Progency: Marketing’s Hedge Fund Moment

Published June 22-27, 2025

1

Transformation Time

In a recent client meeting, a startling statistic exposed marketing’s deepest dysfunction: this brand spent 20% of its revenue on adtech, and just 1% on martech and retention. A 20:1 ratio. Sadly, this isn’t an outlier—it’s the norm. This systemic imbalance highlights a $500 billion crisis: the world of marketing is addicted to reacquisition and neglects retention.

The 20:1 Misallocation

This imbalance reveals marketing’s most profound inefficiency. Brands pour billions into platforms like Google and Meta to repeatedly reacquire customers they already know—contributing to the staggering global AdWaste crisis—whilst criminally underinvesting in the technology and systems needed to nurture those hard-won relationships. It’s akin to buying expensive bait whilst ignoring the fishing rod entirely.

Marketing’s Broken Incentives

The dysfunction runs deeper than spending patterns—it’s about fundamentally misaligned incentives. Traditional marketing operates on a perverse model: agencies and platforms profit regardless of client outcomes, charging for inputs rather than results. Adtech platforms extract their “tax” whether campaigns generate genuine growth or merely churn existing customers through expensive reacquisition cycles.

This raised a question: what if martech operated more like a hedge fund? Hedge funds earn 2% to manage capital and 20% of the upside they create—rewarded only when they outperform. What if we applied that same alignment to marketing? That’s when I saw Progency through a new lens: a marketing partner that earns only when it delivers measurable growth—true marketing alpha.

From Platform Spend to Partner Share

The hedge fund analogy crystallised a revolutionary concept. Just as hedge funds take investors’ capital, generate superior returns, and share in the upside, Progency would take client customers, create exponential revenue growth, and earn a proportional reward from the value generated. Like hedge funds that seek inefficiencies in capital markets, Progency finds untapped growth in customer bases—turning overlooked Rest customers into profit powerhouses.

A New Economic DNA for Martech

This isn’t merely about pricing structures—it’s about fundamentally rewiring marketing’s economic DNA. The opportunity is immense. That 20:1 spend imbalance represents misallocated resources on an industrial scale. Brands desperate to fuel growth pump money into acquisition channels that deliver diminishing returns whilst their retention infrastructure—the systems that could transform one-time buyers into lifetime advocates—remains chronically underfunded and underutilised.

Progency represents this paradigm shift: a marketing partner that operates like an elite investment fund. Just as hedge funds deploy sophisticated strategies to generate alpha for their investors, Progency deploys AI agents, vertical expertise, and continuous optimisation to generate measurable growth alpha for brands. The compensation model mirrors this philosophy—we only prosper when our clients achieve exceptional results that exceed their baseline performance.

The Alpha Class

This isn’t about incremental improvement or better campaign execution. It’s about creating a new category where marketing partners accept genuine accountability for business outcomes, where success is measured not in impressions or clicks but in customer lifetime value expansion and sustainable profit growth.

The stakes couldn’t be higher. Brands that continue funnelling disproportionate resources into expensive acquisition whilst neglecting retention will find themselves trapped in an increasingly unsustainable cycle. Those that embrace the hedge fund model for marketing—investing in partners who share both risk and reward—will unlock competitive advantages that transform marketing from cost centre to profit engine.

This series will go deeper into the Why and How of Progency. It’s a bold blueprint to rewrite marketing’s economics, end the reacquisition addiction, and replace platform rent with profit-sharing partnerships. The hedge fund era of marketing has arrived. Will CMOs be part of the Alpha class—or be left paying the acquisition tax?

2

From Contrarian Bets to Alpha Machines

This section written by Claude and ChatGPT.

The hedge fund industry emerged from a simple yet revolutionary insight: what if investment managers were rewarded only when they delivered exceptional returns? This principle, crystallised in the famous “2 and 20” compensation model, has created one of finance’s most successful and influential sectors.

Origins and Evolution

The hedge fund concept traces back to 1949 when Alfred Winslow Jones established the first hedge fund with a radical proposition: rather than simply tracking market performance, he would actively hedge positions to generate returns regardless of market direction. Jones combined long positions in undervalued stocks with short positions in overvalued ones, using leverage—a basic form of hedging that created the template for modern alternative investment.

