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HOW SOME NORTH AMERICAN AGENCIES
ARE TRANSFORMING THEIR APPROACH
TO COMPENSATION
Presented by Tim Williams
ignition consul...
CLIENT: I want to hire you for your expertise and your ability to create and
execute transformational business ideas for m...
CLIENT: Well if I understand how you arrived at it, then I can negotiate it down.
AGENCY: But I don’t want you to negotiat...
Three basic value pricing approaches
① A fixed price based on perceived value.
② A variable price based on outcomes.
③ A d...
1. A fixed price based on perceived value
What is the customer
willing to pay?
1. A fixed price based on perceived value
What different options
could we offer based
on a fixed price?
1. A fixed price based on perceived value
Three basic value pricing approaches
① A fixed price based on perceived value.
② A variable price based on outcomes.
③ A d...
How can we get paid in a
way that aligns the
economic incentives of our
two companies?
2. A variable price based on outcom...
2. A variable price based on outcomes
2. A variable price based on outcomes
2. A variable price based on outcomes
2. A variable price based on outcomes
Agency compensation determined by three factors:
Sales
50%
Market share 25%
Agency performance 25%
2. A variable price bas...
2. A variable price based on outcomes
On many major brands, pays multiple
agencies based on shared KPIs, which
ensures collaboration and alignment of
economic i...
Global bank
Corporate
Marketing Goals
Creative Testing Agency
Performance
50% Brand Relevance Rating
30% Core Preference
20% Product M...
Bluetooth headset brand
Royalty on sales
Luxury car brand
$ per car sold in North America
Liquor brand
$ per case sold in U.S.
Three basic value pricing approaches
① A fixed price based on perceived value.
② A variable price based on outcomes.
③ A d...
3. A dynamic price based on usage.
How can we get paid
for the use of this idea
rather than just
the production?
“Advertising is not a service
business. We’re a product
business, like publishing and other
businesses that deal with
inte...
3. A dynamic price based on usage.
3. A dynamic price based on usage.
3. A dynamic price based on usage.
B2B marketer
Per qualified lead
E-commerce website
15% of first year sales
YOUR PERSONAL FINANCIAL PORTFOLIO
Low-Risk
Low-Reward
Medium-Risk
Medium-Reward
High-Risk
High-Reward
THE AGENCY COMPENSATION PORTFOLIO
“Every year we don’t know
what 30% of our
compensation will be
because we have placed
bets on ourselves.”
Jason DeLand
Ano...
www.IgnitionGroup.com
@TimWilliamsICG
@IgnitionGroup
www.linkedin.com/in/TimWilliamsICG
Propulsion Blog
www.IgnitionPropul...
Tim Williams on how North American agencies are transforming their approach to compensation
Tim Williams on how North American agencies are transforming their approach to compensation
Tim Williams on how North American agencies are transforming their approach to compensation
Tim Williams on how North American agencies are transforming their approach to compensation
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Tim Williams on how North American agencies are transforming their approach to compensation

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Ignition Consulting Group Founder Tim Williams reveals how some North American agencies are transforming their approach to compensation using fixed, variable and dynamic price models. This presentation was shown at the IPA's Performance Adaptathon in London on 8th July 2014. Find out more at www.ipa.co.uk/adapt/performance and get involved in the conversation on Twitter #ipadapt.

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Tim Williams on how North American agencies are transforming their approach to compensation

