Category Archives for OSM Client Service

Web Pro v2 Walk-Through

Here is my best step-by-step guide to how to run a "Web Pro v2" project, as I understand it today.

Because this is open-source, I would encourage you to try this out for yourself, and then to let me know about your experience.

Alternatively, if you would prefer to have me work with you, feel free to discuss writing me into your plans (on the same kind of fee/profit-share basis as you would agree with ​a client).

Step-by-Step Guide​

1. The Idea


Someone thinks that a particular marketing campaign is "worth doing" (there's a definition of "worth doing" below, but for now all we need to know is that someone thinks it's a good idea).

This might be a totally new venture, a new website​ for an existing venture, a new product line or proposition... practically anything!

Normally, the client will approach the marketing professional ("pro") to propose the idea.​

Great idea!

Let's look into it...

2. Initial Sanity-Check


The first thing we need to establish is: Is the idea worth pursuing?

​This is very important. Under "Web Pro v1", it didn't matter so much to service providers, because we would get paid anyway, whether a project were a success or a failure. That, of course, meant more risk for clients, because they couldn't trust a provider who had no skin in the game.

In "Web Pro v2"​ it becomes very important to establish whether a campaign deserves to be carried out, because everyone stands to win if it works, and everyone stands to lose if it doesn't. This is a good thing.

How do we arrive at that conclusion? Well, it has to come from experience and common sense, but here are some ​tips:

  • ​First, always do at least a Short Circuit exercise, to get an idea of the marketing fundamentals.
  • If you're looking at an existing campaign, are there existing opportunities to optimize it (usually by getting more traffic, better-targeted traffic, or by improving the conversion rate)?
  • For example, keyword research may show that a website is not optimized for the right kind of traffic. You can normally figure this out in under an hour.

Bottom line: I won't even consider taking on a project that is trying to sell a commodity into a crowded market, unless there's something unique and distinctive about the way this offering solves a real problem for people.

(I also won't take on a project that I don't strongly believe in, because experience tells me that I won't be able to give it my best.)

We believe that a project is worth doing. This definition of worth doing is the Golden Rule of Web Pro v2...


We believe there is scope to realize sufficient additional profits that are presently unrealized to reward both the client's and the professional's investment.

* Note: We use the term "profit" to represent any added value to the business or organization. It does not necessarily represent monetary profit, but could include any other measurable benefit such as a new lead, follower, or convert.

Let's unpick this definition. Notice that it's relative. We're balancing potential gain against everyone's investment.

The client will probably be investing their time, money, and assets into the project. The pro will also be investing their skills, time, and possibly other assets.

The question we're asking is, do we have good reason to believe that we'll ALL get a good return on that investment?

Now, bear in mind that the subjective assessment of ​"good return" depends on how much we've invested up to that point. Everyone's assessment of "good return" will be different.

An important note here is that we don't have to consider a full-scale deployment at this point. To use old "Web Pro v1" thinking, such as, "I would normally charge $10,000 for the kind of website ​I think she needs, so how long would it take me to make $10,000 from this project?" would be a mistake, because we don't necessarily have to invest that amount of work... at this point.

Consider t​hat there are cheap, fast ways to test a market opportunity. Here are a few suggestions:

  • ​Are people willing to pay for "X"? Consider doing a lean-startup style "Smoke Test"
  • Another way to test a market is simply to publish a range of AdWords or Facebook ads, which can test the market's reaction to a number of propositions.
  • Are there simple split-tests that could be done on the client's website to test ideas? These do not have to use polished design or copywriting, but could give you an idea (using real customer behaviour data) about the project's potential with very little time investment.

Also bear in mind that scale has a big part to play here. If a client's existing business is generating $100,000 per month right now, that's a very different prospect to if it's generating $1000 per month. The bigger the game right now, the lower the impact you have to make in order to generate "worthwhile" additional profits. That's just a fact of life.

You will never be able to remove all risk from this assessment. Certainty is an illusion. In "Web Pro v2" we become investors in clients' businesses, risking our talents and our time in return for greater potential profits. (If you want guaranteed revenues, stick with the old "Web Pro v1" model... for as long as it lasts!)

Happy?

Great, let's proceed...

