After 30 years in the direct and database marketing industry, it shocks me how little progress has been made in one-to-one marketing. Many of us on the agency and service provider side of the equation are quick to blame timid clients for impeding progress, but instead we should ask ourselves: “What is it about our business model that impedes the advancement of one-to-one marketing, and what can we do to change it?”
A fundamental impediment to accelerating one-to-one marketing is misaligned economic objectives. Either the clients want to maximize their return on marketing investment, or the service providers want to maximize their own revenue and profits and have the revenue be guaranteed through retainer pricing.
Maximizing guaranteed revenue and profits pushes service providers into behaviors that don’t necessarily achieve the client’s objective. There is a disincentive for the agency to deliver more innovative marketing recommendations because innovative programs take more time and money to develop. That means increased costs and reduced profits for the service provider.
One way to overcome the misalignment of economic objectives is to compensate the service provider as if it was a salesperson. What would happen if the service provider was paid a lower “base salary,” or retainer, with “commissions,” or bonus payments, paid based on marketing performance, as opposed to a full retainer? Wouldn’t it be more inclined to invest in new technologies and create more innovative, effective one-to-one programs? Of course it would, because the more effective the marketing programs, the more they would be compensated.
This model may sound scary to service providers, but it has two great benefits. First, you have the potential to generate much more revenue than you would in a retainer model. Second, a competitive advantage will be created when you develop more effective one-to-one marketing programs for clients, improving your new business close rate.
