PPC Chat Streamcap – Pricing PPC

This week, our host Matt Umbro (@Matt_Umbro) wondered about “Pricing PPC.” This chat wasn’t as active as some, but still a good discussion ensued. The following is the transcribed Streamcap from the live chat:

Q1: How do you charge for your PPC services and management?

  • Flat rate for the most part. – Matt Umbro (@Matt_Umbro)
  • % of Adspend and a onetime setup fee. – Luke Alley (@LukeAlley)
    • Yes, onetime setup fee is key, then month by month management fee. – Matt Umbro
  • No single way – flat fee, %, performance based, hybrid… varies massively! But in general most clients are a % of spend. But the % varies. – Arianne Donoghue (@ArianneDonoghue)
  • I was a fan of the flat fee small base + performance based…much like an affiliate actually. made more than avg % ad spend. – James Zolman (@jameszol)
  • % of spend is usually the best bet for scaling services, but have to include performance goals to protect clients. – Chris Kostecki (@chriskos)
  • Typically Estimate # of HRs for initial devx Hourly rate, then monthly management is similar. % comes into play w/ size & scope. – James Svoboda (@Realicity)
  • Consultancy based. % traffic spend based is ridiculous, motivates PPCers to drive more traffic. – Bart Schuijt (@BartSchuijt)
  • Setup-fee, percentage of spend with a base minimum. – Mark Kennedy (@markkennedysem)

Q2: Is it fair to charge by percentage of total spend? In other words, whose to say a $2K account won’t take as long to manage as a $10K account? Should client ad spend be the metric that defines what a PPC manager makes?

  • It’s not fair, because it motivates PPC managers to increase budgets and drive more traffic to clients’ websites. – Bart Schuijt
  • There’s a wide range of cpc bids, so some PPC managers would earn much more. – Bryce Bertola (@brycebertola)
  • When I was in house I never liked the % of spend model. – Ryan Campbell (@_ryancampbell)
  • I prefer to analyze the account & scope – then set flat monthly fee (with setup fee). – Robert Brady (@robert_brady)
  • We use % of Ad Spend as a the guide for size and scope, not an excuse to make more for doing less with larger budgets. – James Svoboda +
    • Agreed – ultimately, if we’re not driving the right results, the client wont WANT to spend more. Still drive performance. – Arianne Donoghue
      • But you can drive a result that is “good enough” at a higher than optimal spend. – Richard Fergie
        • Perhaps you can in the short term, but we take a long term view that whats best for the client is best for us too. – Arianne Donoghue
  • To me, your spend doesn’t matter, I will do what’s necessary to show results. – Matt Umbro ++
    • How do you prioritize that time then? Your time is limited. – Luke Alley
      • I mean obviously bigger accounts get more attention, but I don’t neglect an account simply because of spend. – Matt Umbro
        • Right. More time has to be devoted to the “big” accounts because they pay more. % of adspend then helps you prioritize. – Luke Alley
          • And yes, clients who spend more probably bid on more terms & require more upkeep but smaller clients still need much mgt. – Matt Umbro
            • GREAT point. Smaller budget clients usually don’t have a robust account like larger budget. Helps w/ prioritization. – Luke Alley
          • Disagree. % of adspend is not about the size of a client. Some clients need more attention. Depends on priorities, too. – Bart Schuijt
            • Doesn’t make sense to have a $2k budget client with 100,000 keywords. Can’t get sig. amount of data to optimize. – Luke Alley
              • As PPC marketer you need to be selective indeed. 2k budget / month and 100k kws is not a good combination. for some clients you could spend 10k / month with only 10 kws. Kws and ad spend are two different aspects. – Bart Schuijt
              • There’s a balance to be found tho. Best practice vs spend vs potential. – Arianne Donoghue
                • I agree, there has to be a balance. IMO it’s about what’s in it for the advertiser. – Bart Schuijt +
                  • Youre totally right. Some clients will only ever be small. Know your limits & dont waste effort. – Arianne Donoghue
  • The only advantage of %age spend is that it is easy to track and easy to control. – Richard Fergie (@RichardFergie)
  • Too be honest I let the account department deal with costs. – Matt Umbro
  • The more a client is willing to spend shows their commitment to advertising and how much we commit to their delivery. – Chris Kostecki
  • Is anyone doing incentivized pricing? – Emily Las (@emlas)
    • Do you mean things like CPA deals? – Arianne Donoghue
    • Incentivized pricing as in performance based stuff? – James Zolman
      • I mean incentivized off client goals: i.e. Hit goal(s) for Revenue/Leads/CPA/etc, Get $X beyond base retainer. – Emily Las
        • We have hybrid models with bands of performance that command a separate fee. Not common though. – Arianne Donoghue
          • Agreed- not common b/c its super tricky! And doesn’t take the endless other variables into acct (mkt trends, etc). – Emily Las
            • This is the thing – or issues on the client’s site that might affect conversion! Has to work both ways. – Arianne Donoghue
  • I find Hourly pricing model in particular is pointless in PPC. We always end up going beyond. SEO can make that work, not us. – Emily Las
  • % of spend also rewards seasonal fluctuations. – Chris Kostecki
    • Daily budget limits can cap seasonality. – Jame Svoboda

