PPC tips and advice

PPC management pricing models

With pay-per-click (PPC) advertising becoming more popular, there are now a growing number of marketing companies springing up to offer campaign management services with a choice of pricing packages and levels. However, which one will be best for your business?

Whether your business is starting to consider running a PPC advertising campaign - using services such as Google AdWords or Yahoo! Search Marketing – or if you have tried this already, it can usually be most cost-effective to outsource the set-up and management to an established and experienced agency, since the added management fees can be easily offset by the more efficient running of the campaign that will generate a higher ROI (return on investment).

However, the management fees being charged by the agency need to be fair and transparent so that you, as the client, are able to see what you are paying for. Historically there have been 3 basic types of fee structure being charged by search marketing agencies – a fixed fee based on management time spent on the campaign; a percentage fee based on advertising spend; or a commission fee based on the defined outcome or sales achieved.

The final option is probably the least common as this requires a good degree of data sharing between the client and the agency to reveal sales and revenue figures. In addition, the agency may not want to work on this basis if they have no control or influence on how a client's website is designed, since there may be usability or conversion issues that can impact the ultimate success of a campaign.

The model where a percentage of the advertising spend is charged follows the more traditional advertising agency fee structure, with anything between 10-20% of spend being charged to the client. However, this can only work effectively for campaigns of a certain size to make it worthwhile for the agency, or for the client to avoid a high management fee that may not be justified with the time spent managing the account.

Therefore the fixed set-up or management fee is perhaps the simplest and most common method of fee charging, with costs based on the actual time spent working on the account. Although there can be fluctuations in this management time from month to month, the agency can charge a realistic price to reflect effort and experience, whilst the client can budget their spend and know what they are paying for.

There are examples of agencies charging a fixed monthly fee that combines both the PPC advertising spend and their monthly management fee. However, in these cases the access to, and information supplied about, the client's PPC campaign is usually limited so that the client is unsure what the mix of spend between advertising funds and management fees will be. The reality of any PPC campaign is that spend will fluctuate each month based on bid strategy or competitor and seasonal activity, so this method of charging is unsatisfactory and also results in more limited information being supplied about the campaign by the agency in order to protect their fee margin.

As our clients know, we encourage complete transparency about each PPC campaign so that the mix between fees and advertising funds is clear. This means that we can provide full information to advertisers to enable them to also have complete awareness and understanding of what their spend is giving them, how well the campaign is working, and what they are paying for our expertise.

This article was first published in the April 2010 edition of our monthly newsletter.

If you'd like to know more about PPC cost structures and how your search advertising would benefit from our cost-effective management, please contact us now for details. Alternatively, please request a FREE website assessment and see what you could achieve with a successful search engine marketing campaign.