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June 8, 2010

Internet Marketing Business Track: Opening the Contract Kimono: Translating Your Pricing Model to Legal Agreement

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This is a guest liveblog post by Alan Bleiweiss, Internet marketer and blogger at Search Marketing Wisdom. This was Alan’s first go at liveblogging, and I think we did a decent job hazing the new guy. ;) Great stuff, Alan. The Bruce Clay, Inc. blog readers thank you!

SMX

OK so here I am, at SMX Advanced, in Seattle.  I wasn’t expecting to be liveblogging, yet that’s exactly what I’m doing for this first morning session.

Warning – I have never liveblogged at a conference before.  In fact, I expect I’ll fail miserably at this.  So we’ll pretend it’s the effort that counts, not the results, okay boys and girls?

The good news is I’m sitting next to Matt Siltala (a guy who’s got my back) and Dana Lookadoo – a professional who inspires me to do this as best I can.  So I’m ready to rock!

Great.

Okay – the moderator for this session is Chris Elwell, President, Third Door Media.

Today’s speakers include:

Will Scott, President, Search Influence
Marty Weintraub, President, aimClear
Lisa Williams, President, MEDIA forte marketing

Chris is up to start things off…

[Insert obligatory thanks to Bing for their sponsorship here]. What would a conference be without moderators thanking the money people, right?

If you’re twittering (twittering Chris? Really? Have you never heard the term “tweeting”?) the official hashtag for the conf. is #smx.

This is going to be an exiting presentation about a boring topic. If you’re looking for Matt Cutts you’re in the wrong place!

We have champions for each of 3 topics in parts of a contract. Marty will talk about the scope, Will is going to talk about legal and liabilities then Lisa will talk about compensation with a slant toward pay for performance.

Q&A will be taken during the session and questions can be submitted online to Adam Audette.

None of this is legal advice – you should hire an attorney – we will disavow ever giving this presentation! (LOL – he had to say that, I suppose.)

(Chris is going over the bio for each speaker right now, but I won’t bother liveblogging that – if you want to know more about them, uh, well, look it up!)

Marty’s up first.

If he has a favorite session speaking anywhere in the world, this session would be it because he loves this topic.

The one takeaway he never got from this session in the past – would be what contract language to use. (Marty looks around, sees a lot of empty seats…) We’re not many, but we’re mighty!

Marty’s using a Word Doc instead of a PowerPoint – what a renegade!

That’s a view of his office (photo of a big cargo ship on the screen). He blogs at aimClear.com.

He makes sure to include language about what they’re going to do – what the scope of the project is…

[In your contracts,] you can say “we’re going to do some SEO, or we’re going to provide some content…” You can say “we’re going to do the social media, or whatever…”

First they do market research – demographics. And he practically stand on tables showing clients that we do this… (LOL – can you picture Marty standing on a table in a conference room, jumping up and down? I can, and it almost prevents me from taking notes!)

Marty’s blasting rapidly through the list of things he communicates to clients what they’re going to do – so I’ll just summarize here – be sure you communicate what it is you’ll be doing for the client. Start with an overview paragraph, and then go into details – bullet points with descriptions of each task you’ll be doing. Be clear and cover every aspect of what you’ll be doing. Looking at Marty’s contract example I see he writes one or two sentences for each task point they say they’ll deliver on. (Too many details in a contract can be a bad thing.)

Next, Marty includes KPI specifics including:

  • Work with Client to establish reasonable KPIs (Key Performance Indicators) and controlling strategy to guide channel tactics.
  • How we’re going to report to you and how frequently.
  • A paragraph about doing additional work “as we mutually deem appropriate”.
  • Define how deep you’ll take Social and PPC targets – Marty says they’ll take it to the Ad group level
  • Language about the PPC test budget limit amount, and that additional PPC expenditures are the clients’ sole discretion.

At this point in the preso, Marty laughs and says “That’s a bunch of bullshit to protect me!” :)

He then includes Scope enhancement info how much it will cost to do work that goes beyond the scope detailed in the contract – that it’s at the option of the client, at $X hourly rate.

Decision Making and Authorization: Marty includes a section on the decision making process, essentially stating that aimClear Decides, but that the Client Authorizes the work.

Marty has a whole section on what they’ll do for Facebook research.

He’s put together a doc with a lot of great contract language for different situations, all the language you’ll need to put together regarding what you’ll deliver to the contract. If you want to see it, he’ll be happy to show it to you. Just request it.

In regard to scope, Will then offers:

A unit of work for us costs $60 – an hour of someone’s time, writing of an article, etc. – maybe an article takes 3 units… We’re primarily a content producer – we don’t have a sales team.

