Managing a PPC ad campaign or multiple campaigns across different skews can be time-consuming, frustrating, and costly. That’s why paying a PPC management agency is a good idea. Overpaying is not, however.
Determining what you should pay and the type of agency or services you want will require many different considerations about your business, your willingness to spend on advertising, and how much effort you want to have to put in yourself.
Most PPC agencies have different pricing models based on different needs and the scale of pricing can vary wildly, it’s only one of the reasons clients have issues with their PPC agency. The upside is that a good agency can get you much more of an ROI than a typical marketer is capable of.
It’s a given that you’ll have to spend money on advertising in order to draw in customers, but much of that money can be wasted with an ineffective PPC campaign. The right management will keep your ads fresh, well-targeted, and ever-evolving to consistently engage your market.
The core of figuring out how much to pay will be determined by the type of strategy that works for you and how much you can afford to spend in return for managing your ad campaign.
There are three standard pricing models that each work differently and are best suited for different types of businesses as well as additional fees and services that you may want to consider.
We’ll detail each model and then discuss the optimal situation where that pricing model would work to give you an idea of what’s best for your business and campaign strategy.
The way these models of pricing work, is that companies pay an agency a set percentage of whatever their base ad spending is. The company then manages the ad campaigns based on regular ad spend percentages.
In many cases, the more campaigns the agency manages, the lower the percent paid gets. This means by volume the agency makes more money but the business pays less. This is not the case for every agency but is standard practice for many of them.
This is generally the most common pricing model used and does not include additional fees and services provided by the agency. One caveat that comes with these pricing models is that they typically require a minimum amount of ad spend to operate regardless of the overall budget.
The percentage is also set by the agency and once locked in, can be difficult to renegotiate, especially mid-campaign. This means that fees are locked for a period of time regardless of return or tracked performance unless otherwise stipulated. Knowing the conditional stipulations that apply to your management contract will help to avoid unnecessary costs.
These types of pricing contracts are best reserved for big businesses with big advertising budgets. This is mainly due to the minimum required spending that accompanies these pricing plans.
Small to medium-sized businesses may not be able to afford the price point of these plans and the required minimums.
Additionally, larger businesses that run more campaigns or that have large ad portfolios will benefit more from the decreased fees associated with higher workloads on these price plans.
Larger businesses also have the ability to absorb the cost over the term of a contract if the ROI is not as high as it may have been forecast. Businesses with minimal budgets or that cannot absorb extra costs would not be well suited to these models due to the lack of control overpricing.
This is a fixed fee model that is determined by the associated costs and scope of managing a client’s static ad campaign. The fees and assessments for managing a business’s ad campaigns are all built into one payment.
This provides a set range of PPC management services for static campaigns and covers all associated monthly fees. This provides businesses with a set cost for a set run of ad campaigns.
The one typical downside to this type of payment model is that it is not easily modified and the scope of services may be less than other pricing models. Performance is also not guaranteed. The management fees are paid regardless of how the ads perform unless otherwise stipulated in the contract.
This type of setup can be a double-edged sword for businesses as the simplistic structure and flat fee are beneficial, but the range of services and performance may be limited. It’s best to discuss exact details before deciding on this type of payment model to ensure the services are what you need.
Though this type of pricing model is not as common as the percentage of ad spend model, it can be beneficial for businesses that run a set of standard, static ad campaigns on a regular basis and simply need them managed in some capacity.
Smaller businesses that prefer to pay a flat fee may also choose this model over others so that they have more control over the exact price they pay. The simplified pricing and limited management services also serve smaller less complex ad campaigns better.
Larger businesses or businesses that run constantly changing ad campaigns, seasonal ads, and other promotions would not benefit from this type of pricing. The fee structure is based on static ad campaign costs and the management and oversight level is less than that of other plans.
This means essentially that complex ad campaigns will not receive the management and attention to detail that they need to capitalize on their potential and will therefore have diminished ROI. Even if the cost is lower, in these cases the loss of potential revenue may cost even more. It’s like buying a cheaper product to save money and then having it break two days later.
These models are much less prevalent than the previous two and are tailored to less traditional campaigns that rely on lead generation to close sales. In general, this model is used for campaigns such as e-mail marketing, cold calling, B2B sales marketing, and other types of direct sell campaigns.
Agencies typically manage these campaigns and collect a fee-based either on overall performance or per lead that closes in a sale. Though the niche for these types of campaigns is smaller, the costs associated are also much more mitigated than other options.
This option works exceedingly well for eCommerce, direct sales, and referral models.
As we’ve discussed, this model is rarer than others due to the niche nature of the campaigns that use it. However, businesses that market directly or use conventional sales tactics can make great use of this as a lead generation service to drum up sales.
The basic idea is that you only pay when they bring you a client. This makes the cost relative to client acquisition a worthy exchange in most cases. Linkedin campaigns, B2B campaigns, and direct-to-consumer sales would benefit greatly from this model.
Traditional marketing tactics, ad campaigns, and site-driven sales would not benefit from this model as the overall benefit would be lower compared to the cost per customer.
