At VSA, our pricing model is hourly; we charge clients by the time spent on their business prospecting program, regardless of the number of appointments we set in that time. We have found this to be the best model for us and the type of clients we typically work with, but there is a growing trend in the industry to charge by the appointment (a pay-for-performance model).
I think there is a role for each of these in the industry; it just depends on the needs of the program. Today I’d like to outline how to choose between them, and highlight some of their strengths and weaknesses.
When to use a Pay for Performance Firm:
• You have a history of making prospecting calls and can project the time required to set an appointment; you know your target market, and you know the best message to use. In short, you’re looking for a prospecting team to repeat a proven process.
• You have a high-ticket product/service, especially in the technology space.
• You want predictability in the amount you pay for each appointment, and are willing to pay extra for each appointment. The companies who offer performance-based pricing obviously need to factor their risk into the pricing, since they are making a commitment.
• You are willing to give up a good amount of control of your program (oversight, message, list, styling of calling, etc.) in return for a predictable appointment fee.
• You have deeper pockets and are willing to make a significant upfront investment in prospecting.
When to use an Hourly-based Firm:
• You are introducing a new product/service, entering a new market or have never used the telephone for prospecting before; you need a partner to design your program and are willing to pay for this expertise.
• You have needs/goals in addition to setting appointments such as gaining feedback on objections, learning which competitors are strong, or any other “research” needs. You’d like time spent on this information gathering in addition to setting appointments.
• You want to share control of the process, listen to taped calls, make message adjustments, receive reports and hold conversations about your program (perhaps with the calling staff, itself).
• You want to implement a starter program to “test the waters” without making a longer term commitment.
In essence, performance-based firms are excellent for established programs and clients who can make significant investments and want a virtually hands-off approach.
Hourly-based programs are excellent for newer programs or programs in need of improvements. Also, firms who want to be involved in the design and ongoing oversight of their programs should choose an hourly-based service provider.
For quick reference, this list breaks down the major differences between these two models:
Hourly-based
Program or client new to outbound business prospecting
Need for market intelligence and lead qualification, in addition to setting appointments
Wants to provide feedback, hear taped calls, review reports and be involved in program improvements
Unpredictable appointment fee, that in the long-run is typically lower than a performance-based model
Medium upfront investment
Pay-for-Performance
Experienced with cold calling, proven process
Need for setting appointments only
Program is set, minimal client oversight
Predictable appointment fee, that may be higher than an hourly-based program
High upfront investment
I hope this article illuminated the strengths of each business model and can help you choose which type of firm is best for your calling program in the future.