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What Do You Think Is The Most Effective AdWords Pricing Model? Percentage? Flat Fee? By The Hour?

Badged Google Partner
# 1
Badged Google Partner

Which one do you use as your AdWords pricing model to manage accounts:

 

Pricing Model 1: % of Spend

 

Pricing Model 2: Hourly Rate

 

Pricing Model 3: Flat Fee

 

What do you think are some of the pros and cons of each of the pricing models?

 

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2 Expert replyverified_user

Re: What Do You Think Is The Most Effective AdWords Pricing Model? Percentage? Flat Fee? By The Hour

Badged Google Partner
# 2
Badged Google Partner
Generally for us it's like a piecewise function. The smallest clients might pay for a few hours for an audit. Medium clients get a flat rate. We are confident enough in our pricing model and the estimation tools that we can offer a flat rate, based on population/industry/etc. Then of course with larger clients, we are going to want to go with a percentage, but there are instances when an increase in client spend wouldn't translate well to an increase in our take (like changing time of day, day of week, geographic region - not a lot of work had to go into that, but you could change a target from a city to the whole state or country in a few seconds).

Re: What Do You Think Is The Most Effective AdWords Pricing Model? Percentage? Flat Fee? By The Hour

Top Contributor
# 3
Top Contributor
We always use a flat fee. It's super transparent to the client. I don't feel rushed. I don't have to watch the clock and record my time. It's easy on the budgeting... Downside... We probably could make more $$ if we did percentage of spend (But would the clients pay it).

Re: What Do You Think Is The Most Effective AdWords Pricing Model? Percentage? Flat Fee? By The Hour

Top Contributor
# 4
Top Contributor

My line of thinking is pretty close to @Geromy B and I've certainly been part of all of the above choices.

 

While changes and course correction can and likely will occur, IMO, the most effective model is the one that allows an agency/entity to be profitable (you have to make money to stay in business), flexible (managing AdWords account is never just about managing AdWords accounts, there has to be some flex for the 'other' stuff that comes up), and sustainable (Does your pricing model allow for growth? What does it look like when you add 2, 3, or 10 new clients or people to your team).

 

There can be scenarios and an argument made for or against each of the choices above and in some cases, all of the above can be put to use by one agency/entity. It's all about what works for you and your clients in the long run.

 

-Tommy

Tommy Sands, AdWords Top Contributor | Community Profile | Twitter | Philly Marketing Labs
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Re: What Do You Think Is The Most Effective AdWords Pricing Model? Percentage? Flat Fee? By The Hour

Explorer ✭ ✭ ☆
# 5
Explorer ✭ ✭ ☆
hi Molly,

In my experience i normally have a flat fee for smaller clients but when it comes to bigger accounts i use an hourly rate. I have never been comfortable with what clients spend and taking as a percentage.

regard,
zaby

Re: What Do You Think Is The Most Effective AdWords Pricing Model? Percentage? Flat Fee? By The Hour

Explorer ✭ ✭ ☆
# 6
Explorer ✭ ✭ ☆
Hi Molly,

every agency has it's own pricing model. We have even put our prices on our link so every client can calculate our managment fee in advance.
1. For Micro-advertisers we use a flat fee covering 1 hour/weekly, regardless of the campaign complexity. Micro advertisers invest less than 100,00 U$/month. Very often our fee is bigger than their campaign costs.
2. Small advertisers (100U$ up to 500U$ monthly) are charged a flat fee (or per hour depending on the campaign complexity).
3. Medium Advertisers (they are the vast majority of our clients. They spend from 500U$ up to 15.000U$ monthly) pay a fixed fee + percentage of their advertising spend (ussually 10%)
4. Large advertisers (more than 15.000U$ monthly up to 50.000U$) are always negotiated from case to case and after thorough analysis of their campaigns. Sometimes they pay a percentage only but usually are charged per hour for some special services (Taylor made reports for different CxO or departments, one time activities because of Google AdWords changing or implementing new stuff - eg expanded Ads or GSP).
5. Extra large advertisers (more than 50.000U$/monthly) are charged exclusively per hour.

Re: What Do You Think Is The Most Effective AdWords Pricing Model? Percentage? Flat Fee? By The Hour

Badged Google Partner
# 7
Badged Google Partner
What about "Earned Equity"?
Tom

Re: What Do You Think Is The Most Effective AdWords Pricing Model? Percentage? Flat Fee? By The Hour

Top Contributor
# 8
Top Contributor
Definitely not a fan of equity! I had a lot of equity offers when I was starting out... I feel like the client has to be invested enough to INVEST in their marketing or the business will likely fall apart anyway. I've seen so many startups over the years, of all kinds, and the ones that are the most invested and actually want to hold on to the control seem to do better in the long run.

Re: What Do You Think Is The Most Effective AdWords Pricing Model? Percentage? Flat Fee? By The Hour

Follower ✭ ✭ ✭
# 9
Follower ✭ ✭ ✭
We do a flat-fee minimum with a % spend grade as spend increases. It's meant to ensure we always have enough hours for highly complex accounts. In a prior agency we went after AOR agreements with a simple retainer model. That's my favourite by far.

Re: What Do You Think Is The Most Effective AdWords Pricing Model? Percentage? Flat Fee? By The Hour

[ Edited ]
Visitor ✭ ✭ ✭
# 10
Visitor ✭ ✭ ✭

I believe Percentage of spending is the best way to go. Here are the reasons:

 

  1. Clients usually think is fair, cause if you don't work well within the advertising budget and practices, you will not make money yourself.
  2. You will make more money down the road, versus other 2 pricing model. (improving your performance will get you there)
  3. It's kind of a test-and-drive type of way for the clients. if the client decided to stop at any moment, cause they don't see any value, then they can just pay your cut and move along to different advertising medium.
  4. There is a partnership feeling to it.
  5. With all the cost of optimization and content creation to start a campaign, clients won't feel like they are being drowned into fees.
  6. and so much more.

Just make sure you write contracts when doing percentage (or any model). Specify your minimum budget, to advertise with your agency. make sure you get a client to retained your services.

The big question for me is what percentage to charge? (very challenging, cause of competitors, not the overhead) Smiley Happy