidates for a program like this. Make sure you have a very collaborative, cooperative and friendly relationship with any client you’re considering for this type of program.
It is not the strongest or the most intelligent who will survive but those who can best manage change. --Charles Darwin
In other words, change or die. So in 2016, make change a core competency. One thing is true for all of us, we live in a world that is changing faster than ever before. The agencies who best adapt and take advantage of this change will rise to the top and the ones who resist, struggle or ignore what’s going on around them might become the Blockbuster Videos of the agency community.
Start Today Tip – Start thinking about how you would model this for a client in your agency. This might take you a few tries. To make it easy, use a real client, real costs and real performance data. Even if you have no intention of ever showing this to that specific client. Using a real client makes the modeling exercise easier. Next identify a potential client who is going into their second year and who you have the right kind of relationship with. You don’t have to present the program option, but having a client in mind might give you some extra motivation to try it out when the renewal comes due.
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