The plans we’ve listed are the top 3 that are most common, agencies may include other plan options as well as management fees.
Typically, management fees are flat, static, and applied on top of standard pricing plan rates. The benefit of agencies that offer these fees is that the level of service is usually higher. In particular, services offer more control over ad campaigns, including automatically rotating or updating ads, managing dynamic ad campaigns, updating copy and other elements, and monitoring performance.
The fees for these services aren’t cheap, typically ranging from $500 to $5000, but the benefits are great for businesses with large campaigns who can afford the added cost and want more precise control of their PPC ad campaigns.
Before you decide on a plan, having a full understanding of your needs will help you determine what you need and what you should pay in terms of required services, changes, and other issues. It’s not enough to say “well, I can afford this much, so that’s what I’ll pay.”
First of all, take a look at your business’s advertising structure. Look at your base performance, decide what you want to improve. If you don’t have a dedicated advertising program or budget, try to get an idea of what you want so that you don’t go into negotiating with an agency blind.
This is why larger businesses can afford to pay large premiums, they already have the ad budget and the return on ad spend usually covers any costs associated with using an agency.
Once you have a budget in mind, you can begin to decide on what plan would work best. This includes considering whether you want to pay for additional management services.
The fees on percent ad spend plans are fairly standard and don’t leave much room for negotiation, but performance-based models and flat fee structures usually leave room for negotiation in terms of service and price. The larger and more complex your ad campaigns, the more you’ll spend overall, but you can also expect a higher ROI in these cases, with a good agency.
Before you sign the contract, make sure you have a PPC audit performed and go over any and all particulars so that you know where you stand. Having stipulations in your contract that cover you in case of downturns in business, poorly performing ads, or dynamic ad campaigns will allow you more control over your campaigns and protect you from the unexpected.
To help you figure out how much you’ll be spending, we’ll break down some of the standard industry fee structures.
Startup Fees are essentially assessment fees that are paid at the start of the contract. These are usually paid regardless of whether you start a long-term contract or are month to month. They can range from a couple of hundred dollars to several thousand depending on the agency and the scope of the management needed.
You’re paying these fees up-front for the agency to put together a plan for your ad campaign and the management requirements. What you get for these fees, however, depends on the agency, so don’t expect a guaranteed level of service just because the startup fees are higher.
Contracts typically come in three types when you sign with an agency. Depending on your situation or budget, choosing one type over another may have more benefits.
Some agencies offer month-to-month contracts that allow you to change or alter services on a monthly basis or quit the contract after the next 30 day period if you so desire. If you’re uncertain about your need or want to test out the agency before committing to a long-term contract this is a good option.
Though rare, some agencies offer a no-contract option. This allows you to end service at any time. Fees may be applied, but this may be a good option if you face financial difficulties or find that the service you are using isn’t working out. Those who don’t like commitment may prefer this option as well.
The standard option for most agencies is a term contract. These typically range from 3 to 12 months. These contracts can include performance minimums and expected services as well as all minimums and fees associated with payment. Payment is typically made on a monthly basis and can include the contract fee as well as management fees.
There are three components to PPC management agency fees: Monthly click budget minimums, the standard monthly base fee, and the percentage of ad spend fee.
The first component and one that you should be aware of before signing is the monthly click budget minimums. These are the minimum ad spend budgets that an agency will work with. This is especially important if the agency takes a percentage of ad spend as part of their fee. If you don’t meet these minimums, you may need to change agencies or renegotiate the terms of your contract. This can determine a lot of the expense. Smaller businesses with tighter ad budgets may want to shy away from agencies with high minimums.
The second component is the base fee. This can be structured in a number of ways, but the base fee can be considered the minimum you will pay the agency for their work each month. Some agencies charge this as a flat rate or have flat-rate plans that don’t add additional charges.
Some require a base fee, plus hourly expenses based on workload. Others have a base fee based on keyword count, tiered fee structures, or fees associated with each service, as an a la carte service.
The normal practice is to charge a base fee, plus a percentage of either ad spend, or a percentage of the total advertising budget, both of which can become quite hefty and can range from a low of 15% and a high of 50% of ad spend.
You should assess your financial health and your overall marketing budget when deciding on the type of payment structure and agency to choose.
Understanding the benefits and costs of a PPC marketing agency allows you to make more educated decisions on what to pay. What that number is for you will be dependent on a lot of factors.
The best answer we can give you is to do a hard inventory of your business’s finances and marketing budget and determine what you can afford to spend, even if things don’t go your way.
In general, you can expect a great return on your investment, and using a PPC management agency is a fantastic resource, but you shouldn’t over-leverage your advertising budget in case your conversion rate drops or your business suffers a downturn.
The rule is: pay what you can afford for the services you need most. Even a big business needs to be smart about where it puts ad dollars in order to maximize profits. Paying for things you don’t need is never a good idea.
Hopefully, this post has given you everything you need to know about PPC management agencies, how they work, their fees, and what you can expect to spend.
If you’re thinking of hiring a PPC agency or firing your existing PPC agency, get in touch!
Now you’ll have a better idea of what it’ll cost you and what you should and shouldn’t pay the agency you choose.