Performance Based Agency vs Paying retainer: which is best for you?
When it comes to hiring an agency to manage email marketing for your e-commerce brand, you have two primary options: performance based agency or paying a fixed retainer (or mix of both).
The right choice depends on your specific circumstances and goals.
Let’s dive into the pros and cons of each.
Performance Based Agency
Pros:
- No Upfront Risk: Since you only pay for results, there’s no initial financial risk.
This is particularly appealing if your budget is tight or if you’re wary of investing without seeing immediate returns. - Less Management Required: The agency is motivated to perform well or they don’t get paid.
So you don’t have to spend as much time chasing them, or checking in on them because they’re responsible for their own results.
Cons:
- Variable Costs: As your success grows, so does your payment to the agency.
While this sounds fair, it can lead to unpredictable expenses, especially during peak sales periods like Black Friday. - Short-Term Focus: Performance-based models can sometimes encourage short-term strategies that boost immediate results but aren’t sustainable long-term.
Retainer Based Agency
Pros:
- Fixed Cost: A retainer offers a predictable monthly expense. This can be crucial for budgeting, especially during high-volume periods like holiday sales. Recommended for Q4.
- The Agency Can Invest More Into You: With more guaranteed cash available each month, the agency is more likely to invest more time & money into their service of your business, so that you unlock better results.
Cons:
- Upfront Commitment: Obviously, retainers require a financial commitment regardless of immediate results. This can be daunting if you’re a smaller brand or unsure of the agency’s capabilities.
- Less Immediate Pressure: While a retainer can mean a stable partnership, it might also reduce the immediate pressure on the agency to deliver quick wins compared to a performance-based model.
When to Choose A Performance Based Agency
- Limited Budget: If you have a tight budget, performance-based models minimize financial risk. You pay only when you see results, making it a safer initial investment.
- Testing New Agencies: If an agency lacks case studies or testimonials, a performance-based agreement can be a way to test their capabilities without committing a large sum upfront.
- Short-Term Projects: For specific campaigns or short-term goals, performance-based agreements can ensure you get the desired outcome without a long-term commitment.
When to Choose A Retainer Based Agency
- Stable Budget: If you have a more substantial budget and can afford a fixed monthly cost, a retainer provides stability and predictability in your expenses.
- Long-Term Growth: When you’re looking for sustained growth and long-term strategies, retainers can ensure the agency is aligned with your ongoing success.
- Established Track Record: If an agency has a proven track record, solid guarantees, and plenty of social proof, a retainer can be a worthwhile investment to secure their dedicated attention and resources.
A Good Approach: A Hybrid Model
For many e-commerce brands, starting with a performance-based model and transitioning to a retainer might be the best approach. This allows you to:
- Test the Waters: Evaluate the agency’s performance and compatibility with your brand without a significant upfront commitment.
- Build Trust: Establish a working relationship and build trust as you see results.
- Transition Smoothly: Once confident in the agency’s capabilities, switch to a retainer for a more stable and long-term partnership.
The key is finding an agency you can trust.
If you want to hire an agency, read this guide on everything you need to know when looking for an email marketing agency.