The industry remained niche for decades until legendary managers proved the model’s power:

  • 1980s: Global macro pioneers like George Soros (Quantum Fund) and Paul Tudor Jones revolutionised trading by incorporating macroeconomic bets and high-frequency positioning
  • 1990s-2000s: The industry exploded mainstream with funds like Tiger, Citadel, and Renaissance Technologies. Institutional money from pension funds and endowments flooded in, ballooning assets under management from billions to trillions
  • Post-2008: Greater scrutiny and reduced leverage after the Global Financial Crisis led to the rise of quantitative and systematic hedge funds like Two Sigma and D.E. Shaw
  • 2010s-2020s: AI and machine learning dominate, with systematic-human hybrid approaches becoming the new frontier

The 2 and 20 Model: Perfect Incentive Alignment

The “2 and 20” structure represents one of business’s most elegant incentive alignment mechanisms:

  • 2% Management Fee: Covers operational costs—research, technology, personnel—ensuring the fund can operate regardless of performance
  • 20% Performance Fee (Carry): The fund’s share of profits above a predetermined benchmark or high-water mark

Example: If a $1 billion hedge fund returns 10%, it earns $20 million from the 2% management fee plus $20 million from 20% of the $100 million profits—total revenue of $40 million.

This model creates powerful motivations. Unlike traditional asset managers who earn fees based on assets regardless of performance, hedge funds only prosper when they deliver exceptional returns. The carry structure means fund managers literally share in their investors’ success—perfect alignment between principal and agent.

The Secret Sauce: Proprietary Advantage Through Five Pillars

  1. Proprietary Trading Models & Algorithms: Elite funds develop sophisticated quantitative models that identify market inefficiencies invisible to conventional analysis. Renaissance Technologies’ Medallion Fund employs AI, mathematical models, and vast datasets to detect pricing anomalies, consistently delivering 30-40%+ annualised returns over decades—performance that seems to defy market logic.
  2. Alternative Data Supremacy: Hedge funds invest heavily in alternative data sources—satellite imagery to predict commodity prices, credit card transactions to anticipate retail trends, shipping manifests to forecast supply chain disruptions, and web traffic patterns to identify emerging consumer behaviours. This information asymmetry provides trading advantages before public financial data reflects market changes.
  3. Speed and Agility: Many funds are structured for rapid response—entering and exiting positions in milliseconds through high-frequency trading or dynamically reallocating capital as macro trends shift. This operational velocity enables them to capitalise on fleeting opportunities that slower competitors miss.
  4. Talent Density and Performance Incentives: Hedge funds attract exceptional talent from physics, computer science, and finance through lucrative performance-based compensation. This creates virtuous cycles where success attracts better people, who generate superior results, which attracts more capital and opportunities—exactly paralleling Progency’s talent model.
  5. Alpha Generation Focus: Unlike mutual funds satisfied with beating benchmarks by 1-2%, hedge funds aim for true Alpha—substantial outperformance beyond market returns, regardless of market direction. They systematically seek non-correlated returns that justify their premium fees.

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Evolution, Comparison, Parallels

Strategic Evolution by Era

Era Dominant Strategy Example Funds Key Innovation
1950s-70s Long/Short Equity A.W. Jones Basic hedging concepts
1980s Global Macro Soros, Tudor Macroeconomic positioning
1990s Arbitrage, Quant LTCM, D.E. Shaw Mathematical models
2000s Multi-Strategy Citadel, Millennium Diversified approaches
2010s AI, Machine Learning Renaissance, Two Sigma Algorithmic trading
2020s Systematic + Human Hybrid Man Group, Point72 AI-human collaboration

Comparison Table

Feature Hedge Funds Mutual Funds / ETFs Private Equity
Regulation Light-touch (for accredited investors); less disclosure Heavily regulated (SEC oversight, retail-focused) Regulated, but with exemptions for private placements
Investment Strategies Highly flexible: long/short, arbitrage, derivatives, macro Primarily long-only, benchmark-driven Acquire, optimise, and exit companies (control investing)
Use of Leverage Common; often material to strategy Limited by law (e.g., 1940 Act); conservative leverage Used selectively, often at the portfolio company level
Liquidity Restricted (monthly/quarterly with lock-up periods) Daily (open-ended funds and ETFs) Very illiquid (capital locked for 7–10+ years)
Target Investors Institutional, high-net-worth (HNW) individuals Retail investors and institutions Institutional investors, HNW individuals, family offices
Return Objective Absolute return (generate alpha regardless of market) Relative return (beat a benchmark index) Long-term capital appreciation via operational value add
Fees “2 and 20” (2% mgmt fee + 20% of profits, sometimes more) Typically <1% expense ratio, no performance fees “2 and 20” or tiered fees based on Internal Rate of Return (IRR)

