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How Much Should I Pay for Pay-Per-Click?

How Much Should I Pay for Pay-Per-Click?

January 17, 2014 11:42 pm0 comments

A few weeks ago, I talked about what it may be worth it to pay someone to manage a PPC campaign. For some people, it will be worth it, for some people, it won’t be. In most cases it’s probably to take a least a portion of your PPC budget, provided you’re not scraping to get there, and have a professional manage the campaign. But then the question is, “How much should I pay someone to manage a PPC campaign?” There are a handful of factors that you’re going to need to consider.

How much does a PPC click actually cost?

Before we can get to how much you should pay for someone to manage a PPC account, we have to take into account the cost of a click. How much a single click costs depends very much on the industry. If you start an AdWords campaign, Google will give an indication if your bid is below the cost of a first page bid, and what the suggested bid is for first page (note that this won’t happen until you complete the setup and start running the campaign). These numbers aren’t always accurate, which is surprising because Google has the EXACT data needed to give an accurate number, but they are still helpful for a starting point.

The next factor is the industry. If you are a doctor, you may be able to highlight a procedure or certain symptoms for a few dollars. Another procedure could cost as much as $15. I recently began an AdWords campaign for an attorney where her practice area averaged about $30 for a click. Other packaging clients have been able to get clicks for under $1. Google has a keyword traffic estimator that can be used to help determine the number ahead of time, or at least give a close estimate. Once you know how much your clicks are going to cost, you will have a better idea as to how much left you have to spend on someone to manage your PPC campaign.

And, the final factor that you need to consider ahead of time that affects your bottom line is your cost per lead. If you make $500 for every sale, and you know you close about 1 of every 5 leads, you know that you are going to average net $100 per lead (and you know that you need a consultant to help you learn to close better!). But, you will also be able to factor in how many clicks and leads you will likely need in order to be profitable, and how much you can afford to pay.

What other factors do I need to consider?

Outside of cost, you also need to know how someone plans to manage the account. Is it strictly automated? Is it transparent? These are important. People with automated software make their services sound really good, and usually can afford to give better prices because they have to put in less labor (and they still often make more profit). However, this approach often leads to missed leads due to the lack of human interaction. There isn’t the time and care often put into landing pages and ad creation, and keyword mistakes are often made. Keywords may be eliminated due to lack of activity – even though they don’t cost anything if they aren’t being clicked, and may have a high conversion rate when they eventually are clicked.

Transparency is also very important. We’ve found some agencies show very high conversion rates. When we were finally able to obtain the data, which wasn’t immediately available, we found that they were targeting company names and names of key individuals. Of course you’re going to be getting high conversion rates for that! Make sure you are getting data up front so you can properly evaluate.

How much should I pay the agency

Okay, so how much should you pay? Well, it depends on a handful of factors, some of them discussed above, as well as freelancer or agency and the experience of those involved. Here are a couple of different ways that you can pay, and some brief expectations:

Pay a percentage

Some agencies just charge a flat percentage of ad spend, usually around 20-25%. This is usually a pretty fair way to go, as the amount your spending will usually be proportional to the size of the campaign and the time needed to manage it. However, the agency fee usually tends to be on the smaller side for this model, which means the agency may not be able to put quite as much time into the campaign on an ongoing basis. You may also need to pay a setup fee as well, to cover the extra costs of setting up an account.

Pay a flat fee

Similar to a percentage, but usually a little bit higher. The flat fee usually doesn’t depend on the ad spend, but upon the size of the program (number of campaigns, ad groups, and keywords) and the proportionate amount of time needed to manage that volume. It is also designed to ensure that the agency has enough time to really work with the data and make the correct adjustments without having to rush though. Usually, the extra cost is worth it.

Pay per lead

Most confident agencies are willing to undergo a program like this, where there is a pre-established cost for every lead that comes in. The client is responsible for the ad spend, while the agency fee is directly tied to the number of leads that come in. You can expect the cost per lead to vary by the difficulty to produce a lead in the specific industry and the value of each specific lead. This is usually a great way to go, as it reduces the risk that an agency won’t be able to produce, and if you have to pay more because the campaign is so successful, the extra money comes from the extra profit that you’re bringing in, so you really can’t lose.

Pay a bundled price

Ultimately, this is probably the simplest way to go through a campaign. You pay an agency a set fee, and they decide how much of it goes to PPC and how much of it goes to agency fees. The nice part is, you can quickly see exactly what you are getting for the money you are paying, and you give an agency the freedom to do what they really need to do. Sure, an agency may be keeping a little more money than you’d like, and that can happen. However, they’ll also often spend a little more if they know they need to so that they don’t lose a client when the program is underperforming.

Which to choose?

The model you choose is going to be up to you and what you’re comfortable with. Coming in to the conversation prepared is going to help both you and the agency make the best of the campaign. Just make sure that you talk it through ahead of time and that everyone is very clear on the expectations, and evaluate regularly. Don’t be afraid to change the model down the road, or at least suggest it if you feel something isn’t working either.

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