“You have to spend money to make money.” – Everyone
We’ve all heard this adage at some point in your life.
If the money you’re spending on PPC is managed properly, you will see a healthy return on every dollar spent.
While Google has reported that the average return for every $1 spent averages $2 in revenue (weak sauce!), achieving a much higher return on ad spend on your PPC spend is doable, if you work with a good PPC agency to manage your campaigns and you have a good understanding of what the goals you want to accomplish.
Going Rates for PPC Management Depends On Your Business Needs
As a PPC agency that has been helping businesses succeed online across industries and sizes, managing budget and generating a healthy ROI is in our DNA.
So of course, when this topic came up in our content marketing meeting, we jumped at the opportunity to look at the different PPC pricing models in our industry.
Hopefully you’ll find this helpful as you are in the process of selecting a PPC agency to partner with to help with a sustainable and scalable growth for your online business.
4 Most Common PPC agency pricing models
Before we answer the “how much” question, it’s important to understand the different pricing models PPC management agencies use for billing.
Flat fee pricing
A pre-determined fee upon agreement of a scope of work. Some businesses prefer the flat fee pricing model because it’s straightforward and fixed. So long as the work done on the PPC campaigns is defined and within scope of work.
This is by far the most simple billing option — with a fixed PPC management fee there is no room for confusion. If your business needs relatively static PPC campaigns, without much expansion and granularity, and you want budget a fixed expense each month, then this flat fee pricing model is right for you.
If your online business is seasonal, you run offers, and have dynamic inventory, then this pricing model will not be suitable. Management of such a dynamic PPC campaign will require more work and the complexity is incremental along with the PPC ad spend.
Percentage of ad spend
If you’re shopping for help with PPC management, you’ll see a many agencies using a “percentage of spend” pricing model. This is when clients pay the PPC agencies a pre-determined percentage of their spend on the ads that the agency is managing.
For example; if your PPC ad spend totaled to $15,000 at the end of the month, and the percentage of ad spend agreed upon was 20%, then the total you would get invoiced from the PPC agency would be $15,000 x 20% = $3,000.
Typically, this percentage will be tiered so it decreases as the spend increases over time, but this isn’t always the case.
Smaller businesses won’t benefit from this pricing model because often times there’s a minimum PPC agency fee associated with this pricing model. You don’t want to be stuck with a hefty monthly minimum if your business cannot meet the required monthly PPC spend.
However, it make more sense for larger and growing businesses since the percentage decreases as the budget increases.
Flat fee + percentage of ad spend
Like the percentage of ad spend model, this pricing model also uses the percentage of ad spend as its baseline, just with an additional fee.
Many mature marketing agencies will charge a fixed PPC management fee to cover overheads related to the PPC ad campaigns they’re managing for clients.
This PPC pricing model is ideal for businesses with more complex campaigns and large ad spend. Businesses with low budgets will not thrive with this pricing model.
Performance based pricing
Under this model, most businesses are paying for lower-funnel actions –– think inbound leads, inbound calls, email leads, form conversions, trial signups, and demo requests — are great examples of lower funnel conversions.
A percentage of revenue from a closed sale or pay-per-lead is very common in this model. Whether you’re an eCommerce business or a B2B organization, the concept applies.
For example, under this model, an eCommerce business could be paying you 10% of all sales generated online. And a B2B client would pay you a fixed amount for each qualified lead that originated from the PPC campaign.
PPC management rates today
After some research, the rates below seem to be the industry average in the PPC industry.
Percentage of ad spend: 15-25%
Most agencies charge upward of 20 percent to manage PPC campaigns. It is rare to find PPC agencies charging less than 15 percent of ad spend.
When considering a proposal that uses this pricing model, you need to ask these few questions:
- Will the agency be updating ad copy?
- Building landing pages?
- Rotating ads?
- Expanding campaigns?
- Testing messaging?
PPC pricing model can include a setup fee, which you’ll find to be pretty common. PPC agencies charge this one-time set up fee to cover important activities like pixel implementation, landing page creation, call tracking set up, lead tracking with forms and creative for display and native advertising.
Percentage of ad spend + management fee: 15-30%, $1,000-$5,000/ month
Monthly PPC management fees are flat and fixed and may be assessed in association with activities like ad copy updates, ad rotation, and landing page creation.
Depending on the workload related to managing a particular company’s PPC campaigns, a management fee can vary — typically no less than $1,000 a month, and up to $5,000 a month or more.
Fixed fee management fee
The flat fee pricing model is ideal for smaller businesses — particularly local businesses in the service industry like plumbing, attorneys, HVAC, window treatments, and the likes.
These campaigns are typically static, focused on a specific geographical region, with limited budget.
The management fees in this model typically starts at $499 per month, but you are limited to the scope of work on your PPC campaigns and ad creation.
How much should you be spending on PPC? Use our PPC budget rate card to get a better idea.
Most of all — as a buyer of marketing services, whether organic or paid — it’s critical for you and your agency to clearly discuss and agree upon goals and timelines before you get started.
