Customers of digital marketing agencies can now use something called “revenue sharing pricing,” which is a more modern way to set prices. Instead of hourly or monthly retainers, this pricing structure is based on how well the work gets done. Because of the focus on performance, the company has to focus its efforts on meeting the client’s goals in order to get paid.
What does “Revenue Share” mean?
Under this model, an agency such as VMaaS is responsible for getting customers to enter the website and make a purchase in exchange for a cut of the revenue generated by their produced traffic. The only money that is given outcomes from the money that advertising businesses make.
Many clients like this method because they do not have to pay anything right away. If the agency helps the company make more money, it has a right to a portion of the extra money that the company makes.
How do the profits get split up?
There is more work to be done before a fair agreement on how to share profits can be reached. Both sides are responsible for building trust and keeping things clear. In terms of pricing, this method is more like a collaboration than the typical relationship between a client and an agency.
Companies must be open and honest about their ongoing marketing efforts, conversion rates, advertising costs, efficiency goals, and any other information that an agency may need. Will the pay-for-performance agreement have anything to say about sponsored search results? This is a routine investigation that is done as part of these plans.
Digital marketing agencies for clients must be clear about the amount of advertising they plan to do, the channels they will use, and how they will do it, as well as how they will protect their clients’ brands. The method used to figure out how much money a business made is a hotly debated subject. Is the best attribution method the last click, the first click, time decay, data-driven, or something else? When a marketing agency sends traffic in more than one way, the attribution method is more important than ever.
When figuring out how much money is made through agency work, an advertising company that only does sponsor search will often look at how much money is shown in the user interface. When it is time to bill, both the clients and the agency will be able to look at the same numbers because of this setup.
Why do customers like arrangements where they share in the revenue?
Pay-for-performance makes sure that the client’s and the advertising agency’s goals are the same. Clients want to make more money, and the agency must give the company something of value in order to get paid. If the agency wants to get paid more, it needs to give the customer more value. Because of this, you could say that both businesses are trying to reach the same goal.
This type of pricing is rare in advertising because it includes a guarantee as part of its structure. It is easy: either give the customer something of value, which is sales, or they will not pay you.
If the client uses other forms of advertising that the agency does not handle, the client does not have to give the agency a cut of the money made from those other forms of advertising. This means that there needs to be good attribution and measurement setup so that the value of different advertising channels can be measured, and money can be assigned and billed in the right way.
Since the customer still has to pay for the advertising dollars, there is some risk involved. However, both the risk and the investment are greatly reduced when left in the hands of a professional advertising agency.
Because this kind of pricing is good for customers, it is becoming more common. It makes sense for a relationship that can be rocky at times. When the goals of both parties are the same, the relationship works better, and the client takes on less risk.
With ViSight Marketing as a Service, you can have a digital marketing programme with a free eCommerce platform and no service fees. We do not get paid unless you get sales.
Interested in revenue sharing for your company?
Get in touch with us right away to learn what digital marketing can do for you.