PPC Agency Pricing Models
September 11, 2018
September 11, 2018
Hey everybody. In today’s video I wanted to go over a little bit about ParaCore’s pricing model and how we price projects as a PPC agency. Today I’m at the Arizona Country Club, which is just a really nice country club in Phoenix. Got the golf course. It’s actually a lot hotter than it looks. We’ve got some kids playing soccer over here, I think. I don’t know if you can see them. Right down there, it’s a really nice day. So I figured I would step outside and film this video, talk a little bit about agency pricing.
The reason I want to talk about it is because every time I talk to a new client, they ask me about how we price our products. And there are a variety of different methods that I’ve seen in the marketplace and we chose a strategy which has really worked well for us and I’ll tell you why.
So the methods that I’ve seen are basically a combination of fixed rated or a percentage of ad spend. So a fixed rate is obviously the client’s gonna pay you $500 per month do manage their AdWords account, whatever the case may be. Percentage of ad spend is if someone spends $1,000 a month then you’re charging 15% of their ad spend, you’re getting paid $150. If they’re doing $5,000 a month then you’re getting paid 750 and so as their ad spend increases, your percentage increases. So that’s obviously percentage.
And then sometimes you’ll see a combination, so let’s say $1,000 plus 10% or something along those lines. And when I first started Paper Click at ParaCore we actually did a base fee plus a percentage of ad spend. And I felt that was a good idea and I thought it gave me a bit of a base so that clients that didn’t do a lot on ad spend, we would still make enough money to run our business and then as they scaled the percentage increased.
But what I found was that we ran into a couple problems with that model. One is that just increasing the budget for an account doesn’t necessarily increase our work. If I’m looking at an ad set in Facebook and it’s spending $100 a day and then I change that to $200 a day, that to me doesn’t really feel like I should be receiving more income on the management side just because the budget increased for a month. So that’s kind of weird, especially when you start really increasing spends rapidly, your management fee might double, triple, or quadruple without really doing any more work. And while that sounds great for an agency, clients realized that and then they start expecting more, so it wasn’t that great.
Secondly, the billing was a little bit difficult. So if you’re billing on percentage of spend then you’re billing in rears and you have this kind of strange computational, like you’re billing at the end of the month for spend that has already occurred, and that can just be a little bit challenging because, sorry these kids are, someone’s winning this soccer game. So if you hear kids yelling, I don’t know, some sort of goal, they’re pretty excited about it. But if you are billing at the end of the month than you kind of have this weird, it messes with your cashflow sometimes. You might bill the base rate at the beginning of the month and bill the percentage of spent at the end. And I just didn’t really like that, I thought it was confusing and I definitely wanted my billing at the beginning. The other reason is that automatic billing was not really possible. We had to compute our invoice every single month, account managers had to review them, we run multiple ad platforms like Facebook, Instagram, which is the same, but Facebook, Instagram, AdWords, Beam, Perfect Audience, whatever the case may be. You might have six different platforms that you’re running you have to have an account manager then look at all the spend in each one, make sure that the numbers are being pulled in and it was really time consuming. So that was a challenge. And then there were times when we’d do a lot of work to create a new campaign and maybe the campaign wasn’t approved right away and so we’d spend all this time setting it up and then there wouldn’t be ad spend to offset those costs. And so we actually didn’t see the benefit of all the work that we’d done.
So ParaCore moved to a fixed fee paper click model where we just get paid one fixed fee per month depending on, just depending on your ad spend. So it’s kind of a tiered model. So basically if you’re under $10,000 there’s one fixed fee, if you go between 10 and 20 there’s another fixed fee, and that includes all paper click channels that you’re working in. So one conversation that we would have a lot is someone would say, “Alright, well I’m running an AdWords,” and we would say we think we should do retargeting in Facebook because someone’s already visited your page, you want to retarget them, you want to follow them around. And they say, “How much would that cost?” When we did the percentage of spend model before we’d say, “Well it’s an extra 250, 300, $400 per month “to run Facebook ads, but your spends only gonna be $200.” And they’d say, “I don’t want to spend $400 a month “just to do some retargeting on Facebook.” So then it would get shot down a lot.
With our fixed fee model we actually run campaigns on all the different platforms without any sort of add on. So if we’re working in AdWords and you’re getting traffic to a landing page and you want to retarget them on Facebook we just say, “Alright, next month we’re gonna do that.” And we have a rough equation for hours and billable so that we don’t get too far out of line as far as the amount of work that we’re doing, but it’s worked out really well.
So ParaCore moving forward does the fixed fee model and that helps us with billing at the beginning of the month, we can just do auto transactions on a credit card so it saves a ton of time from calculating the ad spend, the expectations on the client’s end are really clear. “This is the amount of money that you’re spending, “this is your management fee.” It still falls in line with traditional percentage of ad spend amounts. If you start spending a lot or if we’re doing really heavy campaigns we might have an open conversation about, “Hey, this is a lot more time than “what we had originally talked about.” But it’s worked really well for us. So it took us a couple years to get to that model. I highly recommend it, the percentage of spend just doesn’t really seem congruent with what’s happening with the client and your business and work load and we found the fixed fee model to just be a lot more beneficial.
So that’s a little information about how ParaCore prices our projects and our management fees and so hopefully that will be helpful to you. And if you’re a client that’s just looking to learn a little bit more about what we do, that’s obviously just the rationale and reasoning behind our pricing model compared to a lot of others which are percentage of spend and we’ve kind of deviated from that. So if you have any questions, please let me know. Like the video or subscribe to the channel if you’re enjoying it. My email and our website are in the description below. Thanks.
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