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Pay for
Performance? Just Say No
By
Grant Crowell
I've noticed a
peculiar business trend surfacing in the post dot-bomb era: Web
companies are receiving solicitations for services under the
terms of a pay-for-performance relationship.
The
pay-for-performance (PFP) model is not new to the Web. It's
increasingly accepted as a model for selling ad space or as an
incentive package for companies to perform above a certain fixed
margin.
Problems begin
when prospects seek pay-for-performance as the sole means of a
business transaction, regardless of the industry.
This has
increasingly been the case in my field, which involves Web
design and search engine optimization. To share my first-hand
experience, here is an example of how pay-for-performance
solicitors work.
Lead Time
A person solicits
a Web design and promotion company to tender service under a set
rate of acquisition. This means the Web design company would
receive a fixed dollar amount for every qualified lead that
comes to the solicitor's site.
A qualified lead
could be a visitor who fills out an application, buys a product
or service, or meets any other criteria determined by the
solicitor. The solicitor may even tell the company to offer a
competitive bid for the rate of acquisition itself — sort of a
lowest-bidder-wins deal.
Even retainer
fees — a common prerequisite of business transactions — are
not outside the realm of pay-for-performance deals.
The solicitor
will be quick to stipulate that any retainer paid is not an
actual payment for services but simply an advance. This means
that when you complete the work, the money is not really yours
unless the client's market performs above what the client paid
to you.
Article
Continues below...
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Continued...
Nice Work if You
Can Get It
This is a no-risk
situation for the solicitor. If the solicitor doesn't receive a
return on investment, the Web design company is expected to
return the difference on the retainer fee (if offered one) or
make no money at all.
Solicitors argue
that because past deals didn't provide the return on investment
they expected, they now demand a guarantee. What they're really
asking for is another company to assume the risk for their
business.
One solicitor
called to request our services, saying how much he loved our
reviews and our site, then he refused to pay a set fee because
he didn't feel he could trust us.
My personal and
professional stance is not to engage in pay-for-performance
arrangements — especially as the main or sole source of
revenue from a business deal.
Where's my
Lifetime Guarantee?
No matter what
Web field we work in, our work does not determine the ultimate
success or failure of a client's business. There are simply too
many intangibles we have absolutely no control over.
I could give a
client a quality Web design and top-notch search engine
rankings, but that's where my part ends. What if the client's
business lacks service, quality, manpower or business
intelligence? What if the market is too competitive or just not
there?
It is ludicrous
to expect anyone else to assume the risk for your own company.
As a designer and a marketer, I can bring people to your
business. What I can't do is run your business.
When solicitors
tell me they want pay-for-performance results, I tell them this:
If your Web site doesn't bring me additional clients, I charge
you double. After all, pay-for performance can go both ways.
The views of our authors don' t necessarily
reflect the views and policies of this company or its
advertisers.
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