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View Poll Results: How Should You Bill For PPC Services?
Charge hourly consulting fees 6 31.58%
Charge percentage of ad spend 5 26.32%
Charge percentage of sales achieved 0 0%
Combination of two or three of the above 6 31.58%
Depends on type of campaign/service being sold 7 36.84%
Other 3 15.79%
NEW! Fixed cost per click 0 0%
Multiple Choice Poll. Voters: 19. You may not vote on this poll

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Old 09-09-2005   #1
Firebird428
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Which Pricing Model Is Best For PPC Campaign Management?

I've been considering creating a PPC campaign management program to offer to clients. I've been doing some research in effort to find out what type of pricing model for pay per click management makes the most sense. Sherpa reveals 3 basic types that SEO's are doing these days: 1. Consulting fees by the hour or project 2. Percent of ad costs spend 3. pay for performance/results
What do you guys think is the best method??
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Old 09-09-2005   #2
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We do percentage of media buys, like an agency. (Added: this was when I worked in a prior place of employment) However we have structured performance bonuses in the past as well. I feel the percentage is best, if you can convince the client that it is in your best interest to drop the total cost or increase the conversions to the point that the ROI is still better.

Last edited by Chris Boggs : 08-25-2006 at 12:50 PM. Reason: added note
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Old 09-12-2005   #3
matthewmurcia
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Yes i would be interested to talk about this more as I have received a lot of interest from potential clients this summer looking for someone to take care of PPC campaign management and have been having the same discussion/doubts in my head for a couple of weeks. One other method that you haven't mentioned that I seem to have come across somewhere is payment per phrase (i-e. pay us to manage x number of phrases, minimum contract xx phrases) I think the offer was something like 10€/phrase/month. I don't quite know how the offer would work, maybe start with say double the number of phrases to be managed and whittle it down to the agreed number of effective phrases.
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Old 09-12-2005   #4
leftoverjoe
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The agency fee model seems to me to be a little more difficult to sell. The main reason being is that if you feel that the best course of action is to increase spend, then the client may think that you are merely trying to increase your own cut of that spend. The pay for performance model can be good also, but the drawback seems to be the fact that you are relying on the client to be doing their best work to succeed. If they are asking you to increase conversions on a site that they put up and is not good or makes a bad sales pitch, then you're handicapped from the start.

We use the price per service model and are also going with a lot of hourly consulting type arrangements lately. This way we feel we can give everyone the same amount of time and energy and also the clients feel they know exactly what they are paying for. It works well for us.

Good luck!
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Old 09-12-2005   #5
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We use a combination of hourly fees and percentage. Hourly fees apply to initially setting up a campaign whereas in managing a campaign, we charge 15% of their monthly budget with PPC provider.
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Old 09-12-2005   #6
Firebird428
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leftoverjoe, I was wondering what you meant by "price per service model"? I'm new to all this.
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Old 09-12-2005   #7
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No problem...you're definitely in the right place if you want to learn. The way we do price per service is this...

We quote a set price (one-time fee) for setup of the account(s). Then we charge a monthly fee to manage the account(s). Sometimes we will quote an hourly rate to do an audit of existing accounts, or something like that, when it's less clear exactly how much time will be necessary to complete the job.

For standard paid search accounts we know about how much time things take and can therefore charge the same set fee for every account setup and managed by us. Some people, like David Wallace mentioned, use a combination of percentage of total ad spend and a fixed setup fee.

