Hi Steve

Changing the deal after 3 months will only cost the client more if the agency improves performance. An improved performance from the agency means improved sales and conversions for the client. Why shouldn't the client pay more as performance improves? It's a win win situation really.

If the site doesn't perform/convert well in the first 3 months then of course the agency is not going to accept lower fees – why should they if it is no fault of there own. This brings me back to my original point. Without knowing exactly how the site converts this may explain why few agencies are willing to agree to a commission based deal. The 3 month period is an evaluation period for both parties.

If the client is confident in their sites ability to convert and agency is confident in the client’s site and their own ability to deliver quality traffic then both parties should be happy with a performance type deal.

Don’t forget that there is also pros to a client being on a % of ad spend deal e.g. if the client invests heavily in usability and improves conversion. PPC conversions will increase through no improved performance of the agency. If the agency is on a commission deal then they would be rewarded for this despite doing nothing to achieve it.

Periscopix charge a set monthly fee, not a percentage.

* * * Web Retailer - UK eCommerce Software Directory * * *

Hi Kevin,

An interesting post. It's not uncommon for agencies to adopt this pricing model (charging a percentage of ad spend) as their management fee, however it can lend itself to abuse. Some agencies will ensure all ad budget is spent in order to hit revenue targets - even if this means missing campaign targets for the client.

There are a number of different pricing models in the mix. As already stated, a percentage of ad spend is one option.

Another option is a CPA model, whereby agencies earn a fixed fee per conversion. (This method is less common and can be complicated - most agencies will need to be sure a return can be made and as such negotiations for a CPA model can be fruitless.)

A third option and probably the most common is a fixed-monthly retainer, typically over a 12-month period (although some agencies are more flexible than others). An agency will analyse the campaign to identify a realistic management strategy in which they will assign 'x' amount of days per month for campaign optimisation and reporting. Again, depending on the size of the campaign and frequency of optimisation prices will vary.

At Tickbox Digital we charge a fixed <a href="http://www.tickboxdigital.com">PPC management</a> fee per month, which is reviewed bi-annually. With most clients the intensity of management is typically greater during the first 6-12 months, after which costs can be reduced inline with campaign performance.

I hope this helps somewhat in your decision moving forward.

Regards

Simon, Tickbox

We have been operating PAY ON RESULTS PPC for a while now, and our clients love it, as our fees are tied to our clients' ROI not on the amount spent.

See more at www.strategyinternetmarketing.co.uk

We work on the basis of a small fixed monthly fee and cost per action or percentage of revenues.