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I've been in growth marketing long enough to remember when getting an agency to tie any part of their fee to results was a serious negotiation. CMOs fought hard for that shift and they were right to.
Performance-based pricing makes sense, with tighter budgets leadership expects more accountability. If agencies are responsible for driving results, it's reasonable that part of their compensation reflects that.
The problem that a lot of CMOs are facing nowadays is defining what are the right KPIs and goals to incentivize the right outcomes. Not only for their agencies, but for their employees too.
The Trap CMOs Are Walking Into
Performance-based pricing only works if you're rewarding the outcomes you actually want. If you reward or set goals solely on last click conversion, then what you are going to get is a large amount of bottom funnel conversions. There is nothing inherently wrong with it; it has worked well for the last decade or so. However, as marketing evolves, that is becoming less of a sustainable model.
The problem comes when "performance" is defined so narrowly that every marketing investment is judged only by what converts today, and no channel is accountable for creating tomorrow's demand.
Last-click attribution measures the customers who were already ready to buy. It tells you very little about where your brand is earning consideration earlier in the buying journey. But, that’s where future demand is created.
That doesn't mean last-click is wrong, but it is incomplete.
CMOs need to ensure they account for a definition of performance that takes into consideration how their buyers actually make decisions if not, they risk losing buyers early on and they might never be able to touch them with bottom-funnel initiatives.
What Full-Funnel Marketing Actually Looks Like
Buyer behavior is evolving as AI adoption increases. Buyers are increasingly forming opinions before they ever click an ad or visit your site. Furthermore, the content that AI pulls to reference your brand might not even come from your site. LQ Vision data shows that in some verticals, as much as 40% of AI citations come from third-party publisher content rather than brand websites.
That doesn't mean AI replaces paid media or other acquisition channels. It means more buying decisions are being influenced before traditional performance metrics ever have a chance to measure them.
You need to have clear full funnel goals for your marketing initiatives. Once you're clear on the objective, the right metrics become much easier to define.
Yes, that may include traditional performance metrics like CPA and ROAS. But, it may also include leading indicators such as branded search growth, share of voice within influential publisher ecosystems, AI citation share, or other measures that indicate if your brand is becoming easier to discover before a purchase decision is made.
The question to ask yourself is whether the incentives you've created are the right ones to meet your goal, not only to maximize this quarter's results, but to build next year's pipeline too.
Agencies optimize whatever you measure. Make sure you're measuring for the business you want to build.
