Why Performance Based Marketing?
Talk is cheap. There are SO many Internet marketers out there vying for new clients, all with similar sounding services, yet widely varying pricing and little-known to the customer, VARY different ways behind the scenes of how the work actually gets done.
For example, “white-hat SEO” sounds good, but in reality, there are STARK contrasts between what that means to one SEO person and another and how they actually go about that, which may involve these “gray” areas:
- Fake names on profiles
- Backlinks on completely unrelated sites like porn sites
- Links on pages with a MASSIVE amount of outbound links, which divides the effectiveness of each link
You get the idea.
Why is this a problem? Well each of these tactics can cost the client penalties sooner or later, just as soon as Google, a competitor, or any number of other companies who’d benefit from taking out a website, do something about it. Then all that money, time, and hope invested in this strategy paying off for the client goes down the drain, even if they get you to the “first page of Google”.
That’s what every SEO promises, “first page of Google”, but how do they do it, how long will it last, for which keywords, what’s the monthly maintenance on that, etc. Even if a potential client asks an SEO, the answers will either skirt the questions or appease the prospect to get their business. Some will offers guarantees to offset this risk, others will argue against anyone offering a guarantee since nothing can be guaranteed, it’s up to Google mostly.
That leaves businesses in a predicament. They desire to generate more business online, yet they don’t want to deal with these annoying complexities, waste their money and experience failure. That’s where performance-based marketing comes in.
What is Performance Based Marketing?
Performance-based marketing is either a cost per lead or revenue share per sale agreement. The performance based marketer offers no upfront costs to the client, puts in the work to generate the business revenue, then the business gets paid first, and the marketer last. Doesn’t that sound like a great deal for the business? No upfront costs, and they get the cash before incurring ANY expense at all.
Naturally, the demand for performance-based marketing is very high, so there’s criteria for which businesses will be accepted or not.
The performance-based marketer then utilizes a variety of Internet marketing strategies to generate leads or sales and gets compensated on each one generated.
How is Performance Based Marketing done?
Performance-based marketing can be done via:
- SEO (Search Engine Optimization)
- PPC (Pay-Per-Click)
- Banner ads
- Email marketing
- Ecommerce sites (Amazon, Ebay)
- Deal sites (Groupon, LivingSocial, AmazonLocal)
ALL of those require upfront costs to the marketer to generate the traffic or post a listing, except for deal sites.
The Rise of Deal Sites
The deal site, Groupon, was started in November 2008, and LivingSocial, in 2009. They both took off due to rapid consumer adoption from consumers wanting to save more money during an economic recession, which vaulted the value of the companies to over $1 billion each.
However their model is deeply-flawed financially. The discounts to consumers cut into the business’s profits, as most customers are repeat customers getting a discount, rather than new customers, that’ll then drive incremental long-term revenue from future purchases and profit. The cut-rate pricing meant the deal sites had to take a large percentage of each sale to generate meaningful revenue, ultimately leaving with the business often around 25% of the retail price, as a 50% discount is typical to give to the customer and 50% of the deal price to the deal site, which is also 25% of the retail price. So the only party happy and financially better off in this 3-party equation is typically the customer.
The deal site spends a significant amount of resources to produce the deal as well, having to pay the deal sales rep who brought in the deal, their manager, the production team consisting of the scheduler, the graphics person, the webpage person, and the copywriter, customer support staff, ancillary staff, the executives and all marketing costs involved for that particular deal, emailing or even PPC. Each deal needs to generate the deal site thousands of dollars just to cover their costs. Let’s be conservative and say $2,000 to break even, at 50% of the deal price, that means each deal needs to generate a minimum of $4,000 in sales to break even, meaning at least say $5,000 to be worth running to produce a profit. It’s NOT something that’s made up in volume, I’m talking about a per deal cost. But the deal sites have tried to make it up in volume. If you look at the deal sites, there are MANY small deals way under this threshold. Dining deals, services like hair or massages, etc make up the bulk of the volume.
Here are the deals I’ve done to date and their total deal revenue:
- Fitness Bootcamp on AmazonLocal = $396
- Paintball on Zozi = $517
- Paintball with on LivingSocial and AmazonLocal (joint partners) = $5,750
- Las Vegas Penthouse on Vacationist = $7,077
So as you can see the numbers vary widely, yet keep growing as I do more deals and figure out the best path to take. So what role does the deal site consultant play and why?
The Rise of the Deal Site Consultant
In light of the deal sites not running their business properly or profitably, relying on cash from investors instead of from operations to stay afloat, the fixed overhead costs of staff were TOO high for the deal sites, which forced them to lay off hundred of staff, mostly sales reps, the deal sites are financially better off with performance based consultants too.
What about the businesses? Yes, they are better off too for a couple of reasons. The deal site consultant, being a specialist:
- Knows the industry, and knows which businesses have a high-chance of getting accepted and being financially successful
- Knows smart ways to structure a deal to increase revenue, reduce risk, and speed up the payout time for the business
- Reviews the deals to suggest specific marketing tweaks in wording to bring out more of the full-potential of the deal
- Has established relationships with the reps, which means increased deal acceptance and faster and more frequent deal run times
- Knows ways to REDUCE the cut the deal sites take, usually resulting in a big enough cut to cover the small 10% fee the deal site consultant takes PLUS giving additional profit to the business, which I’ve done even for businesses that have already been successful with a particular deal site
- Knows many more deal sites than the well-known ones, like Groupon and LivingSocial. In fact, there have been over 10,000 deal sites created! Many have their own uniqueness, such as by category, customer base, or city
Why Trust Nick Thorsch as Your Deal Site Consultant?
You’ve seen the deals I’ve done and the reasons why I can help you. My client’s brands are always represented impeccably well with attention paid to detail:
The feedback from people who saw my speech was very positive, such as this email I received:
I can’t help but say that your presentation was awesome even if you’ve only done it for 2 months back then.Its very complete, professional, and generous in ideas. Gave me a good number of ideas.
So if you want to tap in to a multi-billion dollar market and take the biggest piece of pie you can for your business, take a bigger cut from the deal sites, and have a professional deal site consultant work alongside you that charges nothing upfront and 10% of what you make after you get cash and customers, then contact me about deal site consulting.