Could PR agencies work on “No cure – No pay” basis?
Commission vs fixed fee
Almost anywhere in the world in any business sales reps work on a base salary and a commission on the sales they are bringing in. Fair deal.
Online advertising services, like Google AdSense, are also on a “No cure – No pay” basis.
If the CEO or VP Marketing does himself the PR, his efforts will get him benefits indirectly as more leads wil become more sales, which translates into a bigger bonus at the end of the year or higher company valuation.
However PR agencies still seem to be in the pre-Internet era with their fee structure.
Public Relationship agencies work on a fixed fee or a fee according to the efforts made (numbers of hours worked).
This compensation method has no relation to the revenue their efforts are generating.
All the risk is for the hiring company, all the benefit is for the PR agency without surprises.
The only risk they have is not being hired for the next term.
No cure – No pay for PR?
Why can’t a PR agency be paid a minimum basic fee for covering the running expenses and a commission in relation to the number of leads or the value of leads they are generating?
Split by: 20 % fix and 80% variable.
Using a “No cure – No pay” model for PR agencies, then they can prove how effective they are.
Splitting the risk
The risk in the “No cure – No pay” compensation is split between the hiring company and the PR agency:
- The risk for the hiring company: the PR agency can mess up or waste time: still pays a minimal fee.
- The risk for the PR agency: they invest time and effort but miss to generate leads, as they fail to address the market or potential customers.
Most salesmen in the world accept the “No cure – No pay” compensation, where they take the big risk of getting a paid minimum wage. Why wouldn’t PR agencies agree upon this risk-based compensation?
Change of business model for PR brings complexity
Changing the business model requires to define the metrics for the compensation.
These metrics are completely under control of the hiring company. Requiring the PR agency to trust the hiring company.
Moreover: the origin of each lead and the lead value would become under discussion.
Thus defining an acceptable compensation method will be difficult.
One metric could be the number of visitors on the website each month. However traffic is not representative for the number of leads and not really related to revenue.
Another metric could be the number of company visitors on the website of a B2B company, as one can define the origin of the lead and relate it to the PR agency’s efforts.
However bounce visits would drive up the invoice, but wouldn’t bring any leads.
A possible better metric could be the number of qualified leads that can be related to the PR agency’s efforts. This are leads that are good enough to be followed up in the CRM.
Qualified leads have a value for the company, thus they won’t waste an cheat upon these.
Conclusion
It is clear that any results-driven compensation model would increase the complexity of both measuring the performance and the billing, thus increasing discussions.
Are there any PR agencies that:
- Dare to work with a basic fee and a “No cure – No pay” commission?
- Have engineered a feasible and acceptable pricing structure?
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