PPCChat | The Great PPC Pricing Model Debate | 31st August 2021

Hello happy readers and welcome to another episode of PPCChat screencap. In this week’s session, host Julie F Bacchini and co-host Kirk Williams sought experts’ views on the PPC pricing model used by them, do they charge for account audits and reviews, what are the pros and cons of monthly billing, and more.

Q1: What pricing model do you currently use for your PPC projects and accounts? How long have you used this method?

We use a Tiered Set Fee based on Ad Spend. It’s been a couple of years now, we switched from percentage of spend. @PPCKirk

It’s pretty all over the place. I tend to price at around 10-15% of existing spend. Depends on what I’m being asked to do. @stevegibsonppc

I use a project / set fee for specific scope of work model. I generally divide work into an initial phase or two (depending on complexity of the needs) and then switch to a set monthly fee to manage all that we have built/improved. @NeptuneMoon

Project based – use an internal hourly rate & project time estimates to quote project without mentioning hourly to client. Also have a few incentive based deals based on performance. would like to try to do this more. @selley2134

As a spoiled omnichannel brat, we look at total spend and preferred channels and price from there. We have some retainer partners and some hourly, and it depends on their needs. Bespoke or begone! @JuliaVyse

Yes, I think Tiered Set Fee based on Ad Spend is better -but- given the % cost of Google Marketing Platform, can understand why firms just stick with that. Easier to markup. @beyondcontent

We have a mixed model with 10% of ad spend and then a monthly strategy fee. Client’s only value what they pay for and we don’t want clients who don’t value time invested into business strategy thinking, which is different from PPC strategy. @duanebrown

Q2: Have you used different pricing models either over time or by client/project? What made you change your model or use a different model for that project/client?

You name it, we’ve tried it! LOL. I’m constantly tweaking to try to find what works best for us, and the client as well (if it works well for the client, it’s easier to sell BTW!). @PPCKirk

I used to use an estimated hours x hourly rate model, but IMO it leads to a “PPC management as an expense” mindset – which isn’t good for the client and wasn’t good for me. @stevegibsonppc

I have pretty much always used this model. I started it when I was doing web sites and have carried it into PPC. I have issues with % of spend, which I will get into on those questions… Clients also like to know what to expect on their invoices, I’ve found. @NeptuneMoon

I’m always experimenting with different approaches. I loathe – and will never use – a strict % of spend model. It creates perverse incentives for the agency + creates a barrier to scale and growth. That’s the only one I flat-out refuse. @DigitalSamIAm

Back in 2017 we did sell hours until August and then ditched that model. Then percent of spend and grow how we price since then. I like where we are and who we attract as a brands. We are a business to and need to make a profit. We don’t race to the bottom on price. @duanebrown

Q3: Do you require any payments up front for your projects or do you “bill as you go”? Why do you do it the way you do it?

I get paid in advance. Why? Because I’m not a bank and I don’t give credit. (Nor do I spend time chasing payments.) @stevegibsonppc

Admitting there are different acceptable ways to charge, we do charge for a setup fee. Part of this is because we do not have long-term contracts in place (month-to-month), so setup fee allows us to get paid for our initial work even if a client leaves immediately. @PPCKirk

The first phase is billed up front and all the other billing is done for the next month (ahead of time) with a strong incentive to pay me electronically. I have a client I let this slide with during COVID and I’m chasing that $$…@NeptuneMoon

Get paid up front. Legally, collecting balances owed for services work is tricky, time-consuming and expensive, so getting paid before delivering work is the most prudent approach, IMO. There are always exceptions (yay mega-corps w/ dumb AP rules). @DigitalSamIAm

100% this. Protect yourself from clients from hell. @beyondcontent

Make sure your contracts specify what happens if they get behind on payments. Selling service work gives us less leverage than those who sell products. @NeptuneMoon

In those cases, we don’t begin work without a fully approved PO. At the very least, that PO is factorable at a more favorable rate + terms vs. invoice factoring. @DigitalSamIAm

I’m a little quiet on this one because our team actually runs, manages, and bills all media, then invoices the client. I feel like that’s not the route for many in this group.@JuliaVyse

Bill as we go and all bills go out on the 1st of each month. If a client starts part way through the month, we prorate that month to align with 1st of month billings. Makes billing easier. @duanebrown

We bill in arrears. Larger clients with finance teams expect it. There’s pros and cons for both. @thetweetingtaz

Q4: Do you charge for account reviews or audits? Why or why not? Are there different levels to this type of work in your opinion?