The Progency Parallel: Marketing’s Alpha Revolution

The hedge fund model provides the perfect blueprint for reimagining marketing economics:

  • Marketing Alpha = Growth uplift beyond historical performance baselines
  • Management Component = Infrastructure for AI agents and platform capabilities
  • Performance Carry = Shared upside from measurable revenue growth
  • Proprietary Edge = AI-powered personalisation and cross-client pattern recognition
  • Talent Alignment = Performance-based compensation attracting elite practitioners

Like Renaissance Technologies’ mathematical approach to market inefficiencies, Progency systematically identifies undervalued customer segments—particularly “Rest” customers whose potential remains unrealised by conventional marketing. The performance-based model ensures focus remains on actual alpha generation rather than activity metrics.

This evolution from niche strategy to mainstream dominance demonstrates how performance-based models can transform entire sectors. The hedge fund industry’s success provides the definitive blueprint for Progency: combining proprietary capabilities, perfect incentive alignment, and systematic alpha generation to transform marketing from cost centre to profit engine.

The Economics in Action: A BRTN Case Study

Consider the mathematics using Progency’s Best-Rest-Test-Next (BRTN) segmentation framework: Rest customers—comprising 40% of most brands’ databases—typically generate 30% of total revenue despite being systematically underserved. When Progency’s AI-powered interventions double this segment’s revenue contribution, the additional 30% revenue jump translates to a 6% compensation under the 20% carry model—a substantial return for both parties.

But this is merely the foundation. Progency’s comprehensive approach extends across all segments: AI-orchestrated personalisation for Best customers drives premium pricing and increased purchase frequency, whilst NeoN’s authenticated advertising network slashes Test customer reacquisition costs by 30-50% and improves Next customer acquisition efficiency. Combined with systematic AdWaste elimination, these interventions can generate total compensation reaching 10% of revenue—derived from both new revenue creation and cost reduction.

Unlike traditional marketing spends that disappear regardless of results, this model creates a self-reinforcing cycle: Progency’s success directly funds further innovation and optimisation, continuously compounding returns for both partners. The 10% compensation represents not an additional cost but a reallocation of existing inefficient spending into performance-generating partnerships—transforming marketing economics from linear expense to exponential value creation.

4

Rest Customers for the Hidden Alpha

Like hedge funds that systematically identify undervalued securities with hidden potential, Progency must pinpoint customers whose lifetime value vastly exceeds their current spending patterns. The mathematics reveal a stunning opportunity: whilst Best customers (20% of the database) generate 60% of revenue, Rest customers (40% of the database) contribute merely 30%—a per capita spending ratio of 3:0.75, meaning Best customers spend 4X more than Rest customers on average.

This disparity isn’t inevitable—it’s inefficiency. Rest customers aren’t inherently less valuable; they’re simply underserved by generic marketing approaches that fail to unlock their true potential. The alpha opportunity lies in systematically converting high-potential Rest customers into Best customer behaviour patterns, effectively doubling revenue from this overlooked segment.

Consider the compound impact: if Progency can elevate just half of Rest customers to Best-level spending patterns, total revenue increases by 60%—not through expensive acquisition, but by maximising relationships that already exist. This represents pure alpha generation: measurable outperformance that flows directly to profitability without proportional cost increases.

The hedge fund parallel is precise: successful funds don’t just buy undervalued assets—they implement activist strategies to unlock dormant value. Similarly, Progency doesn’t merely identify high-potential Rest customers; it deploys systematic interventions designed to transform spending behaviour and relationship depth. The focus must be laser-sharp: customers who demonstrate capacity to spend more but lack the engagement architecture to do so consistently.