There are many ways to handle each aspect of billing. I don't think I've ever heard a concesus as to which way is the "industry norm." With traditional marketing agencies it's all about the 15%...but with online marketing, it's a different animal and everybody has their own best practices when it comes to billing.
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Old 09-12-2005   #8
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David, With that pricing model, do you set X number of hours aside for testing of various ads, landing pages, etc? I'm also curious on how others work in all of the little variables in testing to their management fees. It seems hourly could work against a PPC manager if the client is looking for "cheap" management, but ultimately, that would also work against them as they don't get much (or any) A/B testing. If a % you would have to determine how much/little A/B testing to do in order to stay profitable.
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Old 09-13-2005   #9
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Thought it would be interesting to add a poll -- you can do multiple choice answers, as well.
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Old 09-13-2005   #10
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Can you add fixed Cost Per Click Danny? Percentage, to me, has the inherent flaw that greter costs == better revenue for the SEM. A fixed CPC (say click cost + $0.05) means that more clicks are sought for a budget, and bidding more doesn't equate to a larger cheque for the SEm.
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Old 09-13-2005   #11
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Quote:
Originally Posted by projectphp
Can you add fixed Cost Per Click Danny? Percentage, to me, has the inherent flaw that greter costs == better revenue for the SEM. A fixed CPC (say click cost + $0.05) means that more clicks are sought for a budget, and bidding more doesn't equate to a larger cheque for the SEm.
I don't think I've seen too many people using the click mark up pricing model. That's pretty interesting though. If I was a client I would be afraid that the agency was optimizing the account for more click traffic rather than focusing solely on ROI or CPA. I know that with most of our accounts I can change some settings and increase traffic, but not necessarily increase ROI equally.

That's another good pricing option though. Good thought.
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Old 09-13-2005   #12
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David Wallace explained our pricing structure to a "T." I forgot to mention the setup fee when I inititally posted. (Added: this was when I worked in a prior place of employment)

In regards to Stoney's question to David, I will give one answer by painting a scenario.

Client “A” has an existing account that he feels is underperforming, so he wishes to change over to professional management. He contacts us and we look over the campaign and get "raw numbers." We then estimate the number of groups required, plus the number of portals to be used, any landing page design needed, and come up with a setup fee based on our hourly rate. But during the setup process, we or the client discover that we could be using an extra 500-1000 keywords in a basket hitherto unidentified: for example the use of branded keyword phrases or the addition of an unrepresented product or service. We may also discover the need for a more robust tracking system which will require individual URL's for each keyword instead of group.Either of these will cause a client-approved increase in the setup fee.

At the onset of the campaign, the management percentage fee is initiated. In our case, we will outline in the contract a certain number of deliverables included in the ongoing fee. These may include (but are not limited to) daily management and conversion tracking, A/B and other types of testing, monthly and quarterly reporting, creation of additional landing pages, monthly consultation, and additional "hand holding."

In the case of client “B” who wishes to start a campaign from scratch, essentially the same process takes place. However in this scenario we have “PPC Tests” that cost a fixed setup fee with a maximum number of phrases and portals, and a minimum suggested standalone PPC budget. The purpose of this test is twofold: first we will bring relevant traffic to the site in order to make sales or draw leads, but more importantly we will discover the websites ability to convert. Premium level tests include the creation of new landing pages or modification of existing ones. There will be no “surprise” work in this account until after the test is completed.

At the culmination of the test, reports and analysis are delivered to client B with a consultation. At this time client B can choose to undergo training in order to self-manage the account(s), or elect to continue with ongoing management as described above. Often, additional phrases and groups will be added to the accounts at this point, charged hourly.

I would love to hear some alternate versions of a scenario such as this!

Last edited by Chris Boggs : 08-25-2006 at 12:50 PM. Reason: added note
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Old 09-13-2005   #13
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Quote:
Originally Posted by St0n3y
David, With that pricing model, do you set X number of hours aside for testing of various ads, landing pages, etc? I'm also curious on how others work in all of the little variables in testing to their management fees. It seems hourly could work against a PPC manager if the client is looking for "cheap" management, but ultimately, that would also work against them as they don't get much (or any) A/B testing. If a % you would have to determine how much/little A/B testing to do in order to stay profitable.
Good question - hard to answer. While it is obvious that the higher the budget, the more time we will spend working on a campaign, all are unique.

Some campaigns are very easy to "get it right the first time" while others can be quite challenging. There are campaigns where we put in more time than we are actually getting paid for but once you get it set up to where it is performing well, it requires less time to manage.