Yes! you can’t fully know what needs to be done until you get under the hood. We propose a bank of hours and share the types of deliverables from an audit. that time is accounted for, and valuable for us, them, and the overall project. @JuliaVyse

This depends! We charge for audits. We do offer an “Account Analysis” during our sales process that is more strategic and big picture. Basically, we ask how we can sell a client on our plan without giving it away. @PPCKirk

I charge for an audit. If the client wants it as a separate piece, then definitely. Otherwise it is part of my first phase, because I need to know what is going on in the account(s). I do look at accounts as part of the proposal/sales process, but… @NeptuneMoon

No, I view the audit is as much for us as it is them. Is there opportunity? What strategy shifts can be made? Are they leaving an agency with a solid account? Why? I also don’t go too crazy on audits since I don’t charge. @selley2134

I am not producing a full report like I would for an actual audit, nor am I going as deep as I would. I am basically looking for major issues and I have a list of stuff I always check. @NeptuneMoon

Yes and no. For basic PPC audits, I don’t. They don’t take long to do because I only look at the “big pieces.” For full SaaS PPC funnel analyses, I charge like a wounded rhino. @stevegibsonppc

We have a couple of “tiers” for audits: 1. Discovery Audit – 1-3 hours, focused on validating + ensuring scope is aligned with the conversation, as well as setting realistic goals for partnership. No charge. 1/x @DigitalSamIAm

Strategy Development – includes the full audit, plus the development of a paid media strategy, budget model + dashboard with selected KPIs. Priced based on number of channels + level of complexity. @DigitalSamIAm

Q5: Do you charge differently for Social Ads than you do Paid Search Ads? If so, how?

We don’t do Social! When we did briefly, I learned that Social is less about ongoing technical account optimizations than Paid Search, and more about the (1) setup and (2) creative, and should probably then be charged accordingly (again, I’m not a Social expert). @PPCKirk

We are just now starting to sell social. Our internal hourly rate is the same so the pricing is the same but we do add a few more hours to social as a buffer for tracking issues, dealing with FB, etc. @selley2134

I am currently using the same model across search & social. I will say that social is a lot more labor intensive and less predictable in what will be required for the management. For those accounts, I set a review of scope to kick in after 2 full months. @NeptuneMoon

As usual, it depends. FB can take way too long, but it might have more activity than search. this is where retainers can be super helpful! let us do the best thing for this campaign! @JuliaVyse

We use the same model, though the compensation levels are different across search vs. social. @DigitalSamIAm

Nope. Same pricing model for account management. If clients want us to make ads then we have a monthly retainer for that since our designer will be involved. @duanebrown

We usually package the two together so whatever model we’re using to charge for one we use to charge for the other. @revaminkoff

Q6: Method: Hourly billing – pros, cons and when/if and how it works best?

Pros – transparency, understanding of how long things take, easier to prioritize tasks. cons – time consuming, lots of ‘admin’ hours in estimates and then monitoring hours spent. encourages nickel and dime thinking. @JuliaVyse

Straight hourly? You can *sometimes* get a premium, and it is predictable. Hourly w/ retainer structure: makes team balancing easier, predictable income, immediate grounds to keep team time in order. @DigitalSamIAm

Hourly pros: easy to control scope. Cons: limits your own personal growth, you speed up a task, then you get paid less for it! Bases the “goal” of engagement on time rather than the outcome. @PPCKirk

I generally loathe hourly billing. Mostly because it makes what we do get reduced to discussions about how long item X was worked on. I will do it for certain situations, but the rate is HIGH. An exception is landing page help. I do that hourly at a “regular” rate. @NeptuneMoon

The downsides to both: often, convincing clients to pay a higher hourly for more skilled people. Goes back to the Picasso anecdote – you aren’t paying me just to draw a person in 5 minutes; you’re paying me for the years spent learning how to do that. @DigitalSamIAm

Pros – Easy to understand, less scope creep. Cons – Time tracking, getting shut down for necessary ideas b/c it will be too many hours, less upside for creativity & automating tasks. @selley2134

Clients tend to think hours are fungible, especially for marketing, aka 1 hour of agency X’s time = 1 hour of agency Y’s time = 1 hour of agency Z’s time. That’s often wrong + misguided, resulting in the selection of an agency that’s cheap vs. good @DigitalSamIAm

I love hourly billing for small projects and/or small clients. Makes it easy to get them exactly what they need at a cost they’re comfortable with. @revaminkoff

Q7: Method: Set fee for project/scope of work – pros, cons and when/if and how it works best?

