KPI Boutique Ad Agency Launches With Performance Model To Reduce Payment Term Worries

Former leads from WPP, Publicis and inVentiv Health will launch a Los Angeles-based boutique agency to give an old business new life and rein in how clients pay for campaign performance. The updated operational model makes fixed bids, hourly rates and huge retainers a thing of the past.

KPI Boutique co-founding partner Chad Childress calls the model "partners for performance." It allows clients to pay for results without retainers or hourly fees and gives the agency a vested interest in the success of the clients' ad campaigns.

One reason for the revised business model points to advertisers no longer wanting to layout huge sums of cash before seeing campaign results. "Clients are shifting more decisions around agency selection to procurement to drive down prices and get as much value as possible from the vendor," Childress said. "Brands also want to push out payment terms, so you'll see many advertisers ask agencies for 90-to-120 day payment terms, rather than net 30."

Although agencies have "world-class analytics," their incentives are in the wrong place, Childress said. He explains how there's no need for 12 people in a meeting or an account when the agency can run the same or better campaign performance with three or four. 

Co-founded by Childress and Nico Coetzee, KPI Boutique aims to fill a gap between what clients ask for and how large agency networks deliver services. "The old model incentivizes agencies to put too many junior-level people on the account and bill as many hours as they can," Childress said. "No guaranteed results or accountability exists the old way, because the agency runs away from reporting."

Childress said KPI will attach compensation to goal milestones or products sold, depending on the agreed on key performance indicators, predefined goals, profit margin thresholds, CRM sign-ups or any other goal an advertiser has for their business. It should eliminate the conflict of interest between clients and agencies.

KPI will offer services like search engine marketing, display and programmatic media-buying, video and more, such as direct mail and branding. The company plans to leverage partnerships with Rocket Fuel and Turn, among others.

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4 comments about "KPI Boutique Ad Agency Launches With Performance Model To Reduce Payment Term Worries".
  1. Michael Hubbard from Media Two Interactive , July 11, 2014 at 8:35 a.m.
    Brilliant "new" model :) Nice work by KPI and their PR team getting this picked up as "news".
  2. Kevin Horne from Lairig Marketing , July 11, 2014 at 1:08 p.m.
    Please update in 12 months
  3. John Doe from Havas , July 12, 2014 at 1:37 p.m.
    This is nothing new. The industry is increasingly moving toward performance based accounts. KPI Boutique is late to the game and far behind the push to move to this model. Interesting as well that former inVentiv execs would be taken seriously after being let go from their former posts. Clients beware.
  4. Shaun Pena from Consultant , July 13, 2014 at 1:35 a.m.
    Clearly this is not a new model, but I didn't read anywhere in the article that said that the model was new? It just said that it was built to address the growing trend of payment term issues. I don't think the current pay for performance movement is about being the first to try something its about giving major advertisers more choice and control in how they partner with agencies, seems pretty smart to me if you can see a growing need and position your company's value prop around it. Probably some clients will love it, others will hate it but it is a legitimate option. John Doe's comment that it an agency leading with pay for performance is late to the game or far behind doesn't make any sense to me. I can't find any significant network agencies that lead with a pay for performance model especially for things like branding and website development. (just google "pay for performance agency" and see how many agency websites or agency ads come up that...for me it was zero) The push to move to that model has been just that - a push, many agencies have had to move to hybrid models where they will add a penalty or a bonus based on success but the vast majority still have some sort of hourly or fixed fee base scope in place to cover fixed expenses, but few if any major players staking their entire revenue model around it, especially for non-media buying activities. Google launched in 1998, 5 years after Excite, 4 years after alta vista and Yahoo, and the same year as MSN. Google wasn't trying to be the first search engine, they just had a clearer purpose, abetter algorithm, and understood UX. So I don't think 'late to the game' comment makes any sense to me, being first is quite frequently irrelevant most good ideas need iteration to reach their full potential. It will be interesting to see how this evolves in the industry over the next few years. the thing about agency client relationships is there is a lot of politics involved and many clients will stick to more traditional models for those types of reasons but I think there will be a lot that will really like it.