3 Hurdles to Pay-for-Results Pricing for PR Consultants

If you asked a counselor for advice on coping with divorce, but were still stressed a month later, you wouldn’t ask for a refund.

If your lawyer spent an hour with reviewing business formation options with you, but you tanked in 90 days, you wouldn’t get your money back.

So if you picked a PR or social media consultant’s brain for an hour, shouldn’t you pay him or her in full?

Please Pay Here 3-14-09 19If you’ve ever considered hiring a PR, marketing, or social media consultant, check out Jason Falls’s post. The premise is this: Why can’t I compensate a PR or social media consultant on a pay-for-performance basis?

Or, put another way, if your ideas, recommendations, insights and strategic guidance don’t make me money, why should I pay you in full?

Jason does a good job explaining that when you hire a consultant, you’re buying time and knowledge. Information ain’t cheap, and it takes a lot of research, experience, trial and error, investment time to get as smart as Jason Falls.

Gini Dietrich chimed in with a few ways you can glean wisdom from her for free. Some of these options require more work or patience on your part, but if you want the Cadillac, you gotta pay for it.

The bigger theme in Jason’s and Gini’s posts is “How do I get something for nothing almost nothing?”, but I want to elaborate on three reasons why a “pay-for-performance” consulting model doesn’t work for PR or social media:

1) Social Media Takes Time to Pay Off

Whether we’re talking about building a blog, creating an online customer community, or manning a Twitter account, it can take months or longer to reach “full speed.”

Think of it as planting an orchard. If you plan to harvest fruit and turn a profit in year one, forget it. The time spent building a solid foundation, while not likely to produce immediate profits, is the most important part of the process.

In year one, your social media consultant is advising you on how to design your orchard and planting the trees, so to speak. A results-based payment that doesn’t reflect the foundation-building phase will leave your social media without a paycheck and you without a knowledgeable advisor.

2) Success is Often Poorly Defined

ZollstockToo often, the only metric companies look at is sales. And, yes, a social media program that ignores the bottom line is trouble. But there’s more to profitability than sales – which is why social media shouldn’t be run by your marketing department.

What if the best use of social media for your company is customer service? How does your social media program stabilize or improve customer satisfaction? How many customers were retained because we were attentive online? How many would have been lost if you hadn’t been attentive online? How many negative comments did we prevent by engaging with customers?

If you and your consultant aren’t clear about what metrics matter most, you’ll be tempted ex post facto to pull out a measuring stick that lets you negotiate a lower fee from the consultant. Clarify upfront preserves a fair and honest relationship.

3) The Path to a Conversion is Fuzzy

If sales increased 40% last quarter, but website traffic decreased, did social media fail? Not necessarily. Maybe traffic to the website is a poor metric. Maybe site traffic decreased because more customers found answers on your Facebook page.

Last Click Syndrome – where credit for a conversion is given to the site visited immediately before ours – is a flaw in web analytics.

Classic example: I browse through an article about your company sent to me by a Twitter friend. Later, I see your TV ad. I Google your company, then click thru to your website and buy a widget. Who gets credit? Google? My Twitter friend? Your Twitter account? Your PR guy who got the article placed? Your ad guy?

In reality, you’ll mistakenly give credit to your SEM guy who created the Google AdWords campaign.

Paying a consultant for results only works if you can accurately attribute results. While web metrics are getting better, they’re still not perfect. And metrics are only as good as those interpreting them. If a poor understanding of web analytics leads you to false conclusions about your social media program’s effectiveness, expect your consultant to push back.

3 Reasons Incentive-Based Pricing Could Work?

I hope to offer a counterargument soon…if I can find time to write it. In the meantime, anybody want to guest blog it? Or offer three counters via the comments? Chime in!

  • http://twitter.com/CaseyLBrewton Casey Brewton

    I see incentive-based pricing working in a situation where the client is skeptical about the effectiveness of social media and the consultant is confident that it will work. I also believe it is important for the client and consultant to be transparent. An incentive-based model is too risky for the consultant if the client is not 110% trustworthy. A pre-existing relationship would provide the best-case scenario. If the consultant is willing to wait for a paycheck, this could be a great way to “experiment” and ultimately retain another client. In fact, I am currently working in a situation like this. Ill play guinea pig and let you know how it goes.

  • http://mediaemerging.com Scott Hepburn

    An interesting point-of-view, Casey. Thanks for sharing.

    Social media is still relatively young, so skepticism abounds. I'd be leery about letting client skepticism dictate your pay. If you're knowledgeable, have solid references from past clients, and provide an in-demand skill, charge what you're worth. It takes confidence, and you won't win them all, but if you don't believe you're worth your rate, clients never will.

  • ginidietrich

    I love your analogy. I always say you wouldn't go into a restaurant, eat, and (when the bill comes) say, “I'll call you with my credit card number tomorrow if I don't get heartburn.” Yeah. Doesn't really work, does it?

    The thing I love about digital communication is we can finally measure what we do, but one thing remains the same: We can't control whether or not sales converts the leads we send nor can we control whether or not we get approvals on things in a timely fashion. But we can drive results if everything goes as planned. Now if we could just control everything. :)

  • http://mediaemerging.com Scott Hepburn

    Ha. Yes, indeed…if we could only control everything.

    One day…

  • http://twitter.com/scottmoroney scottmoroney

    I agree with the value in measuring, but I do also have some heartburn on the total accountability factor in service/consultant arrangements with PR/marketing/creative folks. I fear this takes away from the creative “something something” element that they bring. I would rather have an individual or group come in uninhibited, free from some of the stress of failure, and let their creative juices flow. The polar opposite is bringing in an accountant, no offense to that profession, to be precise and NOT fail at all.

  • mommyb

    Great post thanks for sharing. I love the comparisons to other jobs.

  • http://mediaemerging.com Scott Hepburn

    This is such a tricky subject Scott, and I like your point about creativity. There's an “X-factor” involved in all of communications…how do you account for it? You can't plan for it, you can't budget for it, and you can't predict it.

    The “Old Spice Guy” ads are a perfect example. Wieden + Kennedy is a fantastic firm and has done solid work for decades. But could anyone have predicted those ads would have succeeded like they did?

    Whether it's PR, advertising, or social media (which I'm not convinced is its own discipline), one truth remains: It's still more art than science.

  • http://mediaemerging.com Scott Hepburn

    Hmmm…now I'm mulling incentive-based parenting. Maybe we develop a rewards system that compensates parents based on their kids' academic achievements, social development, behavior, etc.

    What, too Big Brother? ;)

  • http://jonnewman12.wordpress.com Jon Newman

    Scott,

    Great stuff here. While pay per play or per “hit” sounds good in practice, it actually cheapens what PR and SM folks bring to the table.

    For skeptical clients we offer a certain amount of time that they will pay us and for some reason if we don't deliver, we offer a certain amount of time that we will work for free until we either get results or exhaust our efforts. That usual works for them.

    Jon

  • http://mediaemerging.com Scott Hepburn

    That’s an interesting approach, Jon. Do you have to dip into the “make good” time often? (Knowing you, I doubt it, but curious to hear if clients take advantage of it)