Why ‘Pay-for-Performance’ SEM Doesn’t Make Sense

The Good, the Bad, and the Ugly

I’ve been working in digital marketing since 2007, and in that time, I’ve had the pleasure of working with some amazing clients. Some were small, local businesses in a niche industry. Others were multinational corporations operating in cut-throat business sectors. Regardless of the business size or target market, “good” clients all seem to share a few common traits:

1. They are organized, ahead of schedule, and rarely drop the ball.
2. They have a firm grasp on who their target market is, and who they are competing against.
3. They understand the fundamentals of online marketing, and realize that SEM is just one piece of a larger marketing strategy.
4. They offer a superior product or service, are competitively priced, or have some other USP that sets them apart.
5. They are an active participant in our ongoing marketing efforts together, and they are open to new ideas, suggestions, etc.

Sounds awesome, right? As great as these types of clients are to work with, I’ve also worked on my fair share of campaigns where the relationship with the client was, well, terrible. Let’s take a look at some commonalities of “bad” clients:

1. They are unorganized, often miss scheduled calls and meetings, and like to drop last-minute, “emergency” requests in your lap.
2. They aren’t completely sure who buys (or even needs) their products or services, and they give you a blank stare when you ask who their online competition is.
3. They read somewhere that if they just repeat a keyword 150 times on their homepage, they will rank #1 in Google and can stop all other marketing.
4. There are 10 other companies who offer a better product or service, do so at a lower cost, and provide better customer service.
5. They are MIA in strategy meetings, and are completely opposed to doing things any other way than “how we’ve always done it.”

 Ok, so there are great, wonderful clients out there, and there are some terrible, awful ones. So what? How does this make digital marketing any different from any other service industry out there?

You’ll Only Pay if It “Works?”

Imagine you’re feeling sick, so you go to a doctor. The doctor walks in, but before she can examine you or even say hello, you tell her, “Hey, listen Doc, I know how this whole “medical examination” deal works. I’ve watched a ton of ER, so I’m no rookie at this stuff. Whaddaya say you give me a quick once-over, prescribe me some pills, but I only pay you if I’m feeling better?”

Now, if you’ve ever had to pay for medical expenses out-of-pocket before, you might be thinking that this seems fairly reasonable. And on the surface, it does. If your doctor prescribes something the cures what ails you, you’d be happy to pay her! If not, why should she get your hard-earned cash?

But here’s the thing: your doctor has no control over what type of patient you’ll end up being. She might prescribe the perfect medication and give you a spot-on treatment plan, but if you take your medication sporadically (or not at all), stay up late, eat lots of junk food, drink in excess, etc. you probably aren’t going to feel any better, even after giving your doctor a visit.

On the flip side, you might be a model patient: you take your medicine every day, on time, without fail. You get plenty of rest. You eat tons of vegetables and drink lots of water. But after a week, you still feel like death. That doctor must’ve been a complete quack, right?

The Best Marketing in the World Won’t Fix a Bad Product, Service, or Business Sense

The same holds true when it comes to online marketing. At least once a month, a potential client comes to us with the pitch of working on a pay-for-performance basis. Basically, we do a bunch of work up front for them, and if they see results they’re happy with, they’ll pay us. If they don’t, they are free to walk away or keep getting free work from us until they are satisfied.

Most of the time, we try to tactfully explain why we don’t work on a pay-for-performance basis and hope we can reach some type of agreement. But the bottom line is, I have complete confidence in my abilities and those of my team to execute a success digital marketing strategy. I don’t, however, have that same confidence in a stranger’s product, service, or business model.

Let me be clear. When a potential client comes to us for help with their website, building an online presence, or increasing their ecommerce sales, we are absolutely thrilled to discuss strategy, establish goals, and begin building a partnership with that company. But the fact remains that we probably know very little about how that company’s specific product or service stacks up against the competition – at least not in the early stages of our partnership.

We also don’t know much about the person or people we will be working with directly. Will they be a “good” client – easy to work with, open to new ideas, and an active participant in our business relationship? Or will they be a “bad” client – stubborn about testing new strategies, rarely available for important meetings or discussions, and unwilling to accept the fact the online marketing is not a “set it and forget it” solution.

Long-Term Marketing Efforts & ‘Pay-for-Performance’ Don’t Mix

Perhaps more than any other reason mentioned above, pay-for-performance arrangements don’t make much sense because the results from online marketing are rarely instantaneous. While the internet has conditioned us to expect instant gratification with all things “online,” the fact is search engine marketing is a long-term strategy that requires careful planning, tons of adjustments, and ongoing testing in order to work. Even paid search marketing, which can provide a relatively quick impact online, has a ramp-up and testing period that needs to be carried out in order to achieve the best results possible.

When an agency agrees to a pay-for-performance relationship, they often must compromise the integrity of the entire campaign. Instead of putting in the time to do things right at the beginning in order to achieve long-term success, corners are cut and steps are skipped in an attempt to get immediate results. As any seasoned online marketing professional will tell you, this approach rarely delivers on a consistent and sustainable basis.

Conclusion

Pay-for-performance assumes that immediate results are not only realistic, but easily achievable. It also ignores all of the other variables that factor into whether or not a campaign will be successful, such as the product or service being offered, the competition, the business model, and the people involved. There are just too many variables when it comes to online marketing – or business relationships in general – to make pay-for-performance an effective solution for both agencies and clients.