For agencies, a growing client base and an increase in PPC spend under management are positive signs, but they also bring challenges.

Each new PPC client presents unique obstacles, such as managing existing ad accounts, dealing with seasonal budget changes, and meeting diverse service expectations. This makes resource allocation and financial forecasting complex. Therefore, establishing a suitable PPC management pricing strategy is crucial for steady revenue generation. This article will explore common PPC pricing models, offering insights and advice to help you determine the best fit for your agency.

Factors Influencing PPC Management Costs

Reports generally indicate that the average PPC management fee falls between 10% to 20% of ad expenditure. Consequently, a client’s PPC budget directly impacts your fee. However, various factors can cause fluctuations in this fee.

Client’s Industry

Industries with higher cost-per-click rates tend to pay more for agency services. Our Google Ads benchmark study revealed that real estate and arts & entertainment have relatively low costs at $1.55 per click, while legal clients pay over $9.

This 450% difference suggests that law firms are likely to pay you more than real estate agencies for similar objectives (although their ROAS and ROI might vary). Additionally, industries like healthcare have stringent advertising regulations, prompting agencies specializing in these areas to charge a premium for their expertise.

Scope of Services

Client requirements vary. Some may only need basic budget oversight on Google or Bing, while others seek comprehensive services like ad creation, reporting, campaign optimization, and strategic planning. The fee should reflect the workload associated with each client.

Number of Managed Channels

Although Google remains the $280 billion gorilla in PPC advertising, other platforms like Bing ($11.5 billion in ad revenue) and Facebook ($113.6 billion in ad revenue) cannot be disregarded. With Bing’s lower average CPC, clients might allocate some budget there.

Managing campaigns across multiple networks demands more effort. A $10,000 budget spread across three or four platforms requires more time and resources, justifying a higher fee to cover the additional workload.

Common PPC Management Pricing Models

Given the diversity of clients, your PPC pricing models should be flexible. Selecting the appropriate model ensures optimal value for both you and your clients.

Flat Rate or Flat Fee

A flat fee is a predetermined monthly charge covering all PPC management costs for a client. This may or may not include the ad spend, which can be billed separately.

Flat rate structures provide revenue predictability, simplifying financial forecasting and billing processes. This likely explains why a third of agencies surveyed prefer this model.

However, flat rates can be risky without a clear understanding of the effort required for a specific client, potentially leading to losses if complexities arise.

Percent of Ad Spend

Here, the agency charges a fixed percentage of the client’s total ad spend. As the client’s expenditure increases, so does the agency’s fee.

Larger PPC budgets often translate to greater complexity, involving more keywords, campaigns, and potentially additional platforms. This model ensures higher earnings with increased workload.

The drawback is revenue unpredictability, particularly for clients with seasonal business cycles. This model is suitable if you can reallocate resources effectively between accounts with fluctuating needs.

Flat Fee + Percent of Ad Spend

This hybrid model combines a fixed recurring fee with a variable percentage of ad spend.

This structure covers routine tasks like campaign setup and reporting through the flat fee, while the variable component allows for increased revenue as ad spend grows. This blend of benefits might explain why a third of surveyed agencies prefer this model.

However, this model also inherits the weaknesses of its components. Revenue predictability remains a concern, making resource planning difficult. The fixed fee, based on an estimate, could lead to losses if the actual workload is underestimated.

Hourly Fee

This model involves charging clients for the hours worked multiplied by your hourly rate.

Clients may find this model transparent as they directly pay for your time. For agencies, it guarantees compensation for all efforts.

However, this approach can penalize efficiency and prioritize less critical tasks. For instance, if your agency adopts a tool that accelerates campaign creation, the hourly fee model would result in lower earnings despite improved efficiency. Moreover, clients would pay the same for activities like reporting and meetings, as they would for core campaign management.

Performance-Based Fee

This model bases fees on pre-agreed success metrics like conversions, conversion value, or leads. Higher results translate to higher fees.

Theoretically, this benefits clients as they only pay for tangible outcomes. However, it is often unsustainable for agencies due to external factors beyond their control. Unsurprisingly, this model is not widely adopted.

5 Tips for Setting PPC Management Pricing

Having explored the available models, you need to select one and set your rates.

1. Separate PPC Management Billing

If you’re a full-service agency, consider separating PPC management as a distinct line item instead of bundling it with other services. This highlights its value to clients.

2. Charge for Setup and Management

Even with a percent-of-ad-spend model, consider charging separate account management and campaign setup fees, especially for new clients who typically demand more initial effort.

3. Understand the Competitive Landscape

Research your competition and your unique selling proposition.

Do you position yourself as a high-volume, budget-friendly agency, or do you provide premium services for niche businesses in a specific niche market? Do you offer strategy, creative support, and SEO or primarily focus on managing Google Ads?

Once you define your position, compare your pricing with agencies offering similar and different service levels. This provides context and strengthens your value proposition when differentiating yourself.

4. Evaluate Your Costs

Prioritize client success, but not at the expense of your agency’s profitability. Before finalizing your rates, determine your costs.

Factor in technology, staffing, accreditation, and basic operational costs like internet and office space. Compare your total operating expenses against potential revenue to ensure viability.

Additionally, determine your break-even point for new clients. If account transfers, campaign setups, and strategy development require a year’s worth of fees, consider higher upfront charges or longer contracts.

5. Partner Instead of Hiring

Managing PPC in-house involves infrastructure, technology, HR, and R&D costs. Retaining institutional knowledge during employee turnover is another concern.

Partnering with an experienced provider equipped with the right technology can address operational challenges like campaign entry, onboarding, reporting, and billing. This allows your agency to focus on strategy while improving staff efficiency and media spend management, ultimately leading to scalable growth without the usual hurdles.

Simplifying PPC Management Pricing

Determining your PPC management pricing strategy is crucial for your agency but shouldn’t be overly complicated. Focus on understanding your offerings, their costs, competitor pricing, and your clients’ ad spend patterns. Based on this, decide whether expanding your team or partnering with a specialized provider is the optimal path for achieving sustainable growth and maximizing revenue.