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Pay for Performance: A Marketing Ploy or a Real Strategic Advantage?

By June 1, 2011Article

Recently, a consultant I was working with tossed out the comment, “P4P is just a pricing model.
Anybody can copy a pricing model.
I don’t see that as an important differentiator.”
WOW. Once I got past my shock at the statement, and then past my admiration that he had the guts to challenge a sacrosanct belief at ServiceSource, I stopped to wonder….could he be right?
ServiceSource was founded over 10 years ago with a Pay for Performance business model and it runs deep in our DNA. It has influenced every step of our sales process, including most prominently our Service Performance Analysis (SPA) – a consulting-like analysis of where a customer’s opportunity lies and the backbone of our conviction that we can deliver results for any given customer. It is HOW we price. It aligns our investments with our customers’ interests.
And it is, we have always believed, very compelling for our buyers.
But is it a real competitive differentiator? It’s true that another company could replicate the pricing model. They could say, as we do, that they will bet their revenues on the results they deliver for customers. They could certainly do that once or twice, or even a few times. But can they do it over time, again and again with conviction? With deadly precision? With consistent accuracy?
Because that’s what it takes to make a P4P model work. You have to know your business really, really well. You have to know with laser-like precision the results you are going to deliver for a customer and what it will take for you to deliver them, and you have to get that right every time.
Because every time you price a deal, you are betting your company’s top and bottom lines on whether you are right.
So…is it a strategic advantage? Well, if what you do is easy to optimize and predict, then probably not. But if what you do takes years of experience, a purpose-built infrastructure, and deep expertise, then yes…you do have a strategy. At ServiceSource, I know just how hard it is to pinpoint a revenue outcome by geography, by product segment, and by dollar segment.
Natalie McCullough is Chief Marketing Officer at ServiceSource.