As the age of digital marketing continues to grow at a rapid pace. More and more business’s are flocking to capture customers through the use of omni channel digital strategies. This is leading many agencies and digital marketing firms to push for a performance bounty with intent to share in the longer term gains and growth of growing business online.
The rise of snapchat, google, facebook, linkedin, and others have required many businesses to not only be relevant but gain exposure to the many channels consumers live in everyday. Whether the business is solely e-commerce focused or not, there is almost a guarantee that only marketing within one of the many channels available today is not enough to remain competitive.
Since businesses have an abundance of opportunities to scale their growth, agencies have had to become more creative in hedging their business models towards offering more than just a mere retainer to sustain growth. So, what is a performance bounty?
A performance bounty is a variable compensation model where a business agrees to paying another business a sum of money based on the performance and or growth of their executed business plan.
This model has greatly improved the potential for many marketing firms to be a more integral part to the client’s they choose to work with and in turn have more skin in the game.
The risk associated with a performance bounty does in-fact raise the stakes on execution. Given the fact that the revenue from receiving a bounty is solely reliant upon the marketing business to execute on their strategy and truly grow their partner’s revenue.
Why risk losing money and time in resources on your partner’s gains?
The Scope of Work
If scoped out appropriately there are many ways to mitigate potential losses due to a lack of performance.
- Identify the opportunity
This could be through identifying the steps in will take to grow traffic and customers to a respective business. At many digital agencies this is a culmination of projecting time, effort, and investments to growth a particular channel.
- Calculate an expectation for timeline to achieve growth
A good way to estimate hitting performance goals would be to re-purpose the “3 horizons” and identify what your team and partner’s expectations for growth will be in the short, medium, and long term. This usually requires a comprehensive discovery phase where the agency and business prospect engage in a deep dive to understand each-other’s strengths and weaknesses.
- Understanding each-other’s strengths and weakness
Once you have identified projections and timelines it is important to consider strengths and weaknesses for both parties. These strengths do not always have to pertain to the business model. In many cases a great performance model relationship can stem from operational excellence. This goes beyond simply making money. Remember to dive deep into the inner workings of each company’s operations and team. In the end of the day performance bounty agreements are to benefit both parties. If a company does not seem like a good fit, it is beneficial to identify that before taking on the risk.
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