3. Basis of Agreement


So we have good reason to believe that we'll be able to have a big enough positive impact, in a reasonable time frame, to reward both parties' investment. Great!

The next step is to draw up the basis of an agreement.

In "Web Pro v2" we don't really need contracts, because we're constantly working on this principle, derived from the Golden Rule...​


If any piece of work is worth doing, it will generate sufficient additional profits to compensate everyone's investment.

I find the implications of this statement quite fascinating...

  • ​If a project or campaign will take too much work for the probable reward, it shouldn't be done.
  • The client-pro relationship should naturally continue, as long as there is continuing scope for growth.
  • If there isn't enough reward for the professional, the pro should either walk away or renegotiate the deal.
  • If there isn't enough reward for the client, they should either end the relationship or renegotiate.
  • i.e. Either party should be free to end or seek to change the terms of the relationship, such that it continue to be "worth doing."
  • What's more, because the terms should always be open for reconsideration, a fixed contract becomes unnecessary. All we need is a record of what we currently agree on.

Here is an example structure for an Agreement

  1. Strategy Phase: The Pro works out their recommended Campaign Strategy, usually partly with the client and partly independently. The outcome will be the Campaign Strategy. Price: $_____

    Notes...
    • The Strategy Phase should be paid for using a fixed up-front fee. That's because the Pro has invested significant time/skill and there is a clear deliverable (the Strategy Document), which the client should be free to take away and use independently (based on the idea that they can walk away at any time).
    • A small scope deserves a short strategy phase. If a client is turning over $1000 per month now, it would be dumb to quote them $2000 for some strategy work. Instead, the pro should spend at most a couple of hours and come up with their best initial recommendations that can be tested quickly and cheaply.
    • The bigger the opportunity, the more sensible it is to invest significant time in strategy (which may include in-depth keyword research, competitive analysis, plus a comprehensive Circuit Interview and Review).
  2. Campaign Implementation: Set out what the pro will do, what the client will do, and how the pro shall be compensated.

    Notes...
    • Obviously, you don't know what the right strategy is going to be yet, do you? So you don't actually know exactly what work needs to be done. This piece does not need to be very prescriptive or detailed.
    • You will need to do what you need to do to test any assumptions you've made in the strategy phase. Aim to test quickly and cheaply, using real market behaviour insights.
    • Figure out an appropriate initial profit-share (or revenue-share) deal. This may depend on the scale of the client's business (the bigger the baseline turnover or profit, the bigger the real gain). Also bear in mind that this figure is flexible. Either side may renegotiate it at any time.
    • If you *know* that a significant amount of work will need to be done up-front (for example, totally redesign a client's site) then you should quote for that work at this point. However, consider building phased compensation, so that the client is not risking too much too soon, and they know that they will only have to pay when their campaign is working. (That will often require a formal agreement, of course, because walking away at any time may leave one party over-exposed.)

Simple, isn't it! That's the point! Simple is often beautiful and honest.

We can stop wasting time arguing over which bits of a contract are likely to protect or reward us the most and just get on with exploring the market opportunity.

Everyone happy?

Cool, let's carry on...

4. Campaign Strategy Phase


Pro gets paid.

The strategy phase aims to answer these core questions...

  1. Where do you believe new profits will be found?
    • What traffic channels does research suggest are profitable?
    • How will we effectively reach, nurture, and convert prospects?
  2. What needs to be done to realize those profits?
  3. Who will do what work?
  4. What assumptions are we making?
  5. How do we plan to test those assumptions?​

It is extremely important to acknowledge "assumptions" because any strategy we design is likely to be sub-optimal. It is actually more efficient to go to market with some unanswered assumptions and a plan to resolve them on the wing, adjusting and optimizing as you go, than it is to launch with a polished, finished "Big Bang" (i.e. "First Best Guess") campaign.

The important thing here is not that the Campaign Design be perfect! What you are really looking for is a plan for evolution, testing, growth, and optimization... in whatever order.​

So don't expect to spend too long on the Campaign Design. Do your best work, make your best guesses, identify them as assumptions, and move on!

Let's go to work!!

5. Campaign Implementation


This is where you all roll out the campaign, where you'll test your new ideas, set up experiments, learn lessons, and change your mind (hopefully a lot).

