To understand how this market works it is a good idea to put ourselves in the position of agencies and freelancers that manage online marketing paid campaigns for their clients: Adwords, Facebook, etc…
Once you get into the PPC business the first question that usually comes up is How much and how exactly should I charge my client for my PPC services? This article is a sum up of all the different ways and real world situations agencies and professionals charge their clients for managing and running their Pay Per Click campaigns. The research has been done by analysing different agencies and freelancers in the UK and US as well as per expert’s input at forums, Q&A sites and articles.
Four ways to charge for PPC
Lead per defined cost
You run the expenses of the PPC campaign and then sell the leads you obtain individually for £3 to £20 each depending on the lead quality, the business/market you are in and the average ROI of that converting lead. To get an idea lets look at some real examples: a lead for a pluming service may cost £5, a low quality lead for selling/buying a house (real estate) may cost £10 or £15, a lead for some financial investment can cost £20 or more and very good leads in insurance can go up to £100-£200.
This method is one of the most straight away and independent, you can set up your own unbranded website to get leads and then sell those leads individually to different clients at negotiable rates. If you are about to start this way, a good way to get the attention of new clients is to obtain 10-50 leads, offer them for free to a relevant company and tell them you can give them more for £10 each or so.
Percentage based on ad budget spent
The simplest way and the most broadly used to bill a client is by taking a percentage of the total monthly spent in advertising. Usually PPC companies range these percentages at a rate of 15% or 20% but there are also companies who charge 50% or even 100%. For example, if a client is spending £1,000 a month and you are charging him 20% you will be earning £200 per month.
This method is a Win-Win situation for both parties since you get to charge more if the client spends more money on advertising and the client will do so if the PPC campaign is doing good and profitable.
Percentage of lead benefit
Maybe the most realistic of the options is to get a percentage per each lead (either potential prospect or converting lead). The only issue with this method is that it is very difficult to track since your client needs to be completely honest with you. You can install a tracking script or monitor their sales/CRM software to make sure although you may miss phone leads since it is much harder to track phone calls (you can set up a separate phone number just for PPC at an increased cost and system complexity).
This method is the fairest ones of all since you get paid exactly by the business/money you generate but will only work if the client is completely honest or if you have the necessary tools to monitor everything effectively which is usually time consuming and complex.
Pay per hour
The last way is to charge per time spent working on the PPC campaign. Some people charge per hour and some charge per minute. This way you ensure you get the fairest amount of profit based on the time spent working for a client although it is completely independent from the success of the advertisement or the profit you are generating so it can sometimes be less motivating for the client or yourself. Also, your income will be very high during the campaign setup but fairly less once the campaign is running and steady you will just spend time monitoring and tweaking.
Which one should you choose?
Depending on your business structure and the number and characteristics of your clients you may want to go for one or another. If you have a lot of small clients the pay per hour may be the way to go. If you have big and demanding clients you could go for a percentage method. Make your calculations: check how much time you need to spend at the beginning while setting everything up and how much time will you spend every week tweaking and monitoring the campaigns. Then, based on that see which of the methods is the better for you and the client.
Some of these methods are easier to track and charge than others. I personally choose the Percentage based on ad budget spent to be the easiest to track, write the invoices and the most motivating for both me and my clients.
Have you got other ways to charge your PPC services? If you are already doing it, which method are you using? Post your opinion and comments below and if you have any doubts feel free to post them below so we can all help you.
Photo by redspotted
Thanks for explaining the different methods, I’ve always charged as per your “lead benefit” (I call it performance based) and agree with you, the fairer the better.