Pay-Per-Click Pricing Models

This week Matt Umbro (@Matt_Umbro) came up with yet another great question set titled “PPC Pricing Models.” The following is the transcribed Streamcap from the live chat:

Q1: Do you track your time spent on client work (even if you don’t bill by the hour)? Why or why not?

  • I track time for statistical purposes, generally. Don’t we all love metrics? – Jonathan Maltz (@MaltzPPC)
  • Yes, because it factors into hiring decisions, understanding each person’s workload, etc. Extremely important to understand. – Andy Groller (@AndyGroller)
  • Not currently but I have at other agencies in the past in order to analyze revenue vs hours. – Amy Bishop (@Hoffman8)
  • Yes – agency requires it. – Melissa Mackey (@Mel66)
  • Still track hours. Even if you’re not hourly, you still want to know which clients are the most profitable. – Joe Martinez (@MilwaukeePPC)
  • Yes – need to know where everyone’s time is going. It can be a hassle to track time, but it’s much more dangerous to your company if you don’t. Tracking time ultimately holds both employees and clients accountable. – Matt Umbro
  • Absolutely. Need to understand where time actually goes vs. where you think it goes. Plus, figuring profitability. – Julie Bacchini (@NeptuneMoon)
  • Yes, it helps me keep a high-level view of the work being done on each account every month. – Jen Kiaba (@Jenkiaba)
  • Yes. I like to know how much time and effort goes into each initiative so I can figure out ways to improve upon it next time. – Olin Downs (@olinjdowns)
  • Yes! it’s the only way we can assess our team members capacities and know when we need to hire additional help! – Erin Sagin (@erinsagin)
  • Yep, gotta understand what projects are consuming time, which are more lax, and which are hitting the assigned time. – Erika Schmidt (@erikapdx)
  • I am planning to figure out what is the best way to track time. – Farzin Espahani (@FarzinOja)
  • yes. Bc that’s how my agency has modeled it. For personal clients I do not. – Matthew Poldberg (@NotSpamIpromise)
  • Yup! Data and self-awareness are like a superpower! – Gil Hong (@Gil__Hong)
  • Yes, all billed in project management system by client and task. – Timothy Jensen (@timothyjjensen)
  • Yes, if the client ever questions what you’ve done you have your records handy. Its also better than view change history. – Orlando Valencia (@OValencia_3)
  • Timesheets / time tracking are awful and mostly pointless. Psychological boost / happiness since I stopped doing them rose 10x. – Sam Owen (@SamOwenPPC)
    • It’s not even about that, but in the agency world where employee time is going and what resources are needed. – Matt Umbro
  • Bane of my existence, but yes! Need to understand how much time you’re spending on an account vs what you thought you’d spend. – Christi Olson (@ChristiJOlson)
  • Yes, helps me stay accountable and on track with my time. I can also enter to project plan for clients. – Josh Kelson (@JoshKelson)

Q2: What is your preferred PPC pricing model? Why?

  • Changed multiple times. Currently % of Spend. Bc: simplicity in marketing it, simplicity in tracking it, aligned interests. – Kirk Williams (@PPCKirk)
  • I prefer % of ad spend since that is often an indicator of size and complexity. – Mark Parent (@parentmark)
  • Interested to hear everyone’s thoughts on this questions. My agency uses a bill by the hour model. – Erika Schmidt
  • Flat fee, subject to renegotiation based on the amount of work. – Mark Hansen (@markdhansen)
  • Not a fan of % of spend. It disincentivizes clients from spending more. I like a tiered flat rate. – Melissa Mackey
  • I don’t necessarily have a preference but I think that it can change by client and client needs. – Amy Bishop
  • Probably a hybrid of a minimum base fee then transition to % of spend. – Gil Hong
  • Set fee for defined scope of work. Fee can shift up or down as scope of work changes. – Julie Bacchini
  • Prefer % of spend since as spend increases, workload to capitalize on opps increases, so $’s should follow to accomodate. – Andy Groller
  • Hourly is my preferred method – I believe it’s the most fair. Charge for the work you are doing – no more and no less. – Matt Umbro
    • But are clients paying for time, or paying for results? – Susan Wenograd (@SusanEDub)
      • I strongly object to pay for perfomance…more to come in a future question. – Matt Umbro
        • Not saying pay for performance…saying if it takes me half the time as a newb to achieve the results, I make less. I get that. Clients often do not. (Not saying I am against hourly, btw, just offering a different perspective.) – Susan Wenograd
  • Hourly. % spend doesn’t always reflect the amount of hours needed to work on the account. – Joe Martinez
  • We use % spend for ongoing management and hourly flat fees for one-time projects/consulting! – Erin Sagin
  • IMO, the best is “% of starting spend”, because % of spend is a conflict of interest. – Steve Gibson
  • % spend is pretty straightforward & set monthly fee can work well, too. Expectation setting/parameters are important in every case. – Amy Bishop
  • There is not one size fits all pricing model. – Christi Olson
  • Hourly is necessary when working with small businesses. I’m not working 20 hours if you’re only paying me for 3. – Joe Martinez
  • I might be alone on this, but I like hourly. I don’t get dragged onto long calls & no bogus ad hoc reports. – Orlando Valencia
  • Start w/minimum billable level based on work that needs to be done.Then layer hourly or % of spend based on clients preference. – Christi Olson
  • We have shares of startup. Once they are aquired, we make money. – Tyson Drake (@tysondrake)
  • % of ad spend. The better you perform, the more they spend. – Olin Downs
    • What if they perform better by cutting out a high spender? – Jonathan Maltz
  • Combination of flat rate and % of ad spend. – Farzin Espahani
  • I prefer a flat monthly retainer. The hourly may vary MoM, but motivates to become more efficient while still doing a good job. – Matthew Poldberg
  • Our fees are based on scope of work being done. Sometimes when spend goes up, work req goes up, sometimes not. – Julie Bacchini
  • I like hourly, but small biz typically can’t justify the costs as compared to spend. That’s why I do combination retainer plus. – Christi Olson
  • Prefer revenue share as a pricing model win win both sides. – James Hume (@zerospin)
  • % of spend gives no incentive to reduce CPA. – Tyson Drake
  • I’m not sure there is a One size fits all pricing model, it might need to vary from client to client. – Brandon Bednar (@brandon_bednar)
  • Not a fan of % of spend. It disincentivizes clients from spending more. I like a tiered flat rate. – Melissa Mackey
  • Unless I control what happens after the user lands (i.e. conversion funnel) pay for performance usually doesn’t work out. – Elizabeth Marsten (@ebkendo)
  • Be leary of pricing tiers based solely on revenue. I’ve seen companies show more favorable data to get a impossible low rate. – Christi Olson
  • Depends on client. Some trust you to do whats best within your abilities, some need to have that defined. – James Svoboda (@Realicity)