The roll-out may include a huge range of activities: any publishing, PR, PPC management, link-building, content marketing, on-going keyword or other research, conversion rate optimization testing, offline marketing activity...​

Consider that the Pro does not necessarily have to deliver all the work personally. If I ​need a smart video intro, or a voice-over, I don't do it myself.. I'll get a friend, colleague, or someone off Fiverr to do it (because they'll do a better job and do it more efficiently).

Also be aware that we are no longer working in a "Big Bang" ​universe! You do not have to deliver everything at once. In fact, that is almost certainly a bad use of everyone's resources (very Web Pro v1)!

One of the beautiful things about Web Pro v2 is the way the economics encourage the professional to make the right decisions at the right time.

In the old Web Pro v1, you got paid anyway, so it would make sense to encourage the client to invest as much money as possible as fast as possible, even if that was not in the client's best interests.

In Web Pro v2, we share in the profits, so we need to make decisions that will help us more rapidly deliver on those profits. That may require us to do low-level activities early on... run split-tests on a client's current site, carry out small-scale market research, interview the client's customers, etc.

If a client blows a big budget and doesn't see the return in a reasonable timeframe, why would they continue to trust the professional? (They shouldn't!)​

So the professional's job is to move carefully and tactically towards profitability, so that...​

Pro gets paid (repeatedly).

5b. Review & Renegotiate


Web Pro v2 depends on maintaining the conditions for the Golden Rule. In other words, we constantly want to keep the investment/risk and rewards in balance.

If the client thinks they would be better off without the partnership (e.g. because growth is too slow)​, they should renegotiate or end the agreement.

If the professional feels they are not getting a good deal, they should be free to do the same.​

Renegotiating the profit share is perfectly fine. If agreement cannot be reached, that probably means the golden rule no longer applies, and the agreement should be dissolved.

The ideal situation is that the pro continue to find new growth opportunities, so that the client can enjoy continual increase in value (profit), and is happy to share that with the pro, because the more they pay the pro, the better they are doing!​

Vision for “Web Pro 2”

The Open Source Marketing Client Service system aims to provide a new model for the commercial relationship between marketing professionals and their clients.

If you have read “Web Design is Dead” (available free on Ben’s website), you’ll be familiar with the Old Model of web design and marketing.

In this post, I’m going to reiterate just why that Old Model is bad, outline what we would need to have everything work better, and describe the “Web Pro 2” model (as far as it is developed right now).

1. What’s Wrong With the Old Model

The most glaring problem with the old model for delivering professional marketing services is simply that the Client takes all risk.

Client Takes All the Risk

The Provider says, “This is what I think you need, and this is what it will cost.” The Client must either accept or decline that offer. If they accept, they pay the fees as agreed.

Thereafter, if the campaign (website, etc.) is a success, the Client may see a benefit (usually profit). However if the campaign fails, the Client may lose more money, on top of the money they wasted by paying the Provider to carry out the work.

I am as guilty of this as anyone else. Several years ago, I was approached by a client who had an idea for a web app, which was like a new Web2.0 knowledge marketplace for professionals.

I quoted £55,000 for the work (US$83k today), and my developer and I created a complete working solution called “Kathink”, which duly went live. (There is no record of the project online now, except for a patent spec.)

The problem was, I had only delivered a product as agreed. We had made no provision in the budget to market the new concept, so it was only ever seen by a few people. Today I look back on that project with profound regret.

However you look at it, most clients have not gotten a good deal from most marketing professionals over the years. Whichever side we’re on, I’m sure we can all list multiple occasions where clients have paid significant sums for websites that bombed.

Who picks up the bill when that happens? It’s the Client. Sure, the Provider (often a web designer) would love to know their work had helped make the client successful, but they’re usually long gone by that time, because they’ve had to move on to the next sale and the next project.

Big Bang / First Best Guess

That brings us onto the second reason why the Old Model was so flawed. Most Providers have a commercially promiscuous relationship with their market. In other words, they are locked into a series of intense, short-term relationships.

The typical web design project can best be described as “Big Bang”… an intense flurry of “creative” work, after which the Provider usually moves on, and the Client is left to discover whether the result is worth the money they’ve paid.

