Pay For Performance PPC Management – Beware!
PPC management is ever evolving, it’s one reason why it’s a great industry to work in, the landscape is always changing technically, the channels in use as well as the industry as a whole.
This year we have noticed an increase in the PPC agencies out there offering Performance PPC management as a revenue model option, and whilst this sounds attractive, especially when pitched by slick agencies, is it really the good deal they make it out to be?
In an earlier blog post we covered the different PPC management charging models, we have always preferred to work on a percentage of spend revenue model where we basically spend as much of the client’s money as possible knowing that the more we spend, the more we earn!
If you’re a merchant reading this you’re probably thinking something along the lines of “WHAT..did I just read that properly” they’re just going to go crazy and spend as much cash as possible, but in reality there is far more to it than just spending as much cash as we can. We run to the client’s KPI’s, so if they say they want as many sales as they can get at £10 per sale or less, then that’s what we’ll optimise the account and budget to do, some sales may be £1, some may be £10 or even over, but on average we’ll hit their target KPI as quickly as possible from a solidly performing account. Once the KPI is hit we often find the volume can be increased but it’d down to the merchant analysing their profit margins at the volume and cost per sale before taking the decision to try to go for more market share.
With the pay for performance ppc management model that we have seen some agencies offer lately it’s become apparent that they are touting it as a zero risk marketing channel but in reality it’s one that doesn’t suit that many merchants. It may sound great that the agency build the PPC account and pay the PPC bill and you just pay them a set fee plus bonus or set fee per sale that increases as sales volume does etc. however the reality is that they operate like affiliate marketers (we should know; it’s where we started in 2001) in that they focus on the products that make them the most profit and not so much on the products that might still be profitable for the merchant.
A client was lured away a couple of months back with the sparkly promises of the Pay for performance ppc Model but after a few weeks of running it was apparent that their business was actually being harmed :
With the pay for performance ppc management model we saw the merchant’s normal percentage of spend model PPC costs go from around £1.00 per sale on a 60% brand to 40% generic sales split; to over £2.50 per sale with a 87% brand to 13% generic sales split, so in effect their own brand traffic was then being used to drive 87 out of 100 sales and their costs had been increased by 150% with the overall sales volume having dropped as the agency had stopped trying to get the longer tail less profitable ROI term sales (for them, despite them being still profitable for the merchant on the percentage of spend ppc management model!) needless to say the came back to us for the more transparent percentage of spend ppc management model.
This isn’t the only instance which we have come across and there are some success stories out there, although most seem to be bigger merchants with huge marketing budgets so it does work for some merchants but we would definitely advise merchants to be very careful about the PPC management revenue model they choose, in addition to picking a model always beware of being locked into long contracts with a new agency and beware of who actually owns the AdWords Account as we have a case or two each week of someone coming to in a bit of state where their current PPC agency have ownership of the account and they can’t move away easily from them.