The 8-Lever Alpha Generation System

Progency’s systematic approach to doubling Rest customer revenue operates through eight interconnected levers organised across three strategic phases, mirroring hedge funds’ disciplined value creation methodology.

Diagnose phase employs three discovery levers: Advanced Customer Intelligence that identifies Rest customers with Best-level potential through “Alpha Gap Analysis”; Predictive LTV Forecasting that scores future value rather than past performance; and Best Customer Journey Archaeology that reverse-engineers proven conversion pathways into replicable templates.

Activate: phase deploys three engagement levers: NeoMails Habit Formation Engine creates daily touchpoints through gamified micro-content and interactive experiences; AI-Orchestrated Hyper-Personalisation delivers 10,000+ individualised journeys rather than crude segmentation; and Behavioural Trigger Automation provides real-time intervention when engagement patterns shift.

Expand: phase maximises value through two multiplication levers: Revenue Architecture Transformation shifts customers from transactional to subscription models whilst surfacing optimal cross-sell opportunities; and Network Effect Amplification transforms Rest customers into referral engines and community advocates.

Each lever generates measurable alpha through specific KPIs—conversion velocity, revenue per customer uplift, engagement progression, and retention improvement. The system’s power lies not in individual tactics but in their systematic orchestration: diagnosis identifies potential, activation builds engagement momentum, and expansion compounds returns. Together, these levers create a repeatable methodology for extracting maximum value from marketing’s most overlooked asset: the underserved middle tier of the customer base.

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Alpha Levers

  1. DIAGNOSE: Hidden Potential Discovery

Lever 1: Advanced Customer Intelligence Beyond RFM

  • Alpha Gap Analysis: Score each Rest customer’s “LTV potential vs. current spend” ratio—this becomes the priority ranking
  • Behavioural Signal Detection: Identify high open/click activity with low conversions (engaged but not converting)
  • Best Customer DNA Matching: Find Rest customers with demographic, category, or engagement patterns mirroring your Best segment

Lever 2: Predictive LTV Forecasting

  • Future Potential Scoring: Use AI models to predict untapped value, not just historical patterns
  • Purchase Intent Algorithms: Detect micro-signals like repeat browsing, cart abandonment timing, or seasonal patterns
  • Category Expansion Mapping: Identify single-category Rest customers with cross-sell potential based on Best customer purchase progressions

Lever 3: Best Customer Journey Archaeology

  • Conversion Path Mapping: Reverse-engineer the complete journey from first purchase to Best status
  • Moment Identification: Pinpoint critical touchpoints, offers, and timing that trigger Best customer behaviour
  • Template Creation: Build “Best Lookalike Journeys” that systematically guide Rest customers through proven conversion sequences
  1. ACTIVATE: Daily Engagement Architecture

Lever 4: NeoMails Habit Formation Engine Your framework here is spot-on. Enhance with:

  • Progression Gamification: Show Rest customers their advancement toward Best customer benefits
  • Personalised Brain Gain: Deliver category-specific education that builds expertise and purchase confidence
  • Social Proof Integration: “Customers like you typically buy X next” messaging

Lever 5: AI-Orchestrated Hyper-Personalisation

  • 10,000+ Micro-Journeys: Move beyond 8-10 segments to true 1:1 personalisation
  • Predictive Nudging: “Time for a refill?” or “You might like this based on seasonal patterns”
  • Dynamic Offer Testing: Real-time A/B testing of CTAs, pricing, and incentives per individual

Lever 6: Behavioural Trigger Automation

  • Lifecycle Intervention: Automated reactivation when engagement metrics decline
  • Inventory Intelligence: “Your favourite item is back” or “Limited stock” triggers
  • Social Momentum: “200 others bought this today” creates urgency

III. EXPAND: Value Multiplication Systems

Lever 7: Revenue Architecture Transformation

  • Next Best Action AI: Surface optimal cross-sell opportunities based on purchase progression analytics
  • Subscription Conversion: Shift high-potential Rest customers from transactional to recurring revenue models
  • Bundle Intelligence: Create compelling package offers based on Best customer purchase combinations