The reality is that any design or redesign is really someone’s “first best guess” (FBG). And experience tells us that anyone’s FBG is almost guaranteed to be less than optimal. In fact, much of the time, a FBG redesign turns out to perform worse than the previous design.

Why is this? Simply because nobody really knows what’s going to work, how people are going to respond to a campaign.

You don’t know until you find out. And the worst way to find out is to bet all your budget on the first best guess.

Of course, this was all really risk-free from the Provider’s perspective. They would get paid whether their guesses were right or wrong. It was the Client who would be left counts the cost.

Cost to Providers

In reality, the promiscuous pattern did not really work out great for Providers either. It meant we were locked in to a “feast or famine” scenario.

When you closed a project, you had money in the bank and a lot of work to do. While you were delivering a project, it was challenging to maintain sales activities, which quite often meant that, when the project was complete, the money would be running out fast, and you had to go out hunting for a new client.

Speaking for myself, that was a stressful way to run a business, particularly for a sole trader or small agency.

We Didn’t Learn

A further downside of the short-termism of the Old Model is that nobody was concerned with really tracking what worked. Not focusing (or caring) about real results meant that our knowledge didn’t really increase very fast.

For marketing professionals, it seemed wasn’t our problem. Hey — clients kept signing our proposals and paying our invoices, even if we could provide no evidence that our services would make them money!

And if a smart client did happen to ask for evidence, we could just mumble something about it being very hard to track and prove results, knowing that they would get the same message from every web designer. I can’t remember it ever being a deal-breaker. Usually, having a sexy portfolio and being able to talk a good sales pitch won the day.

So, because of the short-term involvement, clients couldn’t even check if their designer had a track record of delivering profit, because the designers didn’t even know themselves!

Things did start to change gradually, as more forward-thinking professionals in the web design sector realised that web design was inseparable from marketing. The growth of SEO, and particularly pay-per-click, helped people wake up to the idea that the output of online marketing is in fact measurable.

Too Many Chefs

As the sector matured, clients gradually found themselves having to understand and manage a huge range of marketing channels, roles, and disciplines.

They might read an article saying that they absolutely MUST be doing (take your pick: SEO, PPC, conversion optimization, social media, content marketing, webinars, e-books, email automation etc.). Then they would be compelled to go out and find a consultant to help them do that particular thing.

But that produces a situation of “too many chefs”. Who’s in charge? Who decides what communications go out when? Who decides what content goes on what particular page?

The Client surely is not qualified to make these judgement calls about marketing strategy, and why should they? That creates more stress for the client sector, which only got worse over time as new channels popped up every week.

Of course, we professionals didn’t have to count the cost of the situation. We did our best, usually in good faith, and could always fall back behind the same old excuses…

  • “It’s just the way it is.”
  • “If you don’t invest $$$ up-front, you don’t have skin in the game.”
  • “You have to speculate to accumulate.”
  • All of which add up to,”Buyer beware!”

But, honestly, this situation is not OK. The web is over twenty years old now. It’s time for a better way.

2. What Do We Need?

Let’s consider what an ideal situation might look like. Then, we’ll look at the proposed open-source model for a new Client/Professional model.

Clearly, the Client should not take all risk. They should only pay full fees if and when campaign works, i.e. generates real business results (usually financial profits).

After all, you wouldn’t pay a motor dealer full price if they took your car and sold you a different one that didn’t work!

In order to do that, the marketing professional needs to be involved in the project until it breaks even and becomes profitable. That means we need much longer-term relationships.

There are a few key principles here

  1. Neither party should be over-exposed to risk. Every party’s investment should create a balanced situation, whether they’re investing time and skills, money, or other business assets (e.g. customer list).
  2. If a campaign is worth doing, it must naturally realize previously unrealized profits. (If it won’t be profitable, within a reasonable timeframe, it shouldn’t be done, and the client certainly shouldn’t pay for it.)
  3. If the campaign should be done, it is reasonable that the Provider should be paid in part out of those future profits, thereby sharing some of the risk with the Client, as well as the potential reward.

In order to do this, we need a different type of agreement, in which the Provider is compensated when certain targets are reached, meaning that the Client is not over-exposed to risk.