Q3: What PPC pricing model do you avoid at all costs? Why?

  • % of spend. It creates such a huge conflict of interest. – Steve Gibson (@stevegibsonppc)
  • Performance based that make it so that the agency takes all the risk with little to no commitment from the client. – James Svoboda
  • % of spend. Our interests are not 100% aligned if I get paid more if they spend more. Can breed distrust unnecessarily. – Julie Bacchini
  • I. Hate. Hourly. No room for personal skill expansion without hurting myself. Editor is the enemy of the hourly. – Kirk Williams
  • Performance (only) based models, and models where they don’t want to pay for a minimum amount of work. – Christi Olson
  • Avoid like plague £xxx for guaranteed position/clicks received dodgy emails/calls trying that one. – James Hume
  • I don’t like pay for performance unless it’s bullet proof. Client & agency have to have access to all datapoints & the agency has to have all the tools (LP optimization, etc) to make it work. Even still, the sales team plays a part. – Amy Bishop 
  • Definitely pay for performance. CRM, call data, tracking could screw up & reflect poorly on you. – Erika Schmidt
  • Pay per performance. Too many variables can go wrong with CR that I might not have control of. – Orlando Valencia
  • Dislike the word “guaranteed” in PPC performance pricing. What you control market forces now and have an insider at Google. Unless guaranteed is preceded by the words money back. – James Hume

Q4: How do you handle campaign commitments? No contract, 6 month, Annual, or other?

  • If the contract is a lower rate I generally like to have at least a 6 month committment. – Matt Umbro
  • Contract, and length depends on client and needs. – Melissa Mackey
  • We usually do no contract, month to month unless client requests it or needs long term deal. – Andy Groller
  • I prefer a 3-6 month contract to begin (100% required for new builds) to give time for data gathering/opts to take full effect. – Kirk Williams
  • Minimum of 6 months to start. Weeds out those are not really committed to the initiative. – Julie Bacchini
  • If a client won’t commit to at least 3 months you should say no. – Robert Brady (@robert_brady)
  • We’ve taken a “we earn your continued trust” month by month approach. However commitment can help an agency balance workload. – James Svoboda
    • I’m weary of month by month because clients can then take your work right away. – Matt Umbro
  •  I like 3 month minimums because it typically takes 1 month for developing strategy & restructure. 2 mos to optimize. – Christi Olson

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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.

Participants

Check out the PPCChat Twitter list to see and connect with all current and prior participants.

• Matt Umbro (@Matt_Umbro)
• James Svoboda (@Realicity)
• Paul Kragthorpe (@PaulKragthorpe)
• Amy Bishop (@Hoffman8)
• Andy Groller (@AndyGroller)
• Christi Olson (@ChristiJOlson)
• Elizabeth Marsten (@ebkendo)
• Erika Schmidt (@erikapdx)
• Erin Sagin (@erinsagin)
• Farzin Espahani (@FarzinOja)
• Gil Hong (@Hil__Hong)
• James Hume (@zerospin)
• Jen Kiaba (@Jenkiaba)
• Joe Martinez (@MilwaukeePPC)
• Jonathan Maltz (@MaltzPPC)
• Josh Kelson (@JoshKelson)
• Julie Bacchini (@NeptuneMoon)
• Kirk Williams (@PPCKirk)
• Mark Hansen (@markdhansen)
• Mark Parent (@parentmark)
• Matthew Poldberg (@NotSpamIpromise)
• Melissa Mackey (@Mel66)
• Olin Downs (@olinjdowns)
• Orlando Valencia (@OValencia_3)
• Robert Brady (@robert_brady)
• Sam Owen (@SamOwenPPC)
• Steve Gibson (@stevegibsonppc)
• Susan Wenograd (@SusanEDub)
• Timothy Jensen (@timothyjjensen)
• Tyson Drake (@tysondrake)
 

Streamcaps, Priced Accordingly

This is a guest post by Paul Kragthorpe; works at WebRanking in Minneapolis, Minnesota.
Connect with Paul @PaulKragthorpe, and Google Plus.

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