Lever 8: Network Effect Amplification

  • Referral Acceleration: Transform Rest customers into acquisition engines through incentivised word-of-mouth
  • Community Integration: Use Rest customers as “beta testers” for new features, creating engagement and loyalty
  • Social Proof Generation: Leverage Rest customer testimonials and behaviour to influence similar prospects

The Quantitative Hedge Fund Parallel

Like quantitative hedge funds that use systematic screens to identify undervalued securities and then deploy activist strategies to unlock value, Progency employs:

  • Systematic Screening: AI-driven CLV analysis identifies high-potential Rest customers
  • Activist Engagement: Deploys targeted intervention strategies to unlock dormant value
  • Portfolio Optimisation: Continuously rebalances efforts based on conversion velocity and ROI
  • Performance Attribution: Measures and optimises each lever’s contribution to overall alpha generation

Alpha Measurement Framework

Track success through:

  • Conversion Velocity: Time from Rest to Best status
  • Revenue Per Customer Uplift: Measure improvement in individual customer value
  • Engagement Progression: Monitor daily interaction increases
  • Cross-Category Expansion: Track broadening of purchase behaviour
  • Retention Improvement: Measure reduction in churn to Test status

This systematic approach transforms Rest customer development from art to science, creating repeatable processes that generate consistent alpha across diverse client portfolios—exactly mirroring how the most successful hedge funds create sustainable outperformance.

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Progency’s Prize

For decades, martech companies have sold software priced on inputs—messages sent, users touched, features accessed. This model has capped their impact and share of marketing budgets, relegating them to cost-centre status. In contrast, adtech—with its outcomes-based pricing—has captured 90% of the spend, even though much of it fuels the $500 billion AdWaste crisis, repeatedly reacquiring customers brands already know.

Progency flips this equation. It introduces a performance-first model built on outcomes, not inputs—retention, not reacquisition—Alpha, not just Beta. It doesn’t merely promise capability; it delivers measurable results. And like a hedge fund, it earns a share of the upside: a carry on the new revenue it helps create.

Where Does This New Revenue Come From?

  • Doubling the Rest: As demonstrated, Rest customers represent an overlooked goldmine. With AI-driven personalisation and systematic engagement through the 8-lever framework, they can increase spending 2-4X. Progency makes this uplift systematic and repeatable.
  • Multi-Monetising the Best: Whilst in-house teams focus on retention, Progency unlocks additional value streams through NeoN—monetising brand emails via embedded ActionAds, transforming owned attention into measurable income without disrupting core customer relationships.

The Execution Gap

Most marketing teams cannot seize these opportunities due to structural limitations:

  • Underutilised martech platforms (60-65% of features unused)
  • High team churn and institutional knowledge loss
  • Focus on handful of crude segments versus true personalisation
  • Inability to orchestrate 1:1 customer journeys at scale
  • Fragmented data across disconnected tools and channels

This mirrors individual investors struggling to beat market indices—constrained by tools, time, and expertise that institutional players leverage systematically.

Progency operates as marketing’s hedge fund: deploying the PEAK framework—Platform, Experts, AI Agents, and Kaizen—to systematically generate growth Alpha from brands’ existing customer bases rather than chasing expensive new acquisition.

The 10X Revenue Opportunity

Executed properly, Progency unlocks 10X revenue potential for itself—not by increasing brand marketing spend, but by redirecting waste into value creation:

  • Boosting revenue from existing customer relationships
  • Slashing reacquisition costs through precision targeting
  • Monetising attention in brand-owned channels
  • Eliminating AdWaste through retention-first strategies

This creates win-win-win dynamics: brands achieve superior growth economics, Progency earns proportional rewards for alpha generation, and customers receive more relevant, valuable experiences.

Progency’s Mantra

Max the Best
Double the Rest
Eliminate the Waste
Triple the Profit

Marketing’s Hedge Fund Moment

This represents marketing’s hedge fund moment—a generational opportunity to transform an industry trapped in inefficiency. Through NeoMarketing’s twin engines—Progency and NeoN—we can restore marketing to its rightful position: not as a cost centre, but as a profit engine, with CMOs not as budget owners, but as boardroom MVPs.

The revolution begins with recognising that marketing’s greatest alpha lies not in acquiring new customers through expensive platforms, but in systematically unlocking untapped value within existing relationships—precisely the insight that created the hedge fund industry’s extraordinary success.