One of the major benefits of paid search is that you can create an AdWords account and start driving traffic today. But setting up an account correctly takes time.
Whether you are a freelance SEM manager or a large agency, chances are you've received pushback from a client about how you charge for your services.
The following are some of the most popular pricing models that are currently being used by SEM agencies.
Percentage Of Spend
This pricing model is utilized often by large consumer focused agencies. This pricing model can actually have the opposite effect of sticker shock.
When a brand spends in the millions of dollars on paid search, charging 3 to 7 percent of spend still generates a significant amount of revenue. This level of revenue should easily cover the hours needed to manage a campaign.
While this pricing structure still works for campaigns that spend in the upper hundreds of thousands of dollars a month, freelancers who manage campaigns that spend $500 to $2,000 would go out of business using this model.
Flat Fee Model
This pricing model guarantees to cover the hours you need to properly manage a campaign. For an established SEM manager or company, if you have your account launch and management process down to a science, you should be able to figure out the exact amount of time you need to launch. The total hours can then be multiplied by your hourly billing rate, equating to your fee.
There are potential hiccups that come along with this approach. If you happen to have a high touch client or need to perform extra research for a niche product, your fee needs to be adjusted.
Pay As You Go
If you're open to being transparent with your clients and they are open with fluctuating fees, charging your clients on an as-needed basis is something commonly used by smaller agencies or freelancers.
This can potentially open you up to having your work scrutinized but if you have a trusting client that only wants to pay for the work you bill, this option is your best bet.
Fee + Percentage of Spend
Similar to percentage of spend; this variation can be used for smaller budgeted clients. By putting a minimum fee in place, you guarantee revenue generation each month. This can be helpful with a client who has fluctuating budget or one who pushes to be billed on a percentage of spend model.
Pay For Performance
This model makes the agency put some skin in the game. While media spend can still be covered by the client, fees associated with the work are paid based on performance. Agencies can be paid a fee per conversion or operate on a revenue sharing model.
Which Model Is Right For You?
Each pricing model has pros and cons and some fit better with different size agencies. But when it comes down to the bottom line, you need to make sure you charge enough to cover the amount of work that goes in to launching and managing a campaign.
By having an understanding of what goes into a new account, you can choose a pricing model that fits your needs the best.