There are basically 4 popular pricing models a PPC agency or PPC management company will offer your company for PPC managed services.
I would say most of these PPC management pay structures that I am going to cover will work out to be the same cost over time, mostly. So why not just present one pricing model and be done with it? If PPC management was straightforward than it wouldn’t matter and that would be it but there are pros and cons to each. Plus each model has its own ninja marketing tricks because each pricing structure appeals to a certain mindset. So let’s get this party started.
The most popular outsourced PPC management pricing models:
- 10%-20% of your overall spend, with minimum spend requirements
- Base price + bonus triggers
- Monthly flat fee based on your company’s overall PPC spend
- Hourly rate
I will summarize each pricing structure to give you an idea of why each model has it’s own appeal and my overall opinion.
10%-20% of your overall spend, with minimum spend requirements
This fee structure sounds straight forward but I have a main concern with this type of pricing. The PPC management company has a vested interest in increasing your spend each month. You the company that have contracted the PPC agency are basically giving them the thumbs up to have an incentive to suggest you increase your monthly budget. Unless this is your goal or you tell them to stay in a defined daily budget while increasing your CPA and lowering your cost per conversion. You need to stay very vigilant with your budget and constantly review the numbers to make sure your budget is not inching up.
What’s to say within this pricing model, that the PPC agency/management company does not instruct this as an upsell to their staff or your “personal ppc manager” at that company. It this is the case, it makes sense that it brings in a conflict of interest. With this type of arrangement I would only move forward with an incentive bonus. For example, if your spend would increase than you need to see those clicks turning into leads. That your conversion numbers are up and the cost per lead is down. A pricing model that seems so straight forward can become messy and difficult to real in.
Keep it simple and let the management company know to cap your spend and not go over your monthly budget. Do not give them full reigns to rule your accounts destiny, no matter how desperate you may feel at the time. That way until you have a review of the PPC agencies success with your account, more leads, more paid signups or whatever your main goal is. Than a hard stop spending cap is what you may want.
Important: If you discover at any time the management companies has more excuses than solutions, back away and go elsewhere, that goes for any PPC management company.
Base price + bonus triggers
This pricing model is one I consider to be more robust as it gives itself to baseline quantitative performance. It allows for the use of a flat fee payout factoring major points into the equation, like your overall account size, monthly spend, number of keywords and even the number of Ad Groups. My favorite bonus trigger is one that involves reducing your cost-per-action (CPA) and increasing the number of leads or signups. It keeps the scales balanced and allows for the PPC management company to have some wiggle room in growing your account. It’s a win win for both you and the PPC management agency.
In my opinion your company should never desire a PPC management fee structure that is one sided. When the only way your accounts performance can improve is to pay more for the next level of management. That is why bonus triggers put the burden to perform back on the management company, that’s where I believe it ultimately belongs. Everyone needs to have skin in the game to retain a sense of ownership. Starting with a fair monthly management price and include performance levels into your accounts, in my eyes is a winner. You will not find as many PPC management companies with this pricing setup but they are out there, you just need to dig around a bit.
Monthly flat fee based on your company’s overall PPC spend
This PPC management pricing is the equivalent between 10%-20% of your accounts overall spend. It will match very close to that of a percentage based fee structure.
The advantage over the percentage model is that you will always know what you will pay each month. You get a more all inclusive package. Though the most prominent disadvantage to me would be it is set up on a tier system. The company that is managing your account has built in wiggle room. To illuminate this scenario in a practical example. Let’s say your company pays a flat fee of $1500 a month for your PPC management. That $1500 takes care of any client who falls in between the tier of $12,000 – $15,000 PPC spend monthly. That is in line or close to the 10% model but if you are only at $12,000 spend you are losing, you would only be paying $1200 a month for the same service. Going to the next level of $15,000 – $25,000 and you will pay $2450/mo., you see the math, it is not to your advantage.
It important to make sure the PPC management company you choose with this type of pricing has a tight margin. Unless they can defend why their costs go beyond other typical fair pricing models. Companies that have this pricing structure can be internally incentivized to bump you to the next level of their pricing. Many times your “account manager” assigned to your company will personally get a bonus for pushing you up to the next pricing level. It’s not my favorite model by far but it will depending on the level of expertise that a PPC management company can bring to your account.
Start off by asking yourself, what services do they include in their management fee? If your management company is serious about making you money and they come through in elevating your accounts perform above your goal levels. Well…than they should be making your company a better profit margin, right. I personally believe it’s better to pay a little more to get a level of service that goes beyond standard PPC management.
