Gini Dietrich

Performance-Based Pricing in a Billable Hours Industry

By: Gini Dietrich | September 4, 2012 | 
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A few weeks ago, I met a really interesting business owner.

He has built a company that does more than marketing communications. They also do packaging and point-of-purchase and sales.

A full-on marketing firm that also does something pretty fascinating: Performance-based pricing.

Of course, I was a little skeptical (and very curious) to hear this. After all, when people in our industry charge for performance, it typically means they get paid based on number of impressions, which are totally easy to game.

Put something on BusinessWire and watch the impressions come in. You don’t have to do any work and the perception is it’s been picked up all over the place, including USA Today and Yahoo!

Of course, if you go to those sites (or pick up the paper), you never find the story because it’s buried deep in some spot people don’t actually read, but to an unsuspecting business owner, it looks like you’re doing your job…and they’re more than happy to pay the bill.

What doesn’t happen, though, is the phone doesn’t ring. There isn’t the publicity effect we perceive will happen when we’re all over the news. No one comes in or calls or visits or buys.

So the performance-based pricing sits very poorly with the organization’s leaders because, while it looks like the job was done, they were focused on the wrong things.

Teen Titan

I was reminded of the conversation I had with this business owner about performance-based pricing (and how they do it ethically) when I read “Teen Titan” in the September 3 issue of The New Yorker.

The story is about Scooter Braun, the manager of Justin Beiber, Carly Rae Jepsen, and others, and how he built a teen star out of nothing.

It’s a pretty interesting article; one I recommend you read even if you’re not interested in performance-based pricing because it’s also one of entrepreneurship, the school of hard knocks, and the American dream.

In the article, it describes how Braun discovered Beiber on YouTube, convinced his mom to move Justin to Atlanta (where he paid for their home, furniture, and other expenses) in order to begin to build his following on YouTube and the, eventually, get him in front of music executives.

It also describes how Braun is bringing new talent into a dying industry…or one he describes as changing through licensing, merchandising, and digital sales.

Sound familiar?

What I found most interesting about Braun’s story is how he gets paid. He takes a standard management fee of 15 to 20 percent, but he also takes a cut of all revenues, including ticket sales and merchandising.

Performance-Based Pricing

For the past couple of years, we have been meticulous in working with our clients to deliver results that drive real business success.

Many of you have probably heard me say we drive to one of three things (or a combination of them): Increased revenues, improved margins, or a shortened sales cycle.

For one client last year, we generated $2.2 million in new revenue…and our annual budget was unchanged this year.

So I’ve been thinking a lot about performance-based pricing or taking a cue from the music industry.

What if we were able to get a cut of the revenues we create on behalf of clients?

Of course, there are a lot of variables, but I think it can be done. Not only does this potentially make us more money, it creates a true partnership with our clients. We’re taking risk. We’re putting skin in the game. And, if successful, we win with them.

What do you think? Can it be done in an industry that is notorious for billable hours and retainers?

About Gini Dietrich


Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro.

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  1. […] Gini Dietrich is founder and CEO of Arment Dietrich. This post originally ran on Spin Sucks. […]

  2. […] from corporate to agency life really showed me how different they are – and it’s not just billable hours, managing multiple accounts, being responsive at all times of the day and night, and client […]

  3. […] from corporate to agency life really showed me how different they are – and it’s not just billable hours, managing multiple accounts, being responsive at all times of the day and night, and client […]

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