At the same time, it is worth noting that the Provider should not be expected work for free, either. If they were to invest their time and skills without any compensation, they would be over-exposed, which would also unbalance the situation.

The ideal solution would help avoid the feast/famine for Providers, delivering a slow release of revenues, and ideally generating more revenues for both Providers and Clients, because more is done to realize the potential unrealized future profits.

Instead of having the undesirable scenarios of multiple discipline specialists involved and fighting over a project, or expecting the Client to judge what should be done, there should be one expert in charge of the overall strategy — both creating it and ensuring it is executed efficiently over time.

3. The Proposed Solution: The “Web Pro 2” Model

In this scenario, it might be argued that we are no longer in a Client/Provider relationship. Rather, all parties are mutual investors. Everyone is investing (time, skill, money, intellectual property, etc.) and, as investors, we get to share in dividends from future profits.

Symbiosis

I am a big fan of biomimicry: looking to nature for healthy models. In this, we can look to the biological model of symbiosis, which is where two organisms cooperate in such a way that they both profit.

The key principle is: No one should be risking more than they can afford to lose.

As it is the Client who invests money in the first instance, they should only pay for what they actually receiveThis may relate to specific deliverables (like an SEO plan or strategy document), but should then be represented by agreed specific results.

The Provider is also investing (time and skills), and they should have their costs covered so they are not over-exposed, but the fundamental principle is that their profits should come when the Client profits.

Long-Term Campaigns

Marketing strategies should be planned over time, because it takes time to test how a market will actually respond. Of course, every campaign will have an element of “first best guess” but it also needs to…

  • Assess what assumptions are being made in the FBG.
  • Plan for how those assumptions will be tested and proven, as rapidly and as cost-effectively as possible.
  • Be responsive, incorporating frequent iterations to test, learn, measure results, and optimize performance over time (particularly in traffic acquisition and conversion).

A single role of Marketing Strategist will be responsible for designing and executing the marketing campaign, and for delivering results over time.

That means they have to make intelligent and well-informed decisions on what is likely to get results, and over what timeframe.

Open, Transparent Agreements

This model is built on the principle of win-win scenarios. If either party is not profiting, the relationship is unbalanced, and should not continue — at least in the same form.

For this reason, either party should be able to walk away from the deal at any time. This relationship should work without the need for a contract.

Additionally, either party should be able to renegotiate the deal at any time. The relationship should be in balance.

There are four scenarios that might cause either party not to profit from the relationship in its current form.

Scenario 1: Bad Campaign

If the campaign fails to realize the anticipated unrealized profits sufficiently to compensate the Provider and Client. This may be nobody’s fault.

If we discover that the profits are not accessible, the campaign (and possibly the relationship) should be wound up as promptly as is feasible.

Scenario 2: Provider is Over-Extended

If the Provider finds they are doing too much work for too little compensation, they should seek to renegotiate the deal.

If no agreement can be reached, it may be that we are in a “Bad Campaign” scenario, i.e. there is not enough profit to support both parties.

We should never be in the situation where either the Client or Provider is being greedy, expecting too great a share of compensation.

Scenario 3: Client is Over-Extended

It is possible to imagine the situation where the Client feels they are paying too much in profit-share fees to the Provider.

One scenario might be where a relatively high profit-share is used in the initial stages, in order to provide enough revenue to compensate the Provider for their time while a campaign gets off the ground. As the campaign grows and matures, it may be that the Provider does not have to do so much work, yet they may actually enjoy more revenues.

In this type of scenario, it would seem logical to reduce the Provider’s revenue share by some degree. Ideally, with forces in balance there should be enough incentive for the Provider to invest their skills and time in continually expanding the campaign.

This short video explains the principle of win-win in a continuously growing campaign.

It is reasonable to anticipate multiple renegotations in the lifetime of any campaign.

Scenario 4: Provider No Longer Required

A fourth scenario could simply represent the situation when a campaign is fully matured and running along nicely. In this case, if there is nothing more that the Provider can profitably add, it is right that they should walk away from the project.

Another similar scenario could be where the Provider has transferred sufficient knowledge and skills to the Client such that the Client can do what is required to continue to develop the project, which I think is something we should always try to achieve.

