It’s the age-old dilemma of the service industry: how do you get the best possible value from a vendor who works on an hourly basis?
Most service businesses are in tacit financial conflict with their clients. Law firms, accountants, even plumbers have little direct interest in getting a job done efficiently. The more time they take (and the more damage they do to your bottom line), the better off they are.
So how do you, as a customer, get around this dilemma? When hiring most types of service businesses, you must rely on a vendor’s pride, reputation, and need for referrals (or, in some cases, his fear of malpractice lawsuits). With the Web, you have another option.
The most important part of any Web engagement is customer/vendor alignment. The agency works lockstep with the client to complete the best possible project at the lowest cost. In other words, both sides have the same objectives and the same standards for success.
Impossible? Not really. The solution lies in analytics-based incentives. As I’ve mentioned before in this column, the Web allows you to measure the success or failure of any initiative with precision. A client can set clear performance benchmarks, then reward its Web agency accordingly.
Even so, it’s not a simple matter of pay for performance. Instead, clients should use analytics-based incentives at every level and for every person involved in a project. To do this, try the following steps:
- Include KPIs (define) in your RFP (define) and creative brief. By articulating your measures for success at the beginning of a project, you’ll have a better chance of achieving them. At the same time, your agency partner will know your real goals and be able to work directly toward them.
- Use variable pricing for your agency. Base some, but not all, of your agency’s compensation on its performance against your KPIs. No agency will accept purely incentive-based compensation, but by linking 20 percent of the total to the project’s success, you’ll give your vendor a strong incentive to succeed.
- Establish clear KPIs for the person on your team responsible for managing the agency relationship. In other words, don’t leave success entirely up to your agency. Hold your own employees accountable as well, giving both sides a reason to work together as a team.
- Encourage your agency to reward its employees based on performance. I once worked with a client who hired us to complete a project with a critical, can’t-miss deadline. We agreed to put a clause in our contract that had us reward our team for completing the job on time. It worked, needless to say.
KPIs can be used at every level of a Web engagement to encourage your agency and staff to work together. When everyone understands what success means and has a good reason for achieving it, the groundwork will be laid for a successful relationship.
Have you used analytics-based incentives in one of your contracts? If so, let me know how it went. Perhaps I’ll tell your story in an upcoming column.
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