This is my preferred method, as I shared earlier. Pros – predictable, easy to increase your fees when scope changes Cons – scope or work changes require more work to change compensation @NeptuneMoon

Pros – Easy invoicing, No surprises, No arguing over necessary tasks (or at least less), no time tracking (at least for the client) Cons: scope creeps, relies on accurate forecasting, needs very solid contract/SOW. @selley2134

If you mean “retainers,” that – and all the pitfalls that go along with it – is a big topic of conversation in the copywriting world. The tl;dr version is “retainers are good, but you need to be very clear about scope and deliverables.”@stevegibsonppc

Project pros: can control scope. Simple for clients & easy to sell. Cons: scope issues can still arise. No natural plan for fee growth as an account grows from successful management. @PPCKirk

Q8: Method: % of ad spend – pros, cons and when/if and how it works best?

%Spend pros: allows for agency to grow with an account, or client to pay less if spend less. Cons: spend is an adequate metric for identifying management complexity, but not ideal. Many aspects that work into account management needs beyond spend. @PPCKirk

I find % of spend to be problematic for a few reasons: 1. It puts agency and client interests out of total alignment – I get paid more if you spend more 2. It’s not tied to actual work required. If client decreases budgets, but not scope of work, you’re screwed @NeptuneMoon

I have…feelings on this one. I loathe it. Abhor. Pros: Gets agencies $$ irrespective of effort or outcome. Client spends money on ads, no matter how well or poorly, you get paid a percentage. @DigitalSamIAm

BTW, I’d like to address the oft-brought up attack that %Spend creates agency misalignment. I disagree with this (though I understand the concern) since the client still maintains control of the actual budget. @PPCKirk

Other pro – larger clients are used to it from traditional media agency relationships. Cons: creates a massive set of misaligned incentives between agency + client; not always transparent; doesn’t encourage scaling or channel re-allocation. @DigitalSamIAm

It assumes that you will be working with client for longer term and you’re betting that all of your up front work will get compensated over time as spend increases. 4. % of spend might not be adequate to cover your actual costs as you get into it @NeptuneMoon

Cons: #1: huge conflict of interest between ppc person & client. If you cut wasted spend, you’re devoting hours to lowering your fee. #2: Unpredictable management costs for client. @stevegibsonppc

Pros: Spend and value are generally correlated – i.e. the higher the spend, the more value you’ll produce from improving ROAS by 1%. @stevegibsonppc

(I have never used this model so my lists could be off but this is just how I view it) Pros: Consistent, Easy to understand,. Cons: To me higher budgets dont necessarily equate to more work – so it gets murky to scale accounts @selley2134

Q9: Which pricing model do clients seem most comfortable with in your experience? Least comfortable with?

Something measurable and understandable. Typically “set fee”, which is why we moved to a Tiered Set Fee approach. @PPCKirk

Clients seem most comfortable with hourly. Not sure if that is just the ease of understanding or that is just what they are used to. Not sure about least comfortable, but curious to hear others. @selley2134

Clients would love straight hourly, with a defined cap on hours in a given month, I think. My project/scope based method has been well received. Have not done % of spend. @NeptuneMoon

Monthly flat fees tend to work the best for everyone, but companies also like to go with what they’ve used before so if they were on percent media, they’re often most comfortable there. @revaminkoff

PPCChat Participants

• Kirk Williams @PPCKirk
• Steve Gibson @stevegibsonppc
• Julie F Bacchini @NeptuneMoon
• Shaun Elley @selley2134
• Julia Vyse @JuliaVyse
• Andrew McGarry @beyondcontent
• Duane Brown @duanebrown
• Sam @DigitalSamIAm
• Tariq Mohammed @thetweetingtaz
• Reva Minkoff @revaminkoff

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