Why Performance Based Marketing Agencies Excel

What is a performance-based marketing agency?

It is a structure in which the client pays for performance-based results rather than time. In my thirteen plus years of experience in marketing, I have worked for, hired, outsourced, and observed a majority of all the wrong things to do in marketing. In that same time frame, I’ve also learned all the right things to do. From a client perspective, performance-based structures in marketing top the list.

Performance-based marketing structures more commonly known as revenue share models have become quite popular these days. This became especially true after COVID-19 when money quickly became tight for many companies. Marketing should never be viewed as an expense. Rather, marketing should always be a value add to your company. Now, more than ever, revenue share marketing models have exploded so that the “expense” of marketing translates into real value. 

Let’s face it, money is tight for a lot of businesses out there right now and the last thing you want to talk about is spending more money on a marketing campaign. This is the wrong mindset to have especially if sales are down and revenue is tight. Sales and marketing are the two primary factors of revenue and should be treated as a precious commodity in these times. 

So how does a revenue share model work and how expensive is it?

This depends on a lot of different factors but the structure of it is pretty simple. The cost is something we can break down as granular to each item sold or from a high level of overall sales. For this example let’s use a fake apparel company to demonstrate how a revenue share model works to manage marketing.

The ABC Clothing Company is utilizing more paid marketing channels including Google, Facebook, and Pinterest. The overall objective for ABC Clothing Company is to optimize online sales and create lead generation via emails. Trellis puts together the three-phase structure of the marketing proposal and scope of work in addition to pricing. The upfront cost is zero for the first phase of discovery. The upfront cost for phase two which is the structure and building of the campaigns and strategy is also zero. Phase three is where marketing campaigns start to deliver and generate new revenue. 

Each marketing channel (Google, Facebook and Pinterest) generates a conversion value (sales) along with a return on ad spend (ROAS). The conversion value and ROAS are how the percentage is calculated for the percentage of revenue share. The advantage is this model doesn’t take a percentage of total online sales but only the percentage of revenue generated by each channel. 

From the client’s perspective, this allows better segmentation to determine which marketing channel is most profitable and has the cheapest acquisition cost. Put simply, this model incentivizes the marketing company to work harder toward the common goal of producing cheap revenue vs. be concerned with how many hours were budgeted for a specific campaign. 

What do you get from a pricing model like a revenue share versus hourly or retainer?

You get results that translate into cost-effective revenue rather than a static result that “meets the needs”. In order to manage a performance-based team, the team needs to be great at what they do otherwise you’re left with sub-par results.

Trellis is a highly efficient and effective marketing team that is used to managing our client’s campaigns on a performance-based strategy. We have already put this model into practice with high success. We have an entire marketing department full of designers, analysts, account managers, copywriters, and strategists to help drive more value with your online marketing efforts. The post-COVID era demands agile marketing strategies to reach a wider audience and convert them into customers.

Digital marketing can come in many shapes and sizes- there are many channels, marketplaces, ad types, and agencies to choose from. It is integral to work with a partner that not only know the technical side of the industry, but one that you can trust that has your best interest in mind. The relationship should be symbiotic, not one-sided. A long-term revenue-based partnership will help protect both sides and encourage growth for all parties.

Start capturing more value for your business today. Achieve more growth by instilling a revenue-based model into your marketing strategy before the tide shifts once again. If you have any questions please reach out to Justin Whitaker (justin@trellis.co) for more information.