Whether you’re getting bang for your buck is a pressing factor when choosing a PPC agency. There are also many different pricing models that PPC agencies offer, which can create more confusion for clients. As a brand looking to work with a PPC agency, you should understand the true cost breakdown from the get-go. We’ve put together this post to walk you through the four most common PPC pricing models – their basics, advantages, and drawbacks.
(1) Flat-Fee Pricing
As the name suggests, flat-fee pricing means you’ll pay a pre-fixed amount for creating and managing your white label PPC ads, campaigns, and accounts. The flat fee is typically charged on a month-to-month basis. It’s a great model for clients looking for a set-it and forget-it pricing plan. You’ll pay the same fixed fee regardless of unforeseen circumstances. Whether one or 1,000 ad campaigns are run, you can expect the same bill from your PPC agency. If the agency meets your expectations or over-delivers, then you can enter a longer-term contract.
Pros of flat-fee PPC pricing
- It works best for clients interested in signing short-term, monthly contracts.
- It’s easy to cancel your plan since contracts are usually structured on a monthly basis.
- It’s a cinch to budget since you’ll pay a fixed fee no matter how much work the agency puts into your campaigns.
- Flat-fee pricing typically delivers long-term value to enterprise-level and larger organizations.
- It’s a great way to trial PPC advertising.
- The sting will be milder if the relationship with the PPC agency sours.
Cons of a flat-free PPC pricing
- The agency may ask for a long-term contract and setup fee as a prerequisite, which can lead to a hefty upfront investment.
- Flat-fee pricing isn’t a good choice for organizations with a lean marketing budget.
- It’s usually less cost-effective, especially for small and medium-sized businesses.
- It may require re-negotiation if there are sudden changes to your scope of work.
(2) Milestone-Based Pricing
Who doesn’t want to partner with an agency that works harder to earn its keep? However, keeping tabs on the agency to ensure it’s actually delivering your desired results can be challenging. You’ll find two common PPC agency pricing models that wire performance into the plan. The milestone-based model is one.
Milestone-based pricing is just that – the agency will charge you more for more leads generated. You’ll be more than willing to pay the extra dollars since more leads will add more value to your bottom line. Unfortunately, metrics used to measure PPC results are usually open to interpretation and can be made subjective by the agency to bill you for more.
Certain agencies may use black-hat methods to deliver less-than-stellar leads. For this reason, some models may include performance monitoring beyond lead generation, such as milestones for metrics like a bump in revenue, conversion rate, and click-through rate. You may need to drive some hard negotiations to have these additional metrics included in your pricing plan.
Pros of milestone-based PPC pricing
- Results/deliverables are apparent.
- It theoretically entices your agency to work harder for their PPC fee.
- Your business revenue grows with the fee earned by the agency – it’s a win-win model.
- Your agency will stay focused on delivering results for you throughout.
- The relationship with your agency should go well as long as everything is transparent.
Cons of milestone-based PPC pricing
- You’ll have to ensure your agency isn’t faking the results or embellishing the metrics.
- Certain PPC agencies may not bother about the quality of the leads generated.
- Getting good metrics included in the plan requires heavy, uncomfortable negotiations.
- Things fall apart quickly if transparency fails.
(3) Hourly Rate Model
Pay-per-click advertising can be out of reach for small businesses with lean marketing budgets. With Google Ads’ cost per click staggering at about $2, as reported by Forbes Magazine, it’s no surprise around 45% of small businesses have gotten their feet wet in digital marketing but still shy away from PPC.
More and more PPC agencies are charging an hourly rate to help make pay-per-click advertising more affordable and flexible. As reported by Pranjal Bora of Digital Authority Partners, these agencies set their PPC fee per hour. While that might not make sense for larger organizations, it’s ideal for small businesses that call for flexibility since their PPC needs and budget may vary from one month to the next.
Pros of hourly rate PPC pricing
- Simplicity is at the heart of hourly pricing, as every business is familiar with the model.
- It’s a great option for low-budget, small businesses.
- It’s highly flexible.
- Hourly pricing is easy to understand, monitor, and budget for.
- It encourages you to be more involved in the process.
Cons of hourly rate PPC pricing
- Initial market research can make the upfront investment hefty.
- More hours are required if the agency is inexperienced, slow, or inefficient.
- It doesn’t give the PPC agency an incentive to work faster or harder.
(4) Percentage of Ad Spend Pricing Model
While the percentage of ad spend pricing model may sound complicated at first, it’s actually one of the best PPC agency pricing plans. It’s often the pricing model that good PPC agencies recommend to their clients.
Pros of the Percentage of Ad Spend Pricing Model
- It’s an excellent choice for every client, no matter their budget.
- It encourages transparency between the agency and the client, as no change in spend or scope occurs without the knowledge of either party.
- You review and update your scope of work without disruptions to your PPC budget.
Cons of the Percentage of Ad Spend Pricing Model
- Flimsy agencies may give small accounts to inexperienced staff to optimize profitability.
- Agencies’ reasoning for increasing your budget can be questionable.
- Certain agencies may become lazy to take advantage of this pricing model.
Wrapping It Up – Which Pricing Plan is Right for You?
Pricing models that PPC agencies offer often vary from one to the next. The percentage of ad spend pricing model should be ideal for organizations of all sizes and budgets. Startups, small businesses, and those with lean budgets should prefer fixed-fee and hourly pricing models. Larger, enterprise-level organizations are a good fit for milestone-based and other performance-based pricing plans.