Q3: For those that charge by percentage of revenue or leads generated, what is your rationale for this payment method?

  • I have busted my add to grow accnts to be stifled by client, % of spend shares the commitment. – Chris Kostecki
  • With smaller budgets, prioritization of efforts is key. – Robert Brady +
  • I built my agency 2005-2009 on performance based agreements. it rocked…but may not have been best for customer at times. – James Zolman
  • I’ve done performance based freelance campaigns before…needless to say make sure client sets up tracking appropriately. – Matt Umbro +
    • So true- I have done this as well in freelance. Tracking must be solid. – Emily Las
  • I think ideal situation is 3 mos. performance-based (build trust), then implement flat fee or % spend moving fwd (w/budgets set). – Emily Las ++
    • I like the model. It’s a proven pricing model of giving customers “a taste”. Similar to a free trial with software. – Ryan Campbell

Q4: Can PPC be sold in tiers w/ varying service levels (ie: plan 1 has 5 hours, plan 2 has 10 hours & a remarketing strategy)?

  • It can be done, but in practice can be hard to stick to “levels” or “hours”. Clients always want more. – Arianne Donoghue
  • At previous company billed by hour, but additional services (remarketing, sitelinks, etc) weren’t constrained. In other words did what was best for client within time frame. – Matt Umbro
  • Service levels can be sticky with clients. ‘If you give a mouse a cookie…’ – Nicole Mintiens (@Tregesy)
  • Having said that can be useful for trial periods, or defined “add-on” services. Depends how your client services team fits in 2. – Arianne Donoghue
  • Tiered approach can be done w/a robust Chinese Menu complete w/all add-ons. But then challenge is how to say no to doing more. – Emily Las
  • It can, but IMHO clients like consistent pricing and delivery. Also, fewer packages/tiers keep sales simpler. K.I.S.S. – James Svoboda
    • Tough to have different tiers/plans, agree with James on consistent pricing and delivery. – Matt Umbro
  • I don’t put a limit on the time b/c sometimes an account needs more work. Gotta put in more hours for the little guys at times. – Luke Alley
  • I don’t like by hour. I don’t want to be limited by time in what I can do to make the campaign better. – Mark Kennedy
    • I agree, but there has to be balance between billing and amount of time required. – James Svoboda
  • Yes but is not in client’s best interest. What if remarketing is the best next step but it is not in the client’s tier? – Richard Fergie
    • Agreed – you don’t want limits on what could drive performance. Should be down to strategic benefit. – Arianne Donoghue
  • If client needs image ads created or product feed I would consider as additional fees (whether your company or freelancer does). – Matt Umbro
  • Want to add Ive seen invoices from largest PPC shops in world (sent to me by accident). % Spend favored, major cash flow in Q4. – Emily Las
    • % of spend is simple, but can be a detriment to small budget campaigns. I mean it doesn’t work for really small budgets. – James Svoboda
      • That’s where a base minimum works, for small biz. – Mark Kennedy
        • This has always been my strategy as well. – Neil Sorenson
      • Doesn’t work for whom? The business? Or the PPC specialist? – Neil Sorenson
      • Of course & that’s why the big shops don’t take the small budget campaigns, right? – Emily Las
        • much agreed that % of spend is not appropriate for small companies – flat rate / hourly better. Percent of spend can be dangerous for ROI- what is incentive to cut client costs or CPA. – Bizwatch Analytics (@bizwatchsearch)
      • If clients spend under a certain threshold flat fee might work, over a certain threshold go to % of spend. – Matt Umbro

Q5: In general, do you believe clients underpay or overpay for our PPC management services? Why?

