When looking for an agency to manage your PPC advertising, there are lots of different factors you need to take into account – one of which is how you will be charged. Should you opt for fixed fee or percentage of spend? In this article, we explain the difference between the two and why we choose the former.
What is ‘percentage of spend PPC?’
At face value, the percentage of spend model is pretty simple. Agencies using it will charge a markup on your ad spend, meaning the more you pay the more they make. So, if you spend £10,000 on PPC ads per month, and your agency charges a ten per cent markup, you pay a monthly total of £11,000.
Why we don’t use percentage of spend
There are many reasons why we don’t take the percentage of spend approach when it comes to charging clients. First of all, this model often creates a false economy. Let’s say you’re spending £5,000 on AdWords and paying a £5,500 total to your agency. That sounds like a pretty good deal: only £500 per month for AdWords management.
Unfortunately, when your average PPC Exec earns £100+ per day, you’re not getting a lot of account management for your money – and that’s before other expenses. This ultimately means you’re not getting the best return on your ad spend.
Other reasons we don’t use percentage of spend PPC:
- The more you spend, the more your agency earns
- Big spending clients get priority
- It generally means the ‘set it and forget it’ approach, as mentioned by Ben Potter for Econsultancy
We’re not saying percentage of spend is a pricing model that never works. We just feel some key priorities are in the wrong place. Your goal in PPC should be to maximise ROI whilst maximising volume of leads or sales. The problem with this is that the agency is rewarded when you spend more. That’s a conflict of interest we’re not too comfortable with.
What is ‘fixed fee PPC’?
Fixed fee PPC is the most straightforward model. You and your agency discuss your objectives and complexity of campaigns to determine a relevant fixed level of management. The fee you pay every month won’t change unless any new opportunities arise and you choose to spend more to make the most of them.
Why we use fixed fee PPC
Once again, there are a number of reasons we take the fixed fee approach over percentage of spend. Most importantly, it allows the level of management to directly reflect the complexity of your campaigns. It shifts the focus onto optimisation, campaign progression and refinement, rather than how much you’re paying the agency. Your PPC goals are different to every other client and this determines how much time will be needed to hit those targets. Fixed fee means you’re paying to achieve those goals and nothing else.
It also gives us more long-term flexibility because PPC strategies are designed to get better with time. This means we can increase your ad spend as needed, without charging you the premium. The end result is a set of PPC accounts optimised to get the best performance, based on your goals and the budget available.
Other reasons we prefer fixed fee PPC:
- You know exactly how much you pay and what you get in return
- Every client gets the same attention – no preferential treatment
- Budgets can be increased strategically to increase overall profit
As we said earlier, the key difference for us is fixed fee PPC puts all the priorities in the right place. By focusing on performance, this pricing model aligns our goals with yours. It also puts the fun back into PPC, giving us the right motivation to create more efficient campaigns and find new ways to improve results. When you consider Google makes hundreds of changes to AdWords every year, flexibility is very important.
Download our guide to full-funnel PPC marketing
PPC is a highly effective marketing channel, not only for capturing people in buying mode but also for generating awareness and nurturing potential customers. In this guide, we’ll show you how the various channels work together to drive people through your entire sales funnel, including:
- Which channels work best at each stage of the funnel
- How to make the most of Google Adwords
- How PPC supports your wider marketing activities