Is it best to pay your agency a Flat fee, Performance or Percentage of spend basis?
Whether to employ the services of a professional Pay Per Click Management company is a scenario faced by every business sooner or later. We all know that Google is extremely helpful and will even set up a campaign for you but the reality is that they are a money making machine and want you to make mistakes with high Cost Per Click (CPC) rates.
What options are available to companies?
One of the initial lines of discussion when talking to a new prospect is determining the amount they are proposing to set aside to cover the campaign i.e. how much are you going to pay the search engine for the clicks. This is important as the answer will ultimately determine what type of management service can be offered. Too little and we may advise to try a DIY approach first, whilst larger budgets may require daily tweaks. Having decided that the prospect would like to proceed, the next step is to determine a payment profile that matches their level of investment and expectations. PPC Management Agencies generally offer one or all of the following payment profiles.
1) The Flat Fee PPC Management fee Model
A monthly fee is agreed in exchange for time spent managing the campaign. Usually the precursor would be service level agreement of what is included “service description” together with approximate time on campaign.
Advantages: Both you and your PPC agency knows exactly what is included for the monthly payment. The customer is able to manage their budget accordingly as it is a fixed cost service.
Disadvantages: The PPC agency only has to perform acceptably to keep the client happy. There is no incentive for the agency to go the extra mile lowering the Cost per Click or increasing the Click through Rate.
2) PPC Management in exchange for revenue share
This type of service is not overly common as effectively the PPC agency is agreeing to work for nothing on the understanding that they will be rewarded only if targets are attained.
Advantages: Performance marketing is totally risk free for the client as they pay nothing until a sale is made. In adopting this method it is usual for a starting point to be agreed i.e. number of sales pre management thereafter the agency takes either a fixed amount per sale of a percentage. This system is ideally suited for small start-up businesses or those with limited funds to invest.
Disadvantages: A performance marketing model can work for some agencys however the danger is that as the PPC agency concentrate solely on the “money” terms that easily generate sales while ignoring the lower hanging fruit terms and time eliminating waste. Quite often time spent identifying lesser terms can be the difference between success and failure.
3) Percentage of AdSpend
By far the most common payment profile offered by PPC Management Agencies where the monthly fee is determined by Adspend and the amount of work provided each month. In general terms larger campaigns will require additional management e.g. client spending over £5,000 per month to Search engine will pay a 15% proportion to cover Management Services.
Advantages : The PPC agency is incentivised to get the best possible return on the clients investment as increased yield is likely to result in greater Adspend. This is a win win for both Client and Agency and hence the most popular payment profile.
Disadvantages: Most companies offering this type of payment profile will insist on a minimum payment per month irrespective of the clients Adspend. In addition minimum contracts may be requested to offset time spent by the agency setting up the campaign.
4) Hybrid PPC Management fee Model
Becoming more popular and certainly one that NetTonic are happy to consider. This profile provides a fixed monthly flat rate with an additional performance related bonus. The bonus may be in the form of a sum per sale, percentage of sale or profit share.
Advantages: Combining the pros of both profiles the client and agency work in partnership to produce the most productive campaign. The client is rewarded with a good return on investment and the agency is rewarded for the hard work.
Disadvantages: Clients who find themselves part of large agencies may miss the personal touch. Agencies with large client bases may not be incentivised to go that extra mile, happy with a monthly payment. Easy brand terms may again be chased to provide regular sales.
With over ten years of experience in PPC management and part of the Google Partner Program, NetTonic will provide each client advice based on investment and expectations. As you can see from the brief descriptions about there are pros and cons associated with each payment profile.
That said NetTonic always strive to be a strategic partner rather than a simple service provider. In our experience where each party is motivated by the same aims and can share in the achievements long term relationships can be cemented.
For more information about the PPC Management Strategy offered by NetTonic please call for a no obligation consultation about how we may be able to help you reduce costs and increase sales.