  • Depends on fees (and minimums). If you charge 10% of spend, prob under. if you charge 30%, prob over. Margins are so tough in PPC. – Neil Sorenson (@iNeils)
  • Under – for small biz, they still don’t get it until they see it work on an ROI basis, so tough to get them started. – Mark Kennedy
  • It depends on the pricing model, sometimes clients overpay sometimes they get a great deal. – Matt Umbro +
  • Okay for real – A5 – I think w/the dedication this grp brings to the table: Underpaid 100%!! – Emily Las
  • Depends on the %age of the account represented by brand search and whether or not this is segmented. – Richard Fergie
  • I think it depends on the level of service/results being delivered if ppl under or over pay. Have seen overpaying happen (sad). Flip side-have seen great deals too in comparison to the service/results received. – Crystal Anderson (@CrystalA) +
  • In all honesty I know I go over and above but I know it’s worth it for the word of mouth recommendations I get. – Andrew Baker (@SEOEdinburgh)
    • That over-delivering then leads to more business like your saying. Great strategy. – Luke Alley
      • Well it has so far Luke, but you have to put the hours in. – Andrew Baker
  • Really depends on the level of service. – Chris Kostecki

Q6: Have you ever worked at a company where PPC was an add on service & subsequently PPC fees were added as part of other services? In other words, have you worked at a web design agency that offered PPC as a service…or something along these lines?

  • Think this can be problematic. PPC can drive more revenue than SEO and social if measured properly. – Bizwatch Analytics
  • No, but we’ve gotten a lot of PPC clients who had PPC as an add-on and the business was ALWAYS getting ripped off. – Neil Sorenson +
    • Most likely because PPC was sold how the rest of the services were sold. – Matt Umbro
  • I think in most of those scenarios the (non-PPC) agencies didn’t know what they were doing or opted for auto-pilot. – Neil Sorenson
    • I’ve seen this a few times in the past couple of months. – James Svoboda +
  • This question actually relates well to another topic we did in May, “Selling PPC“. – Matt Umbro

Q7 If you do, how often do you tweak your pricing model and what would lead you to make adjustments?

  • I think a lot of agencies start off at a lower rate getting started and after building a client base increase fees. I think it can be done on a case by case basis depending on the project (if it’s more work, etc) but that’s always tougher. – Neil Sorenson
  • Don’t change often as takes time to integrate through the sales process, but adding & subtracting services does require change. – James Svoboda
  • Only after diligent analysis of hours costs financials etc. At the end of the day it has to make sense for you & your clients. Goal is to find the point where everyone is happy, not w/just pricing, but w/results, service, relationship, etc. – Crystal Anderson
  • Sometimes to win over customers we do a “trial” month or two with lower fees. Sales tactics. – Luke Alley
  • What’s tough is that there is ALWAYS someone cheaper (in PPC fees) but if you can prove value then pricing doesn’t matter as much. – Neil Sorenson

Resources

Google AdWords Editor (version as of today’s PPCChat 9.5.1)

http://www.google.com/ads/answers/

SEM: Pricing Revolution – Great post on Pricing Models from ’09 – still valid today. – James Zolman

Performance Based Pricing Fallacy Part 1Performance Based Pricing Fallacy Part 2

More PPCChats

Don’t forget to stay tuned for the next #PPCchat on Tuesday at 12 noon Eastern, 9 am Pacific and 5pm in the UK. Same Chat time, same Chat channel.

Also, check out the next #PPCSpeak on Tuesday Nights at 9pm Eastern, 6pm Pacific.

Participants

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About the Author

This is a guest post by Paul Kragthorpe, Search Manager at WebRanking in Eden Prairie, MN, #PPCChat Streamcap putterer togetherer, rarely an seo blogger, SEO Padawan, Tweeterer @PaulKragthorpe, and Google+’er PaulKragthorpe.

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One Response to PPC Chat Streamcap – Pricing PPC

  1. marcus says:

    Nice question and answer post here. Very informational.

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