I am looking to start an AdWords Management service and a little confused about the best pricing model to use. I've done a bit of research and can not find a suitable model to emulate so thought i'd ask the question here. I think these are the best options and a hybrid of a few of them may be the best method however, I want to make sure the price is easy to understand and simple. Percentage of spend: My biggest problem with this model is you are rewarded the more you spend, should an effective campaign not reduce waste and therefore budget? CPC: A quick view from the client could be seen as being rewarded for sending low cost low quality clicks Number of keywords: x for up to 1k, xx for 1k-3k etc. does the number of keywords reflect the size and commitment the campaign/account requires? Flat fee: x per month, xx per month (highlighting the fact that more time will be allocated the greater the package) CPA: My favourite, rewarded for a conversion/action difficult to measure depending on business and so many other factors such as company procedures, layout of website and reputation. Any thoughts would be gratefully received, I am trying to ensure whatever model I use is as transparent and workable as possible
unfortunately % of spend is the only method that guarantees transparency between client and manager. Nobody can lie about the spend because the client pays the bill, and the venues provide monthly reports. All other methods are spoofable. CPC - in reality is just another version of % of spend, only problem is that client needs to have all click data to verify your charges, and thats a headache. # of keywords - size of account is a bad way to determine cost, because an account with 100k keywords may practically run on autopilot while an account in a competitive niche with only 1k keywords may require intraday monitoring. Flat Fee - worst pricing model ever. You are not rewarded for increasing spend nor are your rewarded for performance. Flat fee managers are what we usually call bid managers, where all they do is make a couple bid adjustments per month and call it optimization. These are the snake oil salesman of the industry. CPA - probably the best model for both client and manager, but unfortuantly the most impossible to monitor due to cookie limits, tracking, phone orders, and people searching on one comp and then purchasing on another. There is no guarantee of commission for all work performed So % of spend is the only reliable method of billing for a client, and sometimes has to be combined with setup fee's and limited hours since smaller and newer account may require more initial work to get their campaigns on their feet. Hope this clarifies
Many thanks for your thoughts Robert. I am looking for the most transparent method of billing as I want to be upfront and honest about the whole thing. I'm also looking at SEO in a similar way with honest payment for honest work, so many snakes as you call them however, lots of good people doing good work. I want to make it as easy as possible for people to see what they are paying for and demystify a lot of the work that is performed. Many thanks once again
Whilst I agree with Robert on most of his points, I would observe that a flat fee has one advantage over a percentage of spend - it removes any incentive for the agency to pay too much per click (i.e. spend more to appear higher, even though the client is making less money). This may be reassuring to some clients, though as he says, it removes the incentive to perform any optimisation at all... CPA also has its flaws - assuming that the conversion rate is largely similar in different positions, then there's a clear incentive to reduce bids to below the most profitable position, since the lower the bid, the better the CPA...
Robert - While I agree with you on the flat fee model, the issue I'm finding with the % of spend is that that I have to justify pricing fluctuations to the client. I have to frequently justify why they should spend x number of additional dollars for any given short term expense (while I gain income from their expenditures). Some examples: - Getting a higher initial bid price (i.e. Google Slap) for moving high performing kw into their own campaign/ad group. - Adding additional kw/ad copy campaigns/groups that will take a couple of days to perform. I'm finding a combination of flat fee, incentives & weekly forecasting to work for both me and my clients. I'd like to think that my clients are getting value from their PPC management! I'd love to get your feedback. Best Regards