Percentage-of-spend pricing is a broken incentive
Subramanyam 3 min read
The standard agency model takes a percentage of media spend. It is easy to explain and easy to bill. It is also structurally backwards.
Where it breaks
The moment the right recommendation is to reduce spend, making that recommendation costs the agency money. Most will not make it. Not through dishonesty, usually — just the quiet weight of an incentive pulling one way for long enough.
What we do instead
A flat monthly fee based on scope. If the correct call is to pause a channel, that conversation costs us nothing, so we can have it honestly.
- Reporting