In this situation, the Provider would probably not find the work very interesting anyway, because it is not using their best skills. However, it may make sense for the Client to keep the Provider engaged in order to have access to their experience and skills at a higher level, for on-going strategic guidance.

The key is to note that, in each of these scenarios, renegotiating or ending the working relationship is the right thing to do. (If you’re very interested, I explore the balance of forces a bit further in this post.)

What’s Next?

I cannot justify presenting this as a better solution than the Old Model, until it is proven that win-wins are achievable.

That’s why I am currently working out the details of this model with a handful of real client projects. Please watch this space for updates.

These current campaigns are bound to be time-consuming, and it would be great to work this out on a few more projects in parallel.

However, I also don’t want to roll this out as a paid course or coaching program, for two reasons…

  • The first is, a course would not be appropriate, because of the Open Source Marketing position that states that, if something can be recorded, it should be made available to everyone, regardless of ability to pay.
  • A coached program would not come into that category, however because this model still isn’t proven, it would be unethical to charge for training.

Then I realized that I had the answer all along. In fact, you’ve just been reading about it!

Extending the Investor Model

If there are any marketing professionals who would like to investigate using this open-source model with your own clients, please feel free to reach out to me direct.

Here’s how it might work.

  • If you have a client who you think has a great long-term opportunity, which you think would make a good case study, let’s discuss it.
  • I could help coach you through the process of:
    • Assessing the opportunity.
    • Drafting and negotiating a balanced agreement that engages everyone.
    • Designing the campaign, and executing it.
  • In return for this, we would agree an initial percentage share for me, to cover my time, which would come out of the share you get from the Client.
  • Of course, that can be renegotiated or cancelled at any time in the future, as things change, which they inevitably will.

Please email me (ben@benhunt.com) if you would like to parter on a project in this way. Note that I do not have a lot of time available to do actual delivery work (design, site build, writing, etc.), so will need to keep my involvement to high-level guidance.

Also read:

OSM-CS: How Can Marketers Verify Partners’ Revenues?

Jeff posted this excellent question in response to the OSM-CS model.

Hello and thank you for your article. I am definitely interested in the concept and potential of profit sharing for my marketing services, but I have always been discouraged by my inability to answer one seemingly simple question:

How can a marketing company reliably verify their client’s profitability as a result of their services?

In the past, I have proposed my services for free with the profit sharing contingency and I never truly felt comfortable because I had to rely on the client to be transparent with their finances and the success of the marketing campaign.

For instance, if I offered to design marketing materials (website, brochures, social media, direct mail, videos, etc.) for a local law firm that previously had none of these resources, I would ask for a specific dollar amount or percentage of each new client they received as a result of my services.

Unfortunately, however, I cannot verify how many active clients the law firm is getting because I do not work there full time and would have to trust what they tell me. What if they claim they saw no increase in their number of new clients? I would have no way to verify that this was accurate or not and would have no reason to request payment.

This isn’t a hypothetical situation as I actually went through an experience like this and we decided to end the relationship. This was after I already gave them dozens of hours for work on consulting on their website, social media, and produced several marketing materials for them that they continue to use today. If these resources were not successful, I don’t think they would still be using them, but I have no way of proving that they worked. Ultimately I received no payment for any of my services with this client.

How does a marketing company position themselves in a way that they can verify each new client or an increase in profitability without having to rely solely on the word of their client?

Thank You,
Jeff

My Response

This is an excellent question, which goes to the core of why and how profit-sharing relationships work.

The short answer is, with profit-sharing, you shouldn’t have to verify a partner’s revenues strictly.

I know that might sound weird. But it’s true.

The principle of profit-sharing is that it should be a win-win. Both the service provider and the client should want the relationship to continue because they both get more benefit than cost.

If it is not a win-win, clearly the relationship should not continue anyway. That’s why we say that there is no need for a contract, simply an informal agreement or letter of understanding.

OSM-CS tries to construct these relationships such that the forces are in balance. Nobody should have invested more than they can risk. And, if there is abundant growth, everybody should be compensated in a way that they perceive as fair.

Agree on the Metric

The simplest answer to Jeff’s question is to advise partners to agree on the metric that both sides will use.

It makes sense to be clear about the agreement between the parties.

