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Is Your PPC Payment Model Working For You?

Dean Marsden

by Dean Marsden on 14th August 2014

woman decidingGoogle hasn’t become one of the biggest businesses today through offering free organic results. Its AdWords system generated a massive 95% of its revenue in 2012. Each day companies big and small throw cash at Google and other paid advertising platforms in return for instant traffic. If managed properly, it can work wonders. So let’s take a look at how you’re managing your AdWords account to see if it’s working for you.

When it comes to managing paid advertising budgets there are a number different options; set it and run, in house management, fixed fee agency management, performance based agency management fee, spend based agency management fee or a hybrid of fixed fee and performance/spend based fee.

Let’s take a look at all these models and explore the benefits and issues of each.

No Management – Activate and Run

The first option is where many newcomers to PPC advertising fall down on. Google makes it easy to for new advertisers to get started using its AdWords Express service, however adverts that are live will still need management to get the most from a budget. If they are not managed then they are highly likely to deliver poor quality traffic to your website and waste the advertising budget.

In-House PPC Management

This sounds like an easy to option for most medium to large businesses, simply hire or allocate some internal resources to manage the PPC advertising within your own organisation.

This can be a risky option because unless they are well experienced in PPC management then they will likely not improve the account and could easily cause it perform worse and waste even more budget by implementing the wrong choices.

If you are hiring for an in-house role then make sure the person has experience and if possible, is Google Partners qualified.

Although having someone in-house may save you some money on management fees, if you have a large PPC account, be prepared for when that experienced person decides to leave your company, the management will likely stop when it really needs to be run continuously.

bigstock-Saving-Pennies-44448592

Fixed Fee Agency Management

A high percentage of professional agencies offer this type of contract. There are a number of benefits of using this method that are suitable for businesses of all sizes.

  • Fixed costs ensure better budgeting of your PPC management
  • Management service quality will remain constant and efficient
  • More transparency in trying to save the client money on the AdWords spend by working towards a more efficient PPC account

The flat rate management fee model may not always work best for a business if your business has significant seasonal demand and supply differences as a fixed management rate may not be enough to effectively cover busy periods and may be too much for quiet periods.

Performance Based Agency Management Fee

This model works by only paying the management agency their fee once a defined objective or performance level has been achieved on the PPC account. For many businesses this is seen as good option for them because it requires zero risk if the ROI is not met from the PPC advertising. There are many agencies that offer this type of service and it usually appeals to small or new cash-strapped businesses.

These agencies will put lot of effort into making your PPC advertising work so that they get paid, however if the PPC account does not deliver results in adequate time then the agency may lose motivation to do a good job, or worse still, try anything to generate sales and leads including sending poor quality customers to your website.

They may also focus on Brand term PPC keywords which may not generate the new customers that are so valuable. Brand terms usually cost less and generate more conversions. This will cost the business more in their management fees but with less focus by their agency on capturing customers that haven’t heard of the business/product.

Conversion Funnel

Spend Based Agency Management Fee

This model is easy to understand, the more a business spends on advertising the greater the management fee. This model was created because generally speaking if a client is getting more traffic from the PPC advertising, i.e. spending more, the agency will likely have more keywords or targeting to manage.

This model can work well for advertisers who require lots of targeting because they are only paying when the agency is expanding the PPC account to generate more traffic and hopefully sales. If management work by the agency is not checked by the business then they likely risk their agency over targeting the account in an attempt to generate more fees for themselves.

Hybrid Agency Management Fee

If an agency uses this method then there will likely be a small flat fee then bonuses for reaching certain performance or traffic targets. This may seem like the best of both options, however it is still open to deliberately inflating traffic or sales by using poor targeting or mainly brand name targeting.

Conclusions

So what PPC payment model is best for you? As touched on in the various options above, self-management and performance or spend based manage will help smaller companies get started with PPC advertising at a good level and will be better than just setting it and forgetting. The cost of the management can be controlled and increased as necessary.

However, if you are likely to spend more than an agencies fixed rate fee’s on your PPC ad spend then it is worth having this type of management as the agency will likely be able to start saving you lots in wasted ad spend and generate much better Click through Rates (CTRs) and Conversion Rates resulting in a better Return On Ad Spend (ROAS) and likely improvement your overall Return On Investment as your paid traffic quality increases.

A fixed rate management agency is more likely to save you money and increase the efficiency of the PPC targeting as opposed to just looking to maximise the number of clicks from the PPC advertising. Performance based fee’s will reassure businesses that if the PPC traffic doesn’t deliver results then it won’t cost them money, however in some cases PPC traffic may not convert well despite every effort and this will be extremely frustrating for the agency and could break down the client-agency relationship quickly.

Through any choice, both clients and agencies must agree their payment model before commencing work and stick to the contract so that each party is happy.

Form more information on our paid advertising options, speak to one of our experts today.

Image Credits

Doubtful Woman from Bigstock

Saving Pennies from Bigstock

Purchase Process from Bigstock

 

Dean Marsden

Dean Marsden

Dean Marsden will be keeping you up to speed with video marketing and conversion rate optimisation. Dean excels at delivering video marketing solutions for clients and specialises in converting website visitors into customers.

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