6 Pricing Tips for Digital Agencies Adding PPC as a Revenue Stream

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When you think of an inheritance, do you picture money or a headache? Probably money, I assume.

Unfortunately, for digital marketing agencies, taking on a new client often means inheriting an AdWords account. More than likely, the account is a mess – it has poor structure, expensive keywords and few negative keywords.

PPC Agency Pricing

I know this because I work on WordStream’s agency team, so I talk to agencies all the time. You face unique challenges and our company understands this. As such, we listen to you and offer agency-specific solutions. This post is the result of numerous phone calls we’ve received from agencies new to the PPC medium. What we find is that many agencies fall into the trap of not effectively incorporating AdWords into their business model. I hear stuff like:

  • “I only manage two or three accounts. I count up the hours and roll it in with the rest of my services.”
  • “I built their website, shopping cart and started their SEO campaign. I don’t have time to get AdWords certified and launch a PPC campaign.”
  • “It’s not worth the time.”
  • “I’m just going to outsource it because it doesn’t make business sense to bill for it.”

There seems to be an assumption that PPC is an after-thought or a courtesy offering. Most agencies we talk to provide stellar customer service and value client relationships. They’re accustomed to meeting their clients’ needs whatever it takes. However, you need a business plan for this to make business sense. Among the most common reasons for agencies not to pursue a robust PPC offering and truly become full-service is that they don’t see dividends. I know this because I have this conversation about twice per week.

MORE: 6 Customer Retention Tips for Agencies

pricing for ppc agencies

Buhv Designs is one agency that uses WordStream to serve clients more efficiently

Your competitors who offer AdWords management services already have it figured out. With the right tools and the right revenue strategy, PPC can be your fastest and easiest offering. As for the revenue strategy, read on to get my best tips for adding PPC to your agency’s service offerings.

Charge Separately for PPC Management

This might sound like common sense, but I have this conversation about three to four times per week. Since many agencies don't even list PPC or SEM on their own websites, they take over a few accounts and just bill for the hours worked along with their other services. This is very bad....

But Don’t Use Billable Hours

Your business plan likely works off some function of set-up fees and billable hours. Is that accurate? 

Website development and SEO campaigns are time-intensive. Thus, billable hours makes a lot of sense. When digital marketers reach out to our team, they're usually in the building stage of the SEM campaign and assume that billable hours works for their other services, so why not PPC?

The problem is that when you use a PPC management software solution, like ours, you can get fantastic results for your client in terms of conversions and ROI while literally only spending about 20 minutes per week in each account. Over the long term, billable hours will be a loss for your agency when you consider the tremendous value that you will bring to your client. 

Instead, Charge for a Percentage of Spend

Perhaps the most effective way to charge for PPC management is a percentage of spend. Most typically, I hear agencies charging about 10-20% of AdWords spend (I've heard as high as 25%). This is fair for you and the client. The larger the account, the more conversions (hopefully) your client will get. Since you're adding more value to the client, the percentage-of-spend model fairly compensates you while ensuring good ROI for your client.

Consider Adding Setup and Management Fees

This is not an either/or. You can charge a percentage of spend and a flat fee. In particular, if you’re building up the account or making structural changes beyond weekly maintenance, a management fee is appropriate. Again, with the right tool, you won’t be doing much of this after you take on a new account. Are you starting to see why this is such an easy revenue stream?

Please, Please, Please Do Not Outsource

Many companies outsource. Many companies talk to us about software and decide they’d rather outsource their profits than grow their business. This is the worst possible solution. More than likely, the agency you’re handing the PPC account to is using some kind of PPC management software. Now, you’re paying another agency and passing that cost onto your client. Essentially, you’re putting a middle-man between you and profitability. Also, how do you know what results they’ll get for your client?

Finally: Do Not Hire

On the agency team, we take pride in helping you NOT hire additional staffers. We get calls each month from agencies who say: “We’re taking on more and more accounts. It takes hours in AdWords to manage them. We’re going to hire a PPC coordinator.”

Do you enjoy the overhead involved in hiring a new employee? Add up the costs of salary, health insurance, paid-time off, 401(k), etc. That’s before we get to the time costs of training them. With all this overhead, you might as well pass on PPC altogether. Software is cheaper and can make you more efficient so you don’t have to add another head to your team.

I’d like to end on a philosophical note: The greatest risk is the one we never take. This is true of agencies that don’t vigorously pursue PPC as a revenue stream. Of course, some risks are just foolish. It all depends on how well you prepare for your journey.

About the author

Dave Rocco serves on a team specialized in helping marketing/PR/advertising agencies more effectively manage PPC. His goal for most agencies is reducing the time they spend on each AdWords account so they can grow their business. He’s from New Hampshire but hates the cold and loves the French language.

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Comments

Hemanth Malli
Jul 17, 2015

These are nice tips to increase the website traffic for Small Business Services.

Wanda
Jul 22, 2015

Great article! This is the type of information that are meant to be shared around the internet.
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Come on over and visit my web site . Thanks =)

Vivek
Jul 27, 2015

This article started off so well I thought I'd get some insights on the billing models, however, it fizzled out mid-way and started sounding more and more like a sales pitch. I wish you would've talked about the pros and cons of the different fee models to justify the different approaches. Also you talk about not outsourcing and not hiring...so the software is a magic wand, is it?

Michele
Apr 25, 2017

Completely agree. Good, in-depth PPC management cannot be accomplished in "20 minutes per week" unless you only have a branded campaign. I had a demo of the software, and it is sorely lacking in campaign optimization.

Queenie
Sep 01, 2015

I would like to give a thumbs up to the quote above-mentioned, "The greatest risk is the one we never take." This is very true! Hence, we should not be afraid to take challenges. Let's be wise enough not to be reckless, but brave enough to take great risks.

Vittoria Dmowska
Aug 17, 2016

This is the vital part of the ppc campaign. Using the best practices our experts will the compelling content for the text ads in such a way that it will attract the customers attention. We will ensure that you will be getting the right traffic at the lowest cost you could spend.

Nathan
Sep 21, 2016

The problem with charging as a % of spend is that the managing agency always has the incentive for PPC costs to increase. We have also experienced scenarios that required unholy amounts of time to deliver a tight, highly targeted, high conversion campaign where, if we charged as a % of spend, we'd have been seriously out of pocket.

Charging on a time-spent basis is fair. If software allows you , as a manager, to achieve results in half the time, then it's only fair and ethically sound to pass that saving on to your customer. Wear this new-found efficiency on your sleeve and use it to onboard new clients.

Charging as a % of spend is an easy knee-jerk solution, but it also reduces transparency in the PPC management business, and that has negative implications for everyone.

Byron
Oct 25, 2016

I agree with you on the % of spend portion. I do, however, disagree about charging on time-spent. If it's taking you so much time to build out campaigns, even with the most tightly, laser-pointed targeting, that you would be out of pocket charging percent of spend or percent of budget, you are doing something wrong. Especially considering that once the account is built, optimization takes next to no time at all.

Byron
Oct 25, 2016

Charging on % of spend is a double-edged sword. On one hand, it alludes that it takes effort to spend a customer's budget, on the other hand, most customers feel like each new strategy pitch only exists to line your pocket. Charging on percent of budget and intelligently building campaigns to meet customer goals is a far more beneficial route to take. It makes more sense to a customer that they have an idea what their cost will be out of the gate.

Climaxbox Digital Marketing
Apr 03, 2017

Thanks so much for sharing !

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