How Do You Know How & What to Pay for AdWords Management?

This is the third in a series about hiring an AdWords agency.

 

All but the smaller agencies rarely post their rates or payment structures on their websites for all to see.  It can be very confusing when it comes down to figure out how much of your marketing spend to allocate to an agency.

This is going to depend on your business and your budget.  You should be focused solely on profit, so you’ve got to pick a payment model that isn’t going to drastically alter your break even point. (I’ve previously explained that profit is how to measure your account, read about it here).

There are 3 different payment models that are used by most PPC agencies.

Percentage of Spend

You can expect something between 10 & 20% of your adwords spend.  You might have to pay an agency a little more if your account spend is very small.  If you have to pay much higher than 20% (with a good spend) then you might be overcharged.

I don’t really endorse this model because it is in the best interest of the agency to convince you to increase your spend.  A really good agency should be able to decrease your overall costs.  We recently slashed one new clients total spend by $180,000 a year, and got him the same number (& quality) of leads.  But surely we should slash our management costs as a result!

It’s in your interest to have as little waste in your account as possible.  Agencies charging a percentage have no incentive to remove that waste!

 

Fixed Fee

It doesn’t get much simpler than this.  Straightforward and lets all parties know where they stand in the agreement.  A reliable model.

 

Performance Based

In this model, the agency offers to reduce your CPA to a fixed number or percentage.  Sounds great.  But is it too good to be true?  It would be very easy for that agency to just shut down the high cost (but still profitable) keywords, thus lowering your CPA.  But are those keywords the ones that bring in a good chunk of leads & sales?

Following this payment structure requires you to do more than really trust the agency.  You’ve got to be able to really measure your profit accurately too!  If they’ve got your best interest at heart it could be a profitable venture for both of you.

You might find that one of these models suits you better.

Read more in our series about hiring an AdWords agency.