How to package and sell my PPC services

Hi Will,

I read your article it was well written and I can see that you put a lot of thought into your pricing model. However I disagree with some of your conclusions.

In your article you argue that percentage of ad spend pricing "Does not align you with the goals of the client". While I will accept that it may not align your incentives with your clients, however that is only true if you are still using the old efficiency based "cost center" management tactics. Based on your article it sounds as if that is exactly what you are doing. There is a better way of managing PPC accounts that delivers superior campaign performance while also aligning your client's goals with that of your agency's, I'll discuss more on that below.

Did you ever stop to consider that it isn't your pricing model that is causing the conflict in incentives? That your campaign management tactics could be the root cause of misaligned incentives?

Like you, I was troubled by the conflicts that may emerge from misaligned incentives. So I too considered various pricing models but they all seem to have opportunities for misaligned incentives. Then one day, about 7 years ago, the solution hit me like a bolt-of-lightening.

The root cause for misaligned incentives was the campaign management mindset. The traditional management tactics were indeed the source of conflict and I began exploring how I could alter my practices to align my incentives with those of my clients. It took me a couple years of testing and adapting methodologies until I finally discovered the key principles for profit driven marketing.

I wasn't alone in my quest for alignment of incentives, a small number of other agencies have struggled with the same conflict and discovered those same core principles of profit driven marketing.

Google recently did a study on the agency practices that consistently delivered superior results for clients and discovered this elite group of agencies that were all using very similar principals and practices. So they published a whitepaper on this campaign management methodology and dubbed it "Profit-driven marketing".

You do seem to be headed down the same path that a number of agencies took on the journey to a more enlightened management tactics. You do need to track time and expense on a per project basis and budget according to client needs. And you are correct to point out that your clients' needs are not best served by an arbitrarily set fixed budget. But hourly billing is merely a band-aid approach.

Hourly billing may go a long way toward alleviating the guilt of using one client's fees to subsidize work on another client's account. However it doesn't fix the issue of misaligned budgeting or workflow.

Trust me when I tell you that the per hour billing is fraught with the same kind of misaligned incentives. Hourly budgets must ultimately scale in proportion to the ad spend else you will find yourself in a situation where you are short-changing your client, either by over spending on hourly expense, or by under-managing their account. Hourly billing just adds a new set of misaligned incentives without addressing the core issue.

There is generally more work that could be done on a client's account than their current ad spend budget can justify. So we should be prioritizing the workflow to get the biggest ROI, on time and expenses, within a reasonable budget. Labor costs need to be managed and remain within a reasonable budget, right? What should that labor budget be based upon if not current ad spend levels?

I understand that some clients are more needy than others, and we should not use other client's fees to subsidize those extra needy clients. That is best handled by managing time on projects. Our clients are paying for account management and that should include managing budgets, along with managing the labor costs of work performed on their behalf.

Once you get you head around how and why profit driven marketing trumps the more common cost center efficiency approach you will likely realize that it has never been the pricing model that caused misaligned incentives, that it was your campaign management tactics all along creating the core conflicts. Profit-driven marketing tactics will realign your agency's incentives with your clients goals, and generally delivers a much higher standard of performance.