  1. 1. HOW SOME NORTH AMERICAN AGENCIES ARE TRANSFORMING THEIR APPROACH TO COMPENSATION Presented by Tim Williams ignition consulting group www.ignitiongroup.com twilliams@ignitiongroup.com @TimWilliamsICG
  2. 2. CLIENT: I want to hire you for your expertise and your ability to create and execute transformational business ideas for my company. AGENCY: Excellent, we are ideal for that challenge. CLIENT: Yes, but before I hire you I have a few important questions. AGENCY: Okay, shoot. What do you mean? CLIENT: What will you charge me? AGENCY: $1 million dollars for our ability to work with your organization to create the idea, and then if we move it forward another million because truly transformational business ideas are valuable and in limited supply. CLIENT: Why $1 million? AGENCY: What do you mean? Jason DeLand Partner, Anomaly
  3. 3. CLIENT: Well if I understand how you arrived at it, then I can negotiate it down. AGENCY: But I don’t want you to negotiate it down. That is money out of my pocket. CLIENT: Yes, but it’s a privilege to work on my brand and you’ll get lots more business from it. AGENCY: I will? Can you guarantee that? CLIENT: No. But I still need to know how you got to your price. AGENCY: Well, OK...I looked at the size and scope of the opportunity and considered the value of us addressing it for you and calculated a price that I am willing to do it for. A price that I believe to be competitive in the market and a price that affords me the peace of mind that I can make a bit of money. CLIENT: Oh, but I need more than that. I need to know who will do the work... and the amount of time it takes for them to do it. AGENCY: The team I said will do the work...and it will take as long as it takes until we have an outcome that everyone is happy with. CLIENT: Yes...but what if just one person cracks it in one day...and you then execute it with a small team in three weeks – that is not worth a million dollars. AGENCY: You’re 100% correct. It’s worth more.... If that happens, we will double it!
  4. 4. Three basic value pricing approaches ① A fixed price based on perceived value. ② A variable price based on outcomes. ③ A dynamic price based on usage.
  5. 5. 1. A fixed price based on perceived value What is the customer willing to pay?
  6. 6. 1. A fixed price based on perceived value
  7. 7. What different options could we offer based on a fixed price? 1. A fixed price based on perceived value
  8. 8. Three basic value pricing approaches ① A fixed price based on perceived value. ② A variable price based on outcomes. ③ A dynamic price based on usage.
  9. 9. How can we get paid in a way that aligns the economic incentives of our two companies? 2. A variable price based on outcomes
  10. 10. 2. A variable price based on outcomes
  11. 11. 2. A variable price based on outcomes
  12. 12. 2. A variable price based on outcomes
  13. 13. 2. A variable price based on outcomes
  14. 14. Agency compensation determined by three factors: Sales 50% Market share 25% Agency performance 25% 2. A variable price based on outcomes
  15. 15. 2. A variable price based on outcomes
  16. 16. On many major brands, pays multiple agencies based on shared KPIs, which ensures collaboration and alignment of economic incentives.
  17. 17. Global bank
  18. 18. Corporate Marketing Goals Creative Testing Agency Performance 50% Brand Relevance Rating 30% Core Preference 20% Product Mix Rating score on 7 factors 30% Client A 20% Client B 10% Client C 10% Client D 10% Client E 10% Client F 10% Client G 100% 50% 20% 30% Outcome-based agreement for major technology brand
  19. 19. Bluetooth headset brand Royalty on sales
  20. 20. Luxury car brand $ per car sold in North America
  21. 21. Liquor brand $ per case sold in U.S.
  22. 22. Three basic value pricing approaches ① A fixed price based on perceived value. ② A variable price based on outcomes. ③ A dynamic price based on usage.
  23. 23. 3. A dynamic price based on usage. How can we get paid for the use of this idea rather than just the production?
  24. 24. “Advertising is not a service business. We’re a product business, like publishing and other businesses that deal with intellectual property.” Jeff Hicks Vice Chairman, Crispin Porter + Bogusky
  25. 25. 3. A dynamic price based on usage.
  26. 26. 3. A dynamic price based on usage.
  27. 27. 3. A dynamic price based on usage.
  28. 28. B2B marketer Per qualified lead
  29. 29. E-commerce website 15% of first year sales
  30. 30. YOUR PERSONAL FINANCIAL PORTFOLIO
  31. 31. Low-Risk Low-Reward Medium-Risk Medium-Reward High-Risk High-Reward THE AGENCY COMPENSATION PORTFOLIO
  32. 32. “Every year we don’t know what 30% of our compensation will be because we have placed bets on ourselves.” Jason DeLand Anomaly
  33. 33. www.IgnitionGroup.com @TimWilliamsICG @IgnitionGroup www.linkedin.com/in/TimWilliamsICG Propulsion Blog www.IgnitionPropulsion.com

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