Pay for performance, but whose?

One of the key talking points in marketing research circles recently has been the notion of 'pay for performance'.  Essentially, this means compensating marketing research consultants based on the 'quality' of their services, and/or value to the client's business. But in my opinion, this notion throws up the age-old question: how does one determine the performance of marketing research and insight?

It is true that advertising agencies have been quick to adopt this practice. Well, I believe this has been driven partially due to the transparency in what constitutes a good advertising campaign. The client and agency can generally agree on the parameters and benchmarks for campaign success such as awareness, cut through, memorability, brand associations or even ROI. This can then be measured either through market-based validations (in the case of sales) or even through post-campaign consumer research. Once the parameters have been determined and their assessment is agreed upon, the performance of a campaign no longer lives in a black box!

However, let's now apply the same principle to marketing research consulting. I am sure we all agree that 'performance' is determined by 'outcomes'. Well, the outcomes of a market research engagement are judged on the quality of the insights delivered and the actionability of the recommendations for the client.  Interestingly, the relevance and actionability of these insights is highly subjective. What agencies think is high quality work may be far from great in the eyes of the client. But who really decides this?

The true test of performance is in the value of the insights to the client's business i.e did the research help the business make crucial decisions that resulted in financial value? In all honesty, we don't even get to go that far - sometimes research is not even acted upon, in which case it is hard to truly understand the value of the piece of research work. The more we try to gauge the performance of a research engagement, the more we realise that the outcome lies in the hands of the client.

In my opinion, the performance of research lies more in the hands of the client, than the agency! Think of the below scenarios:

What the client does with the insight goes a long way in determining its perceived performance. A brilliant piece of insight may not even leave the boardroom of the client, in which case did the research engagement fail to deliver? Or a poor piece of research was executed brilliantly by the client - in this case, should the agency get the credit?

Based on the above, I am not really convinced that 'true' performance-based payment can be implemented yet. It's probably a great notion to work towards, however, I think it is fundamentally flawed as an approach, due to the number of extraneous factors involved!