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Money for what? Search marketing payment models

Amplify Interactive’s notes from SMX Advanced Seattle 2008

Session 1: Money for What? Search Marketing Payment Models

This session covered basic pricing models, pros-cons, etc. The session mostly served as an affirmation that our pricing model is the right fit for us, but as I’m always reminded of at these things – we aren’t charging enough.

Below are my notes from the session, with a few personal thoughts thrown in.

Ken Jurina – Epiar

“SEM pricing models”

First discussion to have with any client regarding SEM: “Analytics is the key to proving what you do and what your value is, and needs to be addressed up front”

Typical SEM pricing models:

  • Retainer-based: monthly fees, 6-18 month contract & search & pack
  • Pay for performance: %change in sales, leads & traffic with skin in the game commission structure
  • Fee for service: project based with finite scope
  • Hourly consultation: often a quick-fix approach, but fees are typically way too low considering the long-term impact

Ideas for foot in the door services & getting started

  • Web site audits: (Epiar charges at both $5500 & $9500 pricing levels for very custom audits)
  • Negative keyword reports
  • Web analytics
  • Hourly and/or 3rd party consultation (copywriters, agencies, web dev companies) *problem is that fees are probably too low for the value you’re providing

Proposals & Contracts

  • Shows seriousness & professionalism
  • Get to the point – ie 5-7 pages
  • Proposal, presentation & invoicing should all be consistent
  • Show transparency in services
  • Ensure the logic is evident; clients buy in & refer business when they understand deliverables

Promoting yourself, especially when SERP competition is crazy

  • Build a strong home base with a local presence
  • Finding it tough to rank in serps?
  • Promote brand & self
  • Be active: blog, seminars, sempo, sempdx, etc
  • Become a recognized expert, not so obvious tradeshows

George Michie, Rimm-Kaufman Group (paid search only)

Rev-share disadvantages

  • Too much easy money on brand, with a disincentive to dig deeper
  • Marketers didn’t invent christmas, doesn’t take more work / hours when clients make more $
  • Didn’t want to bicker with clients over credit allocation

Cost markup disadvantages

  • Can’t make $ on the low-end
  • Paid for wasteful spending
  • We still didn’t create Christmas
  • For large budgets, fees become divorced from the cost of providing the service – a$150K / mo for a $1 mil / month spend, that’s a really tough cost to justify

The blended model:

  • % of ad spend (RKG charges 12.5%): gives incentive to grow non-branded search, brand advertising has it’s place, no questions about allocation
  • With a minimum monthly fee (RKG charges $3k minimum): ensures profitability with small clients
  • Maximum monthly fee (RKG caps charges @ $12.5K month): protects clients, keeps fees in line with cost of providing service (never considered this, but haven’t run into this problem yet…)
  • For these fees, RKG’s gives everyone a full service including: keyword construction, ad copy, landing page testing (they don’t do the design – someone else does, this is just to run the tests), bid management & standard ppc analyst coverage using proprietary tools

Paul Wilson – iProspect

“Performance based pricing models”

It may work ok for bigger guys, but I won’t even consider this model – so I’m not really going to spend a lot of time on notes for this. It’s obvious that it helps to align goals, but I feel there are too many variables that are out of our control in this model: faulty tracking / analytics, design & usability issues, too many cycles tracking & reporting, some clients aren’t disciplined enough & the target moves, etc.

Q&A

business & account structure: some look at revenue per

iprospect: search marketing specialist (day-to-day contact), search marketing analyst (more of the technical type who writes recommendations etc), overseen by a client services type

Related Links:

SMX on Twitter
Search Engine Roundtable recap

Ben Lloyd

About Ben Lloyd

Ben Lloyd serves as Principal at Add3 and manages the agency’s Portland office.  Ben got his start in SEM way back in 1999 – when there was like, 15 search engines and Google was barely a thing. Prior to Add3, Ben had founded Amplify Interactive in 2003 (which was acquired by Add3 in 2013), and hasn’t looked back since. Ben likes lots of stuff like golf, pinball, food(ie), booze/beer/wine – in that order, etc. Mostly – he likes doing that stuff with his friends. Ben is also co-founder of SEMpdx. Connect with Ben on LinkedIn