In October 2017 we interviewed Mario Schulzke, the current Chief Marketing Officer at the University of Montana and longtime performance marketing veteran.
Mario has overseen marketing at the University of Montana for the past five years. Prior to his current position Mario worked at ad agencies in Seattle, Portland and Los Angeles running digital marketing and performance marketing for brands both large and small.
So why’d we bring Mario on to the podcast?
- To hear his point of view on agency fee and compensation from both sides of the table (agency/consultant vs. brand)
- Ask Mario how he looks at budgets (outcomes first and then work backwards to calculate budget required to achieve) Outline the ideal type of customer for performance-oriented compensation
- Mash the ‘play’ button on the SoundCloud embed below to listen to the full interview or keep scrolling/thumbing down the page to read some of the highlights from our discussion.
Good morning, everybody. Today we've got Mario Schulzke, the Chief Marketing Officer at the University of Montana on our podcast. In a prior life, he lead Digital Divisions at R2C Group in Portland, Oregon, which is the largest independent direct marketing agency in the United States of America. He also led digital marketing at WONGDOODY, an independent agency with offices in Seattle and Los Angeles.
Mario, welcome to the show. Anything else you'd like to add?
No, Mike. Thanks for having me. I'm excited about this.
Today we're going to be talking about compensation for performance marketing services and firms.
Mario, you've been on both sides of the table: agency and client direct.
You're currently at a "client", the University of Montana. If you were to go out and hire a vendor or an agency, how would you personally draw up that contract? What key points would you include in that deal?
In the past there was a model where we said, "Okay. We've got a million dollars ... We've got ten million dollars ... We've got a hundred million dollars, Mike, help us break out that budget." And like a financial advisor you’d put together a portfolio that says, "Okay. We would spend this percentage over here, this percentage over there, and this percentage over here. And overall we'll take a 15% management fee.”
That is the old model. That is the antiquated model. And quite frankly, I think that's a losing model.
The way you want to structure any kind of marketing agreement is with the outcome in mind.
The way marketers should structure their contracts is like this: "Okay. Listen, Mike. In the case of University of Montana we're interested in growing our student body by increasing the size of our incoming class. We are able to spend $1,500 - $2,000 for every new and incoming student. How do we build a marketing program that hits that number?"
Then we can take a step back and I can say "You know what, Mike, for every application coming into the University of Montana we can afford to spend $400. For every general lead or inquiry coming into the University of Montana we're able to spend $50." Whatever those metrics might be, the way I would structure any agreement is with the outcome in mind.
See the difference between the old antiquated model and the future model?
Rather than saying "Hey, here's five million dollars, how should we best spend it?" we, the client, should come to you with something like "Listen. Our target cost per inquiry for a prospective student is $50. If you hit that target, we can pretty much spend any amount of money because our funnel will work out (from click to lead to school visit to application to acceptance… you get the point)
As a recap: structure any agreement with the final outcome in mind. Asking yourself “what are we trying to accomplish” and how much are we able to spend with that?
Got it. You mentioned that charging the tradition 15% is that antiquated, I believe that direct quote was, "a losing model, in the long run for media services, specifically."
Let's say an agency comes to you and offered their services in a base-performance combination model. So, let's say, 20% of their compensation was their “base” while 80%, or the bulk of their compensation, was tied to hitting specific marketing outcomes.
Would an entity the size of University of Montana respond to something like that? Or would they not be interested in a compensation model that has those kind of variables tied to it?
Absolutely interested! The way you'd want to do that is use a sliding scale.
- Set the target or outcome. For example at the University of Montana it could be $25 cost per inquiry for a general inquiry. ++ Think about cost metrics. How much does it cost us to, you know, generate the outcome that we want. ++ Think about volume. How many students are you able to bring in?
Finally attach an incentive to both of those. So, ideally, for the agency, Is the agency hitting the target metrics and you're hitting them at volume?
As a client, I'm willing to pay you a lot of money if it's a winning situation for me. If I hit my metrics, because your work is so efficient, optimized or innovative.
You mentioned in a previous life that you had structured performance-based contracts like this before.
Was there a prototypical client that you just knew would be perfect for this type of deal?
To answer that you have to understand that there are two types of clients in the world:
- Brand focused
- Direct focused marketers
Nike is a brand focused client. They don't necessarily have a call to action in any of their commercials. They're building a brand. And ultimately they want you to walk into Nordstrom or Foot Locker to buy their shoes. That's a brand driven client.
Performance oriented deals do not work with brand driven clients.
On the other hand you have direct clients. Chuck Norris and Total Gym or the Snuggie are examples. For many years direct clients were kind of cheesy. Right? They were sort of the late night infomercials. The stuff when you had nothing else to do and you couldn't sleep and you turned on the TV and the brands that were advertising at that time. Those were the direct clients.
BUT NOW direct clients are much more sophisticated. Direct clients are looking at the world from a long term perspective.
I'll give you the example: we are on a podcast here. I listen to a lot of podcasts. What are some brands that you hear a lot on podcasts?
- Blue Apron
- Leesa mattresses
There are a lot of really interesting, great brands in the direct marketing space now that are, A) Trying to build a long term business that is a truly outstanding business, but, B) They're willing to do so in a direct way.
Awesome. Well, Mario, we appreciate your time here on the podcast. And again, thanks for your time.
Mario: Hey, Mike, thanks for having me.