Canadian interactive agency N5R.com Inc. is replacing cost-per-e-mail rates with cost-per-click across its roster of clients, including Procter & Gamble, Johnson & Johnson, Hershey Foods, Staples and Apple Computer.
With this move, the agency no longer will charge clients for e-mail deployment.
“There are no margins left in e-mail deployment because DoubleClick has commoditized it,” said Roman Bodnarchuk, CEO of N5R, Toronto. “E-mail is now a loss leader. DoubleClick lowered the price to the bottom.
“The implication is the whole industry will have to change the way that banner ads did. Google is extremely successful because they use a pay-per-click model, not cost-per-impression.”
This fee-based compensation plan entails a sharing of risk, but may cut marketing costs on e-mails. Suppose N5R sends 100,000 e-mails on behalf of a client. Seventy percent open it but only 15 percent click on a link. The agency will charge the client only for the 15,000 people who clicked on the link.
N5R's new model will make interactive agencies more accountable for results, Bodnarchuk said. Results will be transparent to clients. And it is intended to make N5R more competitive in the agency business.
Not all clients will be forced to use this model. Current clients can stay on the existing plan or switch.
“We'll use this model with all clients that want it,” Bodnarchuk said. “Most companies will save up to 80 percent on e-mail deployment, so we expect most to sign up for it.”
