Is Payment by Results Workable for Lead Generation Suppliers?

It’s an issue that has come up a lot recently. I was at a function the other night and a business owner said to me:  

‘The trouble with every telemarketing agency we’ve spoken to in the past is that they won’t put their money where their mouth is’.

I asked what he meant specifically and he said:

‘If you’re so good, why won’t you do the calling on a results only basis?’

 
This is a common reply and raised a lot of questions for me so I asked him the following:
 
  1. Do you work on a results only basis? The answer was no but they have a service level agreement and provide a rebate IF the product fails.
  2. What variables in supply do you have and do you have control? The answer was not many variables since his fibre optic network is stable albeit he is not the one that provides this. He operates in a mostly stable environment.
  3. What other marketing do you do and what guarantees do you get with those? He has used lots of others like advertising, PR, direct mail, PPC and so on. None provide a guarantee that they will succeed or money back if they don’t work.
  4. When you do your own lead generation, is everyone delighted to hear from you and do they immediately dump their current supplier in favour of you? The answer was that many if not all have 12 month contracts with suppliers that are global brands and getting them to change is tough.
 
I could go on as I didn’t stop there but I’m sure you get my drift. I actually feel that some risk and reward is a good thing. However, it needs to be genuine. Lead generation agencies should be paid for their time and skills and for results. Organisations large and small pay for pretty much every other marketing service.

 
Some recognition needs to be given to the state and nature (e.g. Level and strength of competition) of the market, the quality of the proposition, the availability and quality of target customer data and so on. Lead generation agencies don’t control a lot of the above variables. They can’t turn a sow’s into a silk purse and they can’t force an entrenched supplier out of the door with an undifferentiated proposition.
If they are to work on a results only basis, and provide an appropriately qualified level of leads, they also need to see a genuine upside. Otherwise, it’s their cash flow that suffers with no reward for the value of their input. For example, we run strategy sessions with every client before commencement and that has value outside of any calling we may do.
Equally, we had a situation with one client where we worked on a commission based campaign with a targeted list that the client had vetted. We generated over 70 appointments with people he wanted to see.

The problem? Prospects preferred his competitor’s service and he was unwilling to adapt his solution to meet their demands. As a result, conversions were pitifully low. We had to resign the account.

I’m all for risk-reward based remuneration. However, the basis for this must be fair, clear, motivating and based on stable variables (as far as possible). There must be openness and trust and bothsides must work hard. It needs to be a partnership not a supplier – buyer relationship. There must be genuine engagement and two-way communication. The must be respect in that both sides must give a little. The customer needs to value the supplier time and effort and pay for some of that. The supplier needs to recognise that leads won’t be handed on a plate or the customer would DIY.

If the above environment exists, a risk-reward remuneration model can thrive. If there is an imbalance, either a dispute or dissatisfaction will arise since there is a risk the supplier will shoehorn opportunities in to get their commission. This will damage relationships both with the customer and, potentially, the customer’s prospects. Either the customer will refuse to pay for poor outcomes or the supplier will resign the business since they will lose money.

I’m sure that there are many relationships where commission only or hybrid remuneration structures work. They work well in high volume commoditised outbound calling where the nature of the proposition is simple and standardised. It allows the supplier to work the numbers game. They perhaps work less well in high quality lead generation where the value of sale is higher but there are entrenched well-known suppliers and the risk of change to a new supplier is high. It’s about balance and if the negotiation between customer and supplier is open and fair there should be a basis for a great and profitable relationship.

GSA is a London based new business development and telemarketing consultancy with an office in Manchester. We offer new business development and marketing strategy, senior-level telemarketing services and telemarketing training to ensure that clients generate more new business and deliver ROI.

If you’d like to find out how GSA Business Development can help Generate Growth for your Business or book one of our new business development and marketing strategy workshops, contact us now on 0845 658 8192 or send us an email.

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