Lisa says that her contribution to scope is pay for performance – PFP isn’t for every client. We all know SEO is underfunded. PFP says “we’ll all make money”. It’s a really fair way to start with a client, especially if they didn’t previously have SEO or what was done was done wrong, or if they don’t have a big budget. That’s the one takeaway she hopes that you learn from their failings.

Will then mentions that he thinks a really strong aspect of Lisa’s language in contracts is attribution – if you, the client do something on your own, we can’t take responsibility for the results…” (Excellent written disclaimer!!!)

Will’s up now.

Good fences make good neighbors. His contract language leans toward limiting liability, Lisa’s is friendlier toward customers, and Marty’s is right down the middle.

Lawyer Joke:

Person 1: How much would you charge for just answering three simple questions?

Person 2: A Thousand Dollars

Person 1: That’s a lot, isn’t it?

Person 2: What’s your third question?

(Everyone laughs – we all love lawyer jokes, don’t we? It’s like a cultural obligation, I think!)

Reasons to limit liability:

  • Lawyer makes enough already
  • You’re too cute to go to jail
  • Clients don’t like losing money
  • It’s PROBABLY not your fault
  • Stuff happens
  • Internet marketing is voodoo

It’s not worth losing your business.

Ways you might lose business:

  • Your lead capture system mysteriously stops delivering – that cost 100k lost revenue (client loss)
  • Your programmer gets drafted to shore up the Kurdish front – 30k settlement (our loss). (They had a programmer in Turkey and that’s what he said caused him to flake out and not deliver on contracted work.)

No joke, they’ve all happened!

Going the litigation route, he has a $14k judgment against this customer, but someone ahead of him has a $300k judgment against them – so they’ll never get paid on that!

Example contract language:

Waiver of warranties and limit of liabilities… (Lots of liability language being flashed on the screen – Wow. Will goes to great lengths in his liability waiver!)

We’ll never be responsible for any more than you paid for us – the max you can ever hope to extract is what you paid us! (That’s crucial, people – be sure to get that kind of language in your contracts!!)

Will says Lisa’s liability / warranty language is “nice”, but open to interpretation – he has serious concerns about that. Essentially, if she has to fix something, she’ll do it for free. Its language that essentially says: You hired me because you thought I knew what I was doing.

Will says that Marty’s language says – neither party is liable for anything. Marty responds – I like your “go to hell” language in yours… (Oh SNAP!)

I’ve read and agreed to the terms on the next page with a checkbox – check here… If you read it you do, if you don’t, you don’t… (sneaky guy there!)

Clients don’t like losing money. If they lose money, they lose their sense of humor – and that could cost you a lot!

Even if you have a lot of liability language, it doesn’t mean you can’t offer a very high level of service.

How do you prevent a lawyer from drowning? Shoot him before he hits the water!

And with that joke, Will’s done!

Marty: I’m just stunned at the gifts these guys are giving (referring to Lisa and Will).

Will: I hate to see people make mistakes that they can learn from my mistakes. And it really really sucks to have to write a client a 30k check.

Audience Question: I get people pushing back on liability language. How much are you willing to modify your liability?

Will: If you want language nice or reciprocal like Marty’s find another company.

Marty: It’s a deal breaker for us.

Will: The point really is, while for short term gain it may seem valuable, there really is a long term impact. If I didn’t have 30k to pay a client, they could take my house. If the company I went after for 14k had any assets, I would have taken it. I would have gone after it. Don’t let the desire for the deal expose you to liability.

Lisa: The creation of trust – it’s just as important for you trust the client as they trust you. If they’re pushing back on so many things, they’ll probably be that way during the whole relationship.

Q: We have E& O insurance. Is it worth it?

Will: Yes, but our deductible is 25k! (HOLY CRAP) Yes it will cover you for big amounts, but you still have the deductible.

Lisa: Even with E& O, there are some things you’ll have to go to court over. I really like Will’s max repayment (what you paid us) language, which I think is really fair.

Lisa’s up next.

Is anyone interested in PFP? A few people (I saw one hand) :)

Has anyone seen Tommy Boy?

10 things for contracts I learned from watching Tommy Boy

Choose your partners well. Choose pay for performance partners that:

  • Have site architecture issues that would greatly benefit from fixing the issue.
  • Have higher transaction value and higher profit margins.
  • Have a lot of potential.

