Not because marketing needs another way to pay agencies, but because it may offer a better way to manage — and share — marketing risk.
Consider two risks.
Opportunity risk.
A company sees a growth opportunity, but uncertainty makes it difficult to secure enough capital to pursue it.
The opportunity remains underfunded.
For some businesses that means slower growth. For a challenger trying to establish scale — or a company facing rapid market change — repeatedly failing to fund the right opportunities can become a strategic, even existential, risk.
Then there is execution risk.
Capital gets approved, but the marketing system is suboptimized. Channels, audiences, markets and timing don’t work together as effectively as they could.
Results disappoint.
Capital gets burned. And a visible failure can damage Marketing’s credibility and the organization’s confidence in the next investment.
Which raises a different question:
Could advertisers and their marketing partners manage some of these risks together?
Agencies bring strategy, creativity, media expertise and increasingly sophisticated technology.
Specialist partners, like us, can add predictive analytics, optimization, incrementality measurement — and, in some cases, capital.
Put those capabilities together and a different commercial model becomes possible.
If we can identify an opportunity, predict its incremental value, optimize how it is pursued and independently verify the result, compensation can increasingly be tied to the business outcome.
And where the evidence is strong enough, partners may even choose to share some of the investment risk.
Now outcome-based pricing becomes more than a compensation model.
It becomes a risk-sharing mechanism.
That could help address both sides of marketing risk:
Fund more of the opportunities worth taking.
Reduce the risks.
Now, advertiser, agency and specialist partners can all have more of their economics connected to the same objective:
Creating incremental business value.
Perhaps that is the bigger opportunity in outcome-based pricing.
Not replacing the agency model.
Giving agencies and advertisers another way to grow together — with greater alignment around both risk and reward.
Understand the risk.
Manage the risk.
Share the risk.
#MarketingInvestmentRisk #MarketingEffectiveness #MarketingInvestment #CMO, #CapitalAllocation #OutcomeBasedPricing