How Much Should PPC Cost?

Marketing Marketing, PPC Leave a Comment

In the first of a five part series of looking at the costs of running various digital marketing channels we’re considering some of the choices you need to make when choosing a PPC agency, how you’ll be charged and how much it is that you’re likely to pay.

What is PPC?

PPC is marketing jargon for pay per click advertising. This incorporates any online advertising platform where you place an advert and pay for each click generated to your website. The most common platforms are the Google, Yahoo and Bing networks where you pay to place an advert when users search for specific kewords on the search engines. There are many other platforms available through different mediums such as Facebook, Gumtree, Google Shopping, Adroll Retargeting and Youtube that use the PPC methodology, but deliver results in different ways. There are many other networks utilizing PPC and many features within these platforms used to optimise performance and results, making an experienced PPC agency an invaluable arrow to your digital arsenal. Make sure you use a qualified agency who can offer the full array of options to suit your specific return on investment targets and needs.

One of the best features of PPC marketing is that once your campaigns are setup, results are instant and can be up or down scaled as necessary. You can vary spend on different campaigns to generate traffic to specific pages or categories at specific times of day to suit your needs. Like turning on and off a tap, you can control how much traffic you generate and where it is sent too. The only downside is the cost you have to pay for the traffic and initial setup. Compared to more traditional offline marketing methods, performance is great and you can see performance and results in real time.

What Should You Expect To Pay?

There are two parts of the equation – the amount you are paying for the clicks and the amount you are paying the person(s) managing the campaign. The former will either be dictated by your own budgets or how you assign re-investment back into marketing – it’s an internal decision that your agency will usually help you decide on (depending on their pricing model – see below) However, if you are only going to be spending a very small amount on PPC, then probably you’re best off doing it yourself as using an agency just isn’t practical.  As a general rule of thumb spending 10% of your ad budget on management fees is a reasonable ball park to aim for.

If you are are running an eCommerce site that has dynamic re-targeting and Google shopping campaigns it’s likely that you need to be budgeting additional resources to cover the greater complexity of these types of campaigns – they do need some nerdy know how. At the other end, once you are up to the point where your activity is costing over £2k a month to run, it’s likely that you should also consider taking on in-house staff to manage or part manage the account.

Like any digital marketing service, the more you pay, the more time and complexity is possible which should in turn make sure your campaigns are growing and well optimised. To get qualified and good at it takes a lot of time, effort and experience and you will usually get what you pay for. Yes, you can set up an adwords account quickly and get adverts showing – but I’ve never seen a successful ad campaign set up by someone who doesn’t truly know what they’re doing.

 
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Common Pricing Methods

There are a few ways of cutting the cloth when it comes to billing for PPC work. There are pro’s ‘n’ cons to each method and it’s important that you find an agency that you feel comfortable with. Most important of all is to choose an agency that is really able to understand your business, preferably with a designated account manager so you are always dealing with the same person. This means you can work together on campaigns over a long period of time and develop a good working relationship.

Every agency  is likely to argue that their own approach is best. My personal advice though is that no matter what their approach, if the money you’re spending on adverts (not management fees) isn’t directly going to pay for ad’s  ie your spend doesn’t match up with the invoice directly from Google/Bing etc, it’s probably a bad egg you’re dealing with. Yes, I’m talking about you Yellow Pages et al. No-one, I repeat, no-one has a discounted preferential arrangement with Google. If you’ve been sold PPC through telesales, ask yourself why, if they’re so good at PPC, are they selling their services over the phone…

You typically will pay the agency a fixed percentage of whatever it is your spending on adverts. Often this is around 10% – so if you’re spending £10,000 a month, you’re being billed £1,000 on top. There will usually also be a minimum charge and/or a fixed additional fee.


Pros – Your bill reflects the size of the account and should grow alongside income.
Cons – There is an incentive to increase your spend, regardless of the merits of doing so
Like the percentage of spend, you pay based on the percentage of revenue driven by your adverts. This is better for e-commerce sites over and above informational/B2B sites as there is a much more direct conversion path – for most lead generation sites a sale does not happen on site at all. So it may mean your PPC executive may not consider top of funnel campaigns.


Pros – You are only paying for adverts that are directly generating sales.
Cons – In a multi-channel world, attributing sales accurately is somewhere between very difficult and impossible.
The agency runs the campaign without any changes being made for a period of time. From thereon in, they take a cut depending upon an agreed improvement in specific metrics, typically Cost Per Click. So if they can reduce your spend, they will take a share of that money.


Pros – It’s sounds  great so you feel good when you sign the contract.
Cons – The agency tends to concentrate on specific metrics, rather than your business. Making a small improvement in month one, means they don’t then have to do anything else to earn every month.
You pay based on how many keywords you are targeting. This method is rather deprecated these days but a lot of software based solutions may require this approach.


Pros – There is a clear correlation between the size of the camapign(s) and the costs you’re incurring
Cons – With the expansion and use of keyword modifiers, this approach isn’t quite so suitable. And you’re often better off applying more budget to the best few keywords than simply adding in more.
You pay x amount a month and the agency runs you’re PPC activity. Usually the bigger the size of the account (either in spend or in keywords) the more you pay.


Pros – It’s a fixed fee which is good for planning and the agency is able to concentrate on doing the best they can without selfishly thinking of their billing potential. 
Cons – It’s difficult to understand just what is being done and if you are getting value for money – an agency can easily do nothing month to month and still get paid.
You pay based on how much time has been spent managing your account. Usually that means the bigger the account, the more work is needed (and thus billing is higher)


Pros – You only spend money when work is being done. And like a fixed fee, there is no incentive for spending your money for any other reason than to make you money.
Cons – There are no guarantees that the work being done is helping. Doing work for the sake of it won’t help you to sell more but will create costs.

What Are You Actually Paying For?

Initially, you are paying for someone to set your account up. That requires a lot of work in terms of researching keywords, writing ad copy and setting up bid management. Even a relatively small campaign will take several hours to set up properly and if you are running many campaigns it can take days to prepare it properly. If you are also running re-marketing campaigns then it’s likely image banners are required and  if you are running a Google shopping campaign then your xml feed will be being built. They will also be setting up and integration with your analytics packages – how else will they know what is working and what isn’t.

After that, the role of PPC executive will need to optimise and improve the campaign continuously. This will make sure you are only spending money on keywords that are generating positive returns and setting bid levels that try to find the sweet spot between clicks and cost. The only guarantee that can be made is that every PPC campaign can be improved in someway – and these improvements are most likely achieved over time as more data and information becomes available to the executive.

Over time, it’s also likely that expansions and test campaigns are made – as your campaigns begin to generate profits, it will afford new opportunities to attract more traffic. The scale and speed at which this happens is likely to be directly linked to your budgets. There is little point spending days on expanding a campaign if the monthly ad spend is in it’s hundreds.

Finally, most businesses will have an element of seasonality to their operations – preparing for key sales dates (Valentines, Christmas, Halloween etc) will need additional work and if you are running a multichannel campaign, it’s likely that your PPC executives will also be supporting and adapting to your other channels (eg TV adverts, print adverts, PR)

Your Choice

Hopefully this short guide will help. Of course, we at Eventure offer our own mix of billing styles and a mix of either standalone PPC campaigns or PPC as part of a multichannel campaign. What we hope though is that you choose an agency based on how well they will do for your business over and above those with fancy sales patter – Pay Per Click is a vital sales channel (it’s how Google makes it’s money) and getting it right is often an essential part of the digital marketing mix.

 

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