Contract points: Choosing your partner well is important for PFP – SEO is under funded which means there’s great deal of opportunity. Consultant will determine in conjunction with client approval the method details and means:

  • Establish trust
  • Have exceptional referrals
  • Make your place in SEM community (establishes credibility)
  • Under promise over deliver
  • Refer potential clients if they’re not a good fit or even to encourage competition
    (And it always comes back)

“A guarantee is only as good as the man who writes it.”

(Oh. My. God. My fingers are buzzing – is this what Susan / Lisa go through every liveblogging session?)

Create language in the contract that shows revenue is priority.

Sample language: “Each strategy will be implemented and monitored for greatest ROI. Determinations regarding increasing budget for strategy will be based on added value to the bottom line. Not all online marketing strategies will be recommended….”

Make sure your skills are a fit.
Clearly define scope.
Provide transparency.

Clearly define expectation.
Creating expectation is the biggest challenge.
Misunderstanding service expectations is the biggest cause of disputes.

(OMG I have to peee.. can we pause the session so I don’t miss anything in my liveblogging? /TMI note)

Give reporting in depth but keep it simple enough to allow for max project time to be spent on executing on deliverables. Simplicity is needed because there are so many factors of attribution.

KNOW YOUR STUFF, DON’T BULLSHIT:

  • SEM industry earning respect
  • Don’t use word “expert” lightly.
  • Share keyword research as it applies to different channels.
  • Identify strategies they’re not using that could help them achieve big gains.
  • Bring in other experts as needed!

“We’re thought leaders but we don’t know everything – and we can find the people who have the expertise in areas we don’t know.”

If you’re reasonable, people will be reasonable back.

What to do when you mess up:

  • Own your mistakes
  • Provide a solution
  • Ultimately it’s your credibility!

On the other hand, they could mess up:

  • Not following recommendations
  • Questioning recommendations
  • Not understanding recommendations
  • Doing things you didn’t recommend that harm results

What to do when THEY mess up:

  • Provide opportunity to work out issues as partners, if not possible, create clear steps for resolving.
  • Dispute resolution: Unresolved disputes go to mediation prior to arbitration.
  • Push the point – of mediation rather than arbitration.
  • Keep the relationship.
  • Provide win-win every step to earn their trust.
  • Put more in contract than you think you need
  • Guiding principles: simplicity, fairness, alignment, clarity, adaptability, and flexibility

Make contract creation a priority.

Will: On payment models, we’re pretty simple – we set a price, and do our best to hold to the scope then our account managers screw me every time. But that means a happy client, then we get to use that as leverage – if the client has issues with something or paying, I can say – hey – by the way – we built you a shopping cart and you got an $1800 gift….

Marty: aimClear has a payment document – fee statement language, how we do it at hourly rates if it goes out of scope, other fees language, initial retainer language.

Okay some questions from the audience:

Question: What do you do if clients are not listening to your recommendations?

Marty: Preserve reputation, do right by spirit of the deal.

Lisa: Spirit is the thing. If they’re not going to do what you say they need to do, we can fire you! She gives an example where you provide nutritional advice to a client, and then they go off and eat at McDonalds… (yeah, that’s a client you don’t want to keep around!)

Question: Is it difficult to work with lawyers that don’t know online marketing?

Chris: Don’t work with them!

Question: Contract went to hell because client team was replaced – new people from Satan – do you ever write stuff in about the contact person?

Will: There are instances where you just can’t win. Having worked with monster organizations as a vendor, they plan their meetings to 15 minute increments – the only thing you can do is try to make the new guy feel smart. “Hey – you can take all the credit without having to take any of the blame!”

Marty: Do it with dignity, get as much cash out of it as possible if it goes bad.

(OK this guy who asked the question is going on and on – sure, he’s talking about real world contract crisis but what about letting others ask questions? – HA ! Marty just said the same thing! Let’s let more people ask questions… Thanks Marty! Then Lisa goes and gives more response to this guy… She really does take the polite and “nice” approach, I would have cut this off and moved on…)

Ok it’s 10:15 – I’m fried, I need to go find a restroom, and then let my hands and wrists rest! And then I have to tell everyone I meet for the rest of my life that if they think liveblogging is easy, they must be smoking crack!

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2 responses to “Internet Marketing Business Track: Opening the Contract Kimono: Translating Your Pricing Model to Legal Agreement”

  1. Chris Elwell writes:

    Thanks for the excellent post on the session, Alan. Lisa, Marty and Will really delivered the goods at this one. (Did I really say “twittering”? Now you know why I got out of radio!)

  2. Alan Bleiweiss writes:

    Ha! Actually, I bet you got out of radio because it didn’t afford you enough time for quality fishing excursions!



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