One of the most common questions that we get asked here at Eventure is “How much should my business spend on on PPC?” We would like to say that there is a definitive answer, but that would be far too easy! There are a few ways of cutting the cloth when it comes to billing for PPC work, so as guide for those who are struggling here is a list of common pricing methods and the pros and cons to each approach.
Percentage of Spend
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.
Pros – Your bill reflects the size of the account.
Cons – There is an incentive to increase your spend, regardless of the merits.
Percentage of Sales
Like the percentage of spend, you pay based on the percentage of revenue driven by your adverts.
Pros – You are only paying for adverts that are directly generating sales.
Cons – Attributing sales accurately to first click is between difficult and impossible and you’re likely to overlook important top of the funnel opportunities.
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.
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 performance and your business. If they make just a small improvement in month one, they don’t then have to do anything else whilst still they get paid.
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 perverse billing incentives.
Cons – It’s difficult to understand just what is being done – 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 are no perversion of incentive for doing a good job.
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.