Disrupting the B2B Compensation Model

Companies are investing in service-based expertise to assist with activities such as marketing, advertising, public relations, event production and branding. Price structures for these services run the gamut, from a one-time project fee to a hefty monthly retainer and everything in between. If you ask an average business leader, chances are they have severed a relationship with a service-based contractor because they failed to see the value or felt bamboozled by big promises and lack of follow-through.

Counseling a hopeful client through the trauma of a previously failed partnership isn’t fun, but neither is feeling like the company you hired to handle a particular task isn’t performing. The majority of clients want to know you have a little skin in the game. Lip service will only take a company so far; eventually, you have to put your money where your mouth is.

Each service-based sector has its own industry payment standard, and many are antiquated and self-serving. Think about the taxi business: People were fed up with taxis, so when Lyft and Uber came onto the scene to offer riders more transparency and logistical ease, it was a no-brainer. Netflix anyone? Some of you remember a time when visiting your local video store to check out the latest DVD or VHS selection was commonplace. Our modern world will continue to support the companies who consider their pain-points and have meaningful solutions and a more efficient customer-centric model.

Play out this scenario: Your company just signed a contract with an advertising agency for six months. The firm sold you a beautiful portrait of what those six months will look like at a price tag of $5,000 a month. The agency will get their $5,000 no matter their performance. Meanwhile, you have a 50/50 chance of seeing a return on your substantial investment. For startups and small businesses, it can be incredibly disheartening and even detrimental if the results are not satisfactory or close to what was promised. These results set a negative tone for the next service-based business to enter the discussion.

The good news is: there are companies, freelancers and agencies that have already begun to explore and offer creative and more client-centric payment models.

Consider a graphic designer who did not believe in giving a client a quote or charging a dime until the client had seen the final product. From there, the client was asked to decide for themselves what they thought the work was worth and that is what the designer was paid. The designer would provide some guidance making reference to previous projects with similar scopes and more often than not, the designer got paid more than they would have if they’d priced themselves. Two things happen in this scenario:

1. The designer delivers a superior product on time to get paid
2. The client walks away feeling great about the investment

Another client-centric operating standard marries the retainer and performance models by charging a reduced retainer and requiring additional compensation based on performance. This payment plan works best when the team performing the work is paid based on their overall performance. The dual compensation package is suitable for both client and business. By providing measurable results to the client, a company can prove its worth and receive payment based on something tangible rather than abstract.

Retainer based payment models are often adopted when there is a broad or ongoing scope of agreed upon work. Marketing companies are a good example of an industry that often uses the retainer-based fee structure. Because the number of hours each month will vary and the deliverables will change, many businesses use the retainer as the easiest way to charge a client. Is it fair though? If the client were to pay as they saw their marketing goals becoming a reality and had a clear understanding of what they were paying for, the relationship stays healthy and has a better chance of surviving long term. As a bonus, the quality and expediency of work produced would likely increase.

The performance-based business model is how the B2B service-based industry can show its value. If more agencies adopt this model or another “client first” payment structure, we can start to change the dialog around customer service. As businesses gain more by doing excellent work, the whole service model will change with an emphasis on quality. Clients will feel comfortable in their role as they have some say in the process and businesses will find they have clear communication with their clients with less room for disappointment or misunderstanding.

Steve Buzby, founder and CEO of Revel Marketing, a partnership solution agency, has focused his career on delivering the right brands to his clients. Revel works with a variety of clients from Esports Arena to nose-to-tail culinary tour, Cochon555. For more information about Revel Marketing email Steve Buzby at [email protected].