Performance based billing offered by Ad Agency
Shared-risk revenue model offers good option in bad economy…
Brandon, MS - 01/05/09 - Traditionally, an ad agency bills its clients based on time-spent and a standard hourly rate. In addition, many ad agencies set a monthly retainer. Starting this year, however, Jackson-based ad agency Mojoloco, llc is rolling out a performance-based model for certain qualified clients and prospects.
“The problem with the traditional model for small agencies like us,” explains Ellison Belt, partner at Mojoloco, “is that we often can’t provide due diligence within the client’s budget. We may spend 80 hours a month, but only be able to bill 50 of those hours in order to stay within budget.”
According to Belt, that can lead to agency/client burnout. “The performance-based model, when properly applied, can solve that problem.”
Performance-based advertising such as Google AdWords’ pay-per-click and other similar pay-per-lead services have been around for a while.
“When you combine those kinds of tactics with others such as special events, referral programs, social networking, and other new marketing ideas,” explains Belt, “you create a situation where there is a reasonably high return on every ad dollar spent- much higher than traditional advertising. So, since the return is much higher, and the tracking mechanisms are much more reliable, it allows us as an agency to pinpoint results.”
Pinpointing results, according to Belt, is the key to the company’s new program. “Instead of billing every hour spent, we’re willing and able to invest some time on the front end, knowing that we are paid a percentage of the sale on the back end. It truly creates a win-win scenario…more of a partnership than the traditional agency/client relationship.”
This new program creates clear benefits for the client, including:
- less up-front expense;
- clear incentive for the agency to work hard;
- true measurement of results;
- clearer picture of ROI on advertising, which can provide flexibility in budgeting.
On the flip side, the benefits to the agency include:
- comfort with providing due diligence within budget;
- cleaner reporting to client;
- better payoff on successful efforts.
“In a recession,” Belt states, “business owners are looking for ways to increase ROI while minimizing risk. This model helps accomplish that. It can be a way for a business to increase brand awareness and market share without the higher costs that usually accompany traditional agency work. It becomes more ‘business development’ and less ‘advertising’ in the traditional sense.”
Mojoloco is currently the only ad agency in Mississippi offering such a program. While other agencies are facing cutbacks in client spending due to the economy, Mojoloco is plowing ahead with three clients on this new program.
“We’re actually seeing clients increase overall spending because of this program. They can do that because the expense is based on an actual result…not just the hope of a result.”
Belt explains that Mojoloco’s program is perfect for businesses with recurring or residual revenue models or businesses with higher profit margins.
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For more information on Mojoloco, llc, contact Ellison Belt at ellison@mojolocollc.com or visit the company web site at www.mojolocollc.com. Ellison Belt also maintains a regular blog on branding and marketing at www.mojolocoblog.com.