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SEO PRICING BULLETIN: Coke Pushes for Pay-for-Performance Model

April 28th, 2009 | | Pricing Models for SEO, SEO Management

Just a couple weeks ago I talked about a pay-for-performance pricing model for SEO, and now we have a powerhouse of the consumer products industry pushing ad agencies to adopt this value-based pricing model—now. Coke has announced that it will push the advertising industry to adopt value based pricing models as a standard practice. And, this call-to-action is likely to force a change in SEO and online marketing pricing models quickly.

The argument made by Coke, and supported by other heavy hitting advertisers like Anheuser-Busch and Procter & Gamble, is that effort doesn’t necessarily equate to value. Even companies with marketing budgets in the billions want to see maximum return for each dollar spent, and they don’t want to pay for anything short of success. Is the economy forcing the marketing and advertising industry into a new era of accountability?

Let’s look at how Coke is breaking from their old advertising compensation methods:

“BEFORE: Agencies and Coke negotiate in advance how much profit the former will see on a given project.

AFTER: Agency is guaranteed only recouped costs, with any profit coming only if certain targets are met.

BEFORE: Agency decides what Coke should pay for a project based on the time it expects to expend on it.

AFTER: Coke tells agencies how valuable a project is based on strategic importance, whether other agencies could deliver the same outcome, and other factors.”

(AdAge, 4/27/2009)

The idea seems simple and straightforward, but what are the downsides? Well, advertisers aren’t as likely to take risks if they might not paid. And this could be particularly damaging for SEOs and online marketers—an industry that is still in a growth phase where taking risks is part of the landscape. Do you spend your time putting together a social media presence when you’re not sure if your hours of effort can achieve a preset goal? Will the perceived value of new online platforms match with the effort required to take advantage of their advertising and marketing opportunities? Client responsibility is a large part of SEO success, how do you account for this element in a pay-for-performance situation?

What does this push for value-based compensation mean for online marketing and advertising? First, the line between traditional and online advertising is becoming blurred—advertising is advertising these days so this push for pay-for-performance certainly applies to online marketers, not just traditional ad agencies. SEOs need to prepare for a new push for pay-for-performance pricing models, learn the ins and outs of how to properly execute these agreements and the pluses and pitfalls of these types of agreements. This call to action is to the greater advertising industry but online marketers are the best equipped to implement pay-for-performance pricing models now—be ready to meet this demand head on.

Second, traditional advertising may have some legitimate arguments to dissuade companies from using pay-for-performance and other value-based pricing models but online advertising doesn’t. Specifically, SEO and PPC offer precise results and advanced analytics that allow you to pinpoint the exact number of unique views for a particular webpage or online ad—print advertising and television can’t come close to that. Get your analytics in order now. SEOs, make sure you study up on short and long terms trends, industry averages and other factors affecting your clients’ results. Reading up will help you work with clients to set reasonable, attainable goals so that both you and your client will benefit.

Get ready, the pricing model for today’s economy is not just an option anymore. The world’s largest advertisers are calling for a shift to pay-for-performance and many are likely to follow. SEO and online marketing offer the analytics and quantifiable results necessary to make this change happen fast so now is the time to prepare yourself and your business to make the shift.

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  • http://www.seoboy.com Eric

    The negotiations of this new model will force SEO Experts to deal with the company’s web designers. I have run across several clients that refuse to adjust their design, because of that I couldn’t offer a comfortable expectation of what the result would be.

    However, this could work out better for the more successful SEOs and weed out the posers. Based on the rate of return, it is possible to make more on a negotiated percentage on web driven sales if you know what you are doing.

    While SEO is somewhat new, I get giddy with changes that force black hat to scramble like cockroaches after the light is turned on.

    • http://www.seoboy.com Amy

      Thanks for your comment Eric. I think you’ve hit on one of the major stumbling blocks in pay-for-performance. There are a number of factors that play into success and a lot hinges on the client’s work and responsibility. If you can develop the necessary relationship with a client through the course of dealing, both you and the client can benefit–you can profit more from hard work and the client is assured of getting good SEO work according to standard best practices. It’ll be interesting to see how the SEO community responds to this call for PFP as a standard pricing model.

  • http://www.frecklered.co.uk Sarah

    The company I work for (in house search) has required a price to be out on everything for quite some time now in order to justify IT time. This has had a severe negative impact on performance, as it simply isn’t possible to predict whether changing “buy now” to “add to cart” will have an impact, and it is impossible to put a financial benefit on this. It is however a totally necessary trial.

    In a world where everything is performance based we will stop moving forward, and it will actually result in big brands seeing less improvement then if they allowed their marketing companies to actually go about the business of marketing.

    • http://www.seoboy.com Amy

      Thanks for your comment! Your comment raises an interesting point. With many pricing options currently working successfully in SEO, is it reasonable to shift the industry towards one standard such as PFP? With such a huge variance in budgets, scope of projects, economic factors and industry variables, it would seem that pricing models should remain as diverse as the types of clients we work with.