At Catalyst Direct, Inc., we create long-term client relationships (averaging eight years) based on shared business objectives.  We realize that when our clients succeed, we succeed. 

Part of what makes this work is our Incentive Compensation Agreement. These are getting a lot of buzz in the industry recently, but we’ve been doing this for some time now.  Our ICAs are not predicated on response rates, impressions, or click-throughs.  Instead, they’re based on real business results. To make this happen, we:

• Align our goals with those of the marketing team we support
• Establish a risk/reward structure that gives us significant incentive to meet and exceed established goals, but costs us money if we do not
• Maintain a fair cash position so that we earn as we go (unlike a bonus that pays us at year’s end and further compromises our cash position)

 Establish the metrics.

We start by determining how much work will be required for the account and the compensation required for delivery— similar to every other client/agency working agreement.  Part of this compensation is held back in reserve and is paid based on our ability to meet the goal.

The linchpin of this is the creation of a Holdout cell.  Results are measured by comparing a Marketable Universe cell to the Holdout cell.  The Holdout cell includes a randomly selected mix of customers.  This group will receive no targeted direct marketing communications during the course of the year.

The Marketable Universe includes all other records in the database that are available for targeted communications.  We use a Holdout cell to show us what customers would naturally do on their own, without communications from us, in order to reflect the true effect of our communications.

 Shared goals, mutual success.

In essence, once we and our client have agreed on the goal (sales, visits to a location, etc.), a large part of our compensation is based on how we perform.  If we meet 50% of the objective, we get 50% of the reserve; 100% of the goal, 100% of the reserve; 150% of the goal, 150% of the reserve.

The results? We are as focused on our clients’ business results just as much as they are.  In the words of one of our clients, “I have never worked with a partner more collaborative and more engaged in all aspects of our business…the team puts together both short-term as well as long-term plans and strategies to help us continually move our efforts forward.”

Want to learn more? Post a comment, email me at Mike.Osborn@catalystdirect.com or give me a call at 585-453-8300.