Of course any PPC management should include testing of ads, landing pages, etc. but how much time is put into this - it varies per project as there are differing levels of competition as well as the goals of the client.
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Old 09-13-2005   #14
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It could depend on the size of the campaign. If the client has a small budget, it might not be cost effective to work on a percentage base. So, in this case, a set up fee could prove useful.
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Old 09-13-2005   #15
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SEM Pricing Is Flexible

As someone who has handled both corporate and individual accounts in the PPC sector over a period, I have come to a conclusion that there is no hard and fast rule about SEM pricing. Experience, they say is the best teacher, but some experiences are costly. If you read Chris Bogg's post very well, I think you would have picked on the experience of a SEM sage.

Usually, it depends on the type of campaign and how large it is. One of the things I have modified over time is to perform and overview of the campaign and check what competition I am up against, then weigh that against the objective of the client. That determines what price I would charge the client.

On a general note, blue chip companies, tend to sway into the "percentage of ad spend" model, while individuals prefer the "Charge hourly consulting fees" model. However, I always charge a basic fee across board.

From the short expression above, you will note that you may need to keep your pricing flexible to accommodate more clients, however, you may want to stick to a particular model rigidly, that's why all fingers are not equal.

I wish you all the best in your SEM quest.

Last edited by David Wallace : 09-13-2005 at 06:14 PM.
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Old 09-13-2005   #16
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It all depends on the clients you work with...

I don't think saying one pricing model is better than another is the way to go. There are many variables that play into how much time and effort goes into setting up and managing a campaign. Our company works with a lot of smaller and local types of business, so how we work and where we spend the majority of our time and resources is completely different with them than it is when we manage the few larger company clients we have. How you sell it is different and how you manage the client expectations and relationship is completely different as well....thus different pricing models work better for the many different types of clients and projects you may have in your business model. What a savvy internet marketing person may see as the way to go, may be completely different than what Joe Small Business Owner sees as reasonable....as long as they are getting value and a solid ROI, then you are giving them good service for their business.

That all said, I think the key is to listen to the individual client and work with them within their comfort zone, and in terms they are familiar, while still running a profitable business of your own. Ultimately, competition in the marketplace will create the pricing model that will be the best fit for each segment of the market.
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Old 09-14-2005   #17
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Standardizing # of keywords

In effort to assess how much "work" will have to go into optimizing ads for each campaign... is there a magic # (or range) for the amount of keywords to have per an ad? Maybe this could be standardized in effort to get a better handle on price quoting to potential clients?
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Old 09-15-2005   #18
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I just remembered where I saw the 10$/word model. I typed in PPC Management in Google and if you click on Bruce Clay's page, you will see this offer about half way down. It seems that like this you have the potential for making more money. MAnage 100 phrases, earn 1000$ etc,etc...whereas if their adspend is 1000$ and your fee 15% then yuo get 150$. Any thoughts?
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Old 09-15-2005   #19
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The only thing I can see wrong with the cost per phrase managed model, is that you might discourage a client from going with what's best for them because of the cost. Most campaigns would benefit from having a large campaign with many 3,4 and 5 word phrases, as well as 1 and 2 word phrases. This would mean coming up with a long keyword list and without such a comprehensive campaign, the client might not get the ROI that would have with an extensive campaign.

We work in such a way that we always do what's best for the client. If a client can't afford the best solution, then we come up with one that's the closest to it, while staying within their budget. In our case, it's easier to do this with either the hourly consulting fee, or the setup fees that are set in stone ahead of time.

One way we price this out is by using a system where we charge a specific amount for each category of keywords. This includes one ad and set of keywords for a single ppc engine. Then, if the client can afford it, we break the campaign up more significantly and make things more targeted, etc., with more categories.
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Old 09-15-2005   #20
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I would quote a fee for campaign setup, based on an hourly rate, but tie compensation to improvements in cost per action. If you're paying $10 per opt-in and getting 100 a day, I'd be happy to get you to $5 per opt-in and 200 a day. But I want $2.50 for every opt-in, half the improvement, to land in my pocket, and a long term agreement.

Maybe this is why I'm not managing a bunch of PPC campaigns?
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