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- Performance based fees have a reputation for being difficult to implement and have poor outcomes. This is usually because they have been badly implemented to lower agency fees.
- It is also because often they are based on ‘soft’ measures such as relationship and task performance and not measurable marketing and business metrics.
- They ideally work in direct response business models where the agency inputs have a direct and measurable result.
- It also requires a balance of risk and reward for the agency and therefore setting metrics and fees is critical in getting this right.
- Performance based fees are often part of a hybrid model where the base fee is paid to the agency with a performance component on top.
- Read more on successful Performance Fees here