Note: The best part and advantage about this structure type is it’s typically a combined amount, so if for example you have 5 different PPC accounts. The company will handle them all for the same monthly price. These companies tend to not shy away from complexities other management company’s pricing will not handle. You have to weigh your options, even though you could pay a little more in fees, you get twice the level of service. It all depends on what you need and are looking for.
This fee structure is more suited for PPC consulting than it is a PPC management of your accounts. These are individuals that can have an in depth grasp on managing and understanding PPC. You may find these individuals or companies to have a edgy but consistently winning PPC strategy. The issue comes into play when the management of their time is called into question. If an hourly rate is agreed upon then it’s important you make sure performance is apart of the contract.
At first you may find yourself policing their time much more than you realized at first. Also by the very nature of curiosity, you may start asking them strategic specific questions. The PPC hourly manager may not be forthcoming in divulging what they consider “trade secrets”, realize in-depth strategy questions can be very touchy. This type of managing your PPC manager will end eating into your time beyond acceptable measures. The best way to keep from micro-managing is request a detailed report of was done for the week and of course the hours each item took. You will take that report they give you and do a comparison. It may sounds basic but make sure your companies PPC campaigns are performing above and beyond from when the PPC manager took over. Also it’s important to do an internal monthly spending report to make certain you are getting the service level you agreed upon.
The big advantage to this type of PPC management setup is you have dedicated hours and you can know what was done and when. If your company plans on self-managing and need adgroups setup, campaigns corrected or even an overall strategy, it’s much easier to do a la carte. Understandably, your company may want to shy away from this type of hourly structure if all you need is straight automated PPC bid management. As with every model there are more than a few things to consider. Below are some considerations I thought of as I wrote this article, it’s not an exhaustive list by any means.
- Pro: With proper reporting you can see exactly what the PPC manager did, taking into account you can also read between the lines. Eventually you know how long it takes to actual manage an account of your size, invaluable information and priceless intel.
- Pro: If the PPC manager is highly effective you could pay less than what you would pay with other fee structures. A thought to process; if a PPC management agency uses nothing but an auto bidding technology strategy. Than how much time is that company actively managing your accounts?
- Pro: Paying per the hour you get dedicated time to your account, time you can track.
- Pro: Since they are hourly you can ask for different reporting and tasks to be complete. In many cases these types of request would be outside of the usual management fee. Pay for what you get and only what you need.
- Con: There is no incentive for the hourly management of your account to drive more leads or bring down the cost per conversions. Make sure there is a performance level agreement between the two of you.
- Con: It could actually cost you more than the other PPC pricing models. Having a company truly manage hourly or otherwise means adding new keywords, competitor analysis, making bid adjustments and more, the monthly cost can add up fast. Time is money and if you are interacting with them via email or the phone, the meter is running.
- Con: You will spend more time managing your hourly PPC manager and keeping frequent contact to make sure performance goals are being meant. More than likely that will take away your valuable company time and may be a huge reason to shy away from this PPC management model.
Important: The best advice in dealing with an hourly PPC manager or management company is set specific goals and ask for detailed reporting on your accounts. Also an hourly breakdown on the work they performed.
Wrapping It Up
It’s easy for me to say choose the right fit for your company when it comes to hiring out for PPC management. The right fit is something you and your team need to develop, list out your goals and make sure to put specifics. It will do no good just to convey that your company wants more leads and lower costs. Come up with the numbers that make sense to your company. This way your company gets insight and analysis that will be invaluable going forward.
Don’t be surprised if you may find your company switching management companies many times to find the right fit. My suggestion is to weigh your needs against what is offered in the PPC managed market and a point worth making again. Make sure your goals are set ahead of time before proceeding. It may be that a flat fee works the best for your company or 10% of your overall spend. Whatever you decide make sure that the PPC company you hire is not just giving you a simple money back guarantee, there should be no need for that if they are offering you an ongoing performance based approach to your PPC management.
Consideration: Make sure your future or current PPC management company can put your accounts back to the way they originally were before they became your PPC management company (basically a PPC account backup). This is incase your campaigns go haywire and perform worse than before contracting out management. It’s always good to have a backup. It’s best to make sure your company backs up your campaigns and adgroups in your accounts or ask for the copy from your PPC management company.
Stay tuned for the next article where I will discuss more of a theoretical alternative to pay-per-click management services.