A guide to PPC agency pricing

As if the world of Pay Per Click was not confusing enough with all the campaigns, keywords, statistics and optimising. Not to mention developing a paid search strategy specific to a business with an appropriate starting budget. That’s why many businesses look to outsource their paid search campaigns to specialist agencies. Then the question of ‘how much does it cost to outsource my pay per click campaign?’ arises.

There are many different Pay Per Click pricing structures including payment per click, pay per keyword and payment per performance (metric) that are applied by agencies.

Below are common examples of PPC price plans.

Hourly Rate

This is the most flexible option offering a more ‘pay as you go’ service which allows you to pop in and out of agreements when you feel the campaigns could need some attention. It can work well should you have an in-house executive who will look into the more basic functions and day to day monitoring of the paid search campaigns. Then should you require new campaigns to be built for new products, split testing for optimisation or more complex tasks to be completed you can always pay a specialist to look into this for you.

However this option may not be the right approach to pay per click. Firstly is it cost effective to pay an hourly rate to a specialist and pay a monthly wage to an executive to both co-manage the paid search campaign? Or on the other hand just leave the account to its own devices and look into it occasionally.

A great amount of data and information is received throughout the day which may indicate trends and opportunities to enhance the performance of the campaigns and further the results. If an expert is only given access to the account now and then, these indicators may be missed. A worst case scenario is that performance starts to slowly decline with no eyes looking at the account until someone realises that new business leads have slumped and decide to take a look into the account and notice that performance has dropped.

Other factors to consider is how long does the work in question actually take and how can you the customer measure this? How transparent is the agency’s services and work logs? What incentives are there to make the agency want to give the same level of attention and detail to the campaign when compared to a fully managed campaign?

Percentage of Profits

This option is not commonly used by agencies as there are a number of issues around tracking sales and their values. It is however an ideal option for a client who does not have much budget to invest in paid search advertising, as they only pay once sales have been made. Another advantage is that the agency is incentivised to make sure the campaign produces results as the agency will only make money should the campaign perform, if it doesn’t then the agency gets nothing.

There is a great deal of shared accountability as the agency will look to drive traffic to the site for you but then it is up to your sales process to close any sales opportunities.

So what are the downsides to the PPC percentage of profits pricing? Well the agency will be focusing on brand related search phrases so this could just be repeat customers and therefore a lot of opportunities will be missed by not targeting a wider field of search phrases. It is always questionable how much time the agency will actually spend on the account as if it is not a huge revenue generator then the agency may not spend too much attention to the account.

Percentage of spend

A very popular, if not the most commonly used pricing plan for agencies. This is ideal should you spend a certain amount which is deemed a reasonable payment by the agency and is at the same time a competitive price for you. Some say that this method is great as it incentivises the agency to deliver results so that you will invest more funds to gain more conversions. This could be a legitimate reason however there may be less expensive ways of incentivising an agency instead of a percentage of your click spend.

Usually the agency will charge 10-20% but if this turns out not to be in the agency’s interests then the percentage is likely to change. With this option it is most likely that the agency will withhold the percentages they charge which makes it difficult to predict how much you are going to pay moving forward.

Another factor to consider is the agencies intentions – if they recommend a large click spend to begin with – why is that? Is it to enable the agency to charge more or is it to further improve results for you the client?

On one side, you have a huge amount of funds to invest into paid search advertising which then equates to a substantial management fee of £4000+ then you are probably quite a large business and may benefit hiring someone to manage the account in-house.

On the flip side, like many businesses that have only a set amount of investment. An agency may recommend a starting budget which may result in a good deal, however how much work will the specialist put into the account for such a deal?

Google suggest starting with an appropriate click spend to identify areas that perform well and what does not perform so well. The idea is to then optimise higher performing areas further for better returns and tweak lower performing sections to gain incremental improvements for future optimisation. Once these performance indicators have been identified then budget should be increased to increase the results and further return of investment.

So why go in guns blazing with a huge starting budget when this could be spent on low performing areas.

Fixed Fee

Is exactly what is says on the tin. A pay per click fixed fee allows you the client to know exactly what you are spending moving forward and makes plans ahead. It allows you to know how much time the specialist will spend on the account.

It also means that once the higher performing areas have been identified and investment is increase to increase return the management fee will remain the same – so you really are getting a better return with no percentage chunks being taken away!

‘But the agency isn’t really incentivised to get the results for me!’

Take it from me, when I was a campaign delivery manager the account were like my babies and if they did not perform it reflected back at my ability. I may be just speaking for myself – so let’s look at it in another way – What would be best for an agency, a client who leaves after month 3 or a client that stays for as long as possible, is happy and happy to provide case studies, refer more business?

The main goal for Pay Per Click is to get a return of investment possible and continue to increase that return moving forward.

James Alexander

 

Client Stories: Jo Haynes – BijouByJo

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