Money for what? Search marketing payment models

Published by Ben | Filed under Search Industry, Events

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