If the profit-share is based on gross profits or net profits, that would require insight into the client’s accounting, which is unlikely to be forthcoming.

If the campaign sells online, something that is often easier might be to work off e-commerce statistics in Google Analytics, which is pretty easy to set up and to share, and does not expose too much sensitive information.

In the case of a law firm, the conversion goal would not be monetary, but might be a new contact form submission. In this case, the partners (service provider and client) should agree on an arbitrary value for a new lead.

A Per-Lead Pricing Method

In a lead-gen situation, I will often use the following thought experiment…

If I had a list of one hundred hot leads in my hand, what is the maximum price that you would happily pay me per lead?

This is an example of the kind of mechanism we can use to balance the forces. If a client would gladly buy all 100 leads at $20 per lead, would they gladly pay $25, or $22?

If the agreed lead-value is high enough, the marketer will be confident that they can get a healthy return for their efforts, and the partners will proceed on the basis of that agreement.

If it is too low, the marketer may try to push the price higher.

Of course, if the price is too high, the client may not be confident in their own profitability, and there may be no agreement.

If the price is too low, the marketer may not see enough potential, and there may be no agreement.

Balancing Forces

https://www.flickr.com/photos/ftmeade/6947321108In any of these cases, the right result is reached. There is nothing wrong. And that is part of the beauty of the profit-sharing model. We only proceed to execute campaigns that should be executed. If we cannot see where we’ll find enough profit to compensate all parties, that is a risky situation.

Again, there is nothing wrong with a risky situation. But someone has to be prepared to take the risk. Traditionally, that has always been the client, who must pay the contracted marketing fees and hope that the campaign pays off.

It is also possible that the marketer might shoulder some of the risk. But if they do so, they should do it consciously.

Walking Away

As I have said, in the OSM-CS system, we don’t rely on contracts. Contracts would be required to (attempt to) compel either party to deliver on agreements that they don’t want to deliver.

In a win-win situation, why should this ever be the case?

If, at any point in the future, the revenue the marketer gets does not justify their continued work, they may walk away from the arrangement.

Likewise, if the revenue the client pays out is not justified by the growth they are seeing, they may sever the relationship.

Logically, it is likely that these two situations would coincide. And, in that case, if the profit-share is not delivering a win-win, again, walking away is the right thing to do.

Renegotiating

If it seems that the revenue-share agreement no longer balances forces, i.e. where input and reward are not in proportion, then either side of the relationship may also choose to renegotiate the terms. That would also be an appropriate measure, and a possible alternative to walking away.

Getting Stiffed

Obviously, we can all worry about partners lying about their revenue, as Jeff’s question illustrates.

But, again, with a balanced profit-share arrangement in place, where neither side is being too greedy, it is in everyone’s interests to pull together for growth, not to grab all they can.

If a client were to stiff the marketer and misrepresent earnings in order to pay out less in profit-share, that would be dumb, because it would claim there was less growth.

In that case, the marketer may feel inclined to walk away, or to invest less effort in that project, redirecting their skills into other partners.

Fixed-Fee Element

In the interests of balancing the forces, it is often necessary to include some kind of combination of profit-share and fee-based compensation.

Specifically, if there is a significant amount of work that needs to be invested (say re-launching a whole website, or doing extensive keyword research), it would not be equitable for the marketer to invest all that work over a short period without a corresponding investment from the client. So, it makes perfect sense for there to be an initial fixed-fee engagement to cover that work, after which you would transition to a profit-share model.

That’s one reason why profit-sharing exclusively is not always the right model. Profit-sharing works where both parties gain:

  • The client sees supplementary growth in their business, which means their profits grow and they do not resent passing a share of those extra profits to the marketer (or team);
  • The marketer receives income from their share of profits that rewards their investment of work, ideally increasingly over time as the business grows.

So profit-sharing is ideal where there is reason for the service provider to be engaged with the campaign over an extended period of time. This would be appropriate for strategic guidance, on-going SEO, content production, conversion optimisation, etc.

To take Jeff’s example of producing marketing materials for a law firm, if there is significant work to be done up-front, I would imagine a combination of fixed-fee contract to cover the production of the materials, followed by an on-going profit-share for the rolling out of the longer-term marketing strategy.