Paying for the effect of the work instead of the hours that went into it. It is the model everyone supports in theory and that rarely survives in practice. The reason is not unwillingness but measurability.
Why it appeals
Under an hourly rate you pay more the longer something takes. That rewards slowness and penalises experience: the agency that solves your problem in two days earns less than the one taking two weeks. Value-based pricing reverses that incentive.
It also fixes an old distortion. The value of a good idea bears no relation to the time it took to think of it, and an hourly rate pretends otherwise.
Why it usually does not hold
The measure. What do you measure value against? Revenue is influenced by price, distribution, weather and competition. Brand awareness moves slowly and costs money to measure. Leads can be steered by making them cheaper.
The attribution. Was it the campaign, the new packaging, or the promotion your largest competitor did not run? In a good year everyone wants the credit, in a bad year nobody wants the bill.
The asymmetry. The agency carries the risk of your decisions: you approve, you set the budget, you pick the moment. An agency hanging its fee on that without a say in those choices is taking a risk it cannot steer. In practice it prices that risk in, and you pay more rather than less.
The form that does work
A base fee that covers the cost, plus a bonus on one or two outcomes meeting three conditions: agreed in advance, measurable by both parties from the same source, and as close as possible to what the agency genuinely influences.
Prefer an outcome the agency can steer (reach within the target audience, conversion on a landing page, the share of recommendations actually implemented) over a business result carrying thirty other factors.
What to settle above all
Who measures, with what instrument, and what happens if the measurement fails. That sounds bureaucratic and it is the point at which these agreements usually break.
Making such an arrangement hold requires a measure both sides can live with, and that is exactly where IKAg sits in Agency evaluation & remuneration.
See also: which remuneration models exist and fee, commission or hourly rate.