How to Structure a Pay for Performance Deal | Ep. #1381
Up your marketing knowledge with your instructors. Neil Patel and Eric Su. Hey Margie school listeners. I have an interesting stat for you. Did you know that Walmart improved their conversion rate by two percent for every second that improved their low time in other words website speed helps with conversions in addition to that google uses it to determine where your site ranks in their index so the fastener website loads the higher? You'll rink for that reason. I want to talk to you today. About a company called Dream House dream. Hose powers the web with fast websites and superior customer service brought to you by team of web experts or super committed to your success online. We've worked with them. To a special offer just remarking school listeners. All you have to do is go to dream. Host DOT COM slash marking school to learn more and get your website online today. Welcome to another episode of Marketing School. I'm Eric Su and I'm Neil Patel and today we are going to talk about how to structure a performance deal more so pay for performance deal but first we have to define what that actually means so We're doing this live right now. And Patrick Chung asked if he has any tips so he has a bootstrap sas start and he wants to know how to work with the performance based agencies any tips to working with one based on performance type of arrangement. So Neil what is this p. for performance thing what is this affiliate thing mean actually so Patrick. China figure out as instead of saying hey I want to go and pay Ad Agency or Digital Marketing Agency to go. Do all my work. I only want to spend money. They drive revenue. Think of like affiliate model. Where you're working with the agency. Who JUST GOES IN? Does it for you right? 'cause typically at a higher ad agencies have a ton of staff to say hey let me go and work with them but instead of paying him a retainer let me just only pay every time they generate. Mia Sale or elite. Yep so here's how I would look at this right Patrick specifically for your case if you're looking to work with affiliates in general what I would say I is go to people that have your traffic already. It might not necessarily be an agency like for example if you're in telecom whatever there's a lot of affiliate blogs out there to get a lot of traffic or let's say survival space and you teach people how to prep for doomsday scenarios. You might have a ton of articles or that blog. My son articles and a ton of traffic. A lot of eyeballs. That you need and you do a partnership with them saying hey you know what every SASS product every free. Trial that you drive. I am going to pay you one hundred dollars or something like that right. So that's how you can structure with a site God and you yourself. You do performance based marketing as well to your agency. Now you WANNA know about how we structure it. Yeah do you structure so how we structure is? Let's say you WANNA work with an agency and you want them to do paid media for you but you don't want to pay them a retainer so what you might say is hey agency. I know you guys specialize in Saas and we're GONNA pay you like for every lead that you drive you guys run the ads. You guys all the risk. Okay you run the Google as in a facebook guys will come to an agreement on it and we're GonNa pay you per lead or on a personal basis and the agency will kind of go back and forth with you that you guys would go sheet on terms when you payment terms are and all that and then once you guys get started the agency will start running ads they might have other partnerships that you might not have they might just be better than you are and hopefully in the first month or two months it is successful because usually what happens is if the performance is not successful pretty quickly. The person that's running it is going to give up yet. And then what other performance agencies are there out there? Yeah so there's a couple and here's why the performance agency model and I don't know if you've ever talk about these numbers but if you look at center field they are performance and they run ads for telecoms based companies and they also bought sales teams to help manage the entire customer journey from lead to actual conversion and they get paid on the actual conversion from my understanding. I mean they're doing a couple hundred million dollars a year in revenue and they have about three hundred thirty six employees. So if you look at it let's just say hypothetically they're doing five hundred million dollars a year in revenue their revenue per employee. I believe would be about one point. Four million dollars or so. That's actually much higher than a traditional agency. That's a good example. Yes but also they have a ton of advertising spend. Their advertising costs per employs probably through the roof though was a fair. Yeah I mean if you were to take that out it'd probably be way lower exactly but no in general. I know they're doing well. I think they've raised a ton of money. Didn't raise the weight later from private equity. I believe yeah which usually means the founders took money off the table in general this models really good the hardest part with working for a performance space agency is they don't produce results so you gotta even. If you're not spending money you gotta really figure out which ones are going to drive results. Which ones are and dislike? Churn and burn until you find the right one. Sadly I think the same thing for any type of agency Right Hill. Not necessarily because when you're paying an agency you're able to interview a more much more picky with performance. There's not as many options and you really can't be too picky because you're not paying any money out front. Yeah so I mean what I'm basically saying is agency I mean performance base. It's very transactional. You either numbers or you don't or else you're outright. I think agency to it's kind of similar to you. You're looking to hit some type of numbers if you don't get it. Obviously that tried to sack the agency. I mean at the end of the day you just incentivizing them to get results or else. They're out so anyway. Hopefully that answers your question pat. Go ahead neil nuts. That's it okay. So that's it for today and go to marketing school. I O slash school if you want to get on the waiting list for the education program that Neil and I are putting together and we'll see you tomorrow. We appreciate you joining us for this session of Marketing School. Be Sure to.