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Let’s kill the hourly rate: We are leaving money on the table

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One of the hottest topics and hotly debated threads on r/ppc is about rates and what you should charge. What does an agency charge? What should I charge as a freelancer? How do you charge if you do work on Amazon versus Google or Facebook?

Different ways to charge clients

There are a lot of models for how you are going to charge a client. No one model is perfect and you have to do what is right for your business in the end.

Hourly

Bill for each hour of your time and track how many hours you worked that week. This is one of the most common ways we have seen freelancers charge for their time.

Pros

Work more hours and you know you are going to get paid more (all things being equal). Clients love to love the hourly rate because they are familiar with it from designers and other creative industries.

Cons

As you get better at a task and it takes you less time, you end up making less money even if you are getting better at your task. How does that make any sense? This is the biggest drawback to the hourly rate, in my opinion.

Percent of spend

Scale that spend up and bill each of your clients more money at the end of the month. This is the most common way we see agencies charge. It’s what clients expect to hear but increasingly clients do not want to pay this way as it can lead to abuse.

Pros

As clients trust you and they spend more money, you see your agency revenue increase in lockstep with that higher spend. Assuming that increase is leading to a profitable business, this can work out well for both sides.

Cons

Not every client loves this because it can be abused by some agencies to just spend money but not have it be profitable. Also, there are some clients who don’t think an agency should be paid $10,000/month, even if they manage a large ad spend budget that has a good ROAS. 

This can lead to “negotiation” on agency fees or firing the agency and taking it all in-house. The latter being from a lack of value for what agencies can do and thinking they are easily replaceable. You can not in-house an outside point of view for your business.

Monthly retainer

Charge a fixed or flat monthly fee for the work that was agreed upon in the contract and proposal.

Pros

It keeps billing simple and both sides know what to expect each month. It’s easier to sell it to clients versus other methods above. Clients are less likely to feel like they are getting ripped off.

Cons

Scope creep can increase the workload and yet, it can be harder to increase that monthly fee. If you don’t think about where you will be a year from now with that client, you could find yourself with an unprofitable client on your hands.

Performance-based

Not as widely used but an interesting model we have done with clients. You set a target based on top-line revenue you bring into the business. As you hit different tiers, you get paid on that tier level.

Pros

Clients love it because they feel the agency is putting skin in the game. If the agency is good at what they do and the client’s site is top-notch you can make a lot of money each month.

Cons

This depends on trust from both sides and a site that is ready to convert. If that site is not good, you can spend a lot of time going nowhere. Also, some clients may not pay the bonus even after the agency did an amazing job. I worked on an account in the UK where this happened.

Mixed Model

Do a combination of the above. Maybe you do a month strategy fee and then do 5% of ad spend each month. You could do a monthly retainer with a performance bonus basked in. There are a few ways you can mix this model up.

Pros

It gives you a base retainer for each client but gives you the upside if work increases and the client wants a deeper relationship. You can make more money to cover your costs.

Cons

A more complex pricing model that some clients might find more complicated. It can be harder to explain to some clients or turn them off because you still have a percentage of spend in there.

Kill that hourly rate

Once you start charging hourly, you often get into discussions about how long something took. 

This could be because the client was thinking it would take less time or they feel it should take less time because they used to do it themselves.

If you spend all of your time talking about hours and how long a task took on their invoice, the conversation shifts away from outcomes and towards labor.

This shift is about pressuring you to be faster at a task, where there might not always be a faster way to do it. Sometimes faster is not better if you don’t reach the same outcome.

Less time spent on a task means the client spends less money on marketing. So many view marketing as a cost center, when it’s an investment center. Based on my experience, the majority of clients who like hours are just trying to find the cheapest person to do the task.

Hiring agency A at $50/hour is going to be the same as hiring agency B at $100 or $150/hour. We all know this is not the case.

If agency B comes down in price, then this tells the client that this set of work is worth that much. Even if it’s going to cost you a lot more to deliver on the work. We should stop selling hours and starting selling outcomes.

No one right way future

As much as I believe there is no right answer to what we should charge as an industry, I also believe that we should stop underselling ourselves and leaving money on the table. The biggest way we leave money on the table is by competing on price.

Tell me if you heard this one before: you are talking to an awesome client and the brand is one you want to work with. They love you and you love them…you got that first date vibe going on. They ask about your pricing for the project and you tell them your fee structure.

There is this pause and you just wait for them to respond. What has only been 30 seconds feels like minutes. The client then tells you some other agency can do the work for X or your hourly rate of $150/hour is too high because they talked to someone who can do it for $100 cheaper.

Not valuing the work can come from not understanding the task and what it takes to deliver. What is worse is that the client does not value the task and just wants someone, anyone…the cheapest agency to do the work. Large brands have been known to be just as bad at this as SMBs.

What do you do? Some agencies will come down in price and not change the scope of work. Other agencies will come down in price but will ask for a change in scope of work. Other agencies will just say they don’t compete on price and this is what it costs to do the work right the first time.

Working with a client needs to be a partnership. Both sides need to understand that each other’s success creates a rising tide which lifts all boats. Creating a win-win partnership is the only way that both sides will succeed and will be in business a year from now. Remember, an agency is a business and needs to make a profit. Killing the hourly rate can help us get there as an industry.

Duane Brown will be participating in a roundtable discussion about profitable pricing strategies at SMX East on Nov. 12.


Opinions expressed in this article are those of the guest author and not necessarily Search Engine Land. Staff authors are listed here.


About The Author

Duane has been called an international man of mystery and digital nomad by friends. He has lived in 6 cities across 3 continents and visited 40 countries around the world. He uses his curiosity for people and love for people watching to run better marketing campaigns for clients. After leaving Toronto in 2011 to gain an international view of the world. He has worked for Telstra in Australia and brands including ASOS, Jack Wills and Mopp (bought Sept. 2014) while in London, UK. He now lives in Montreal, Canada helping brands grow through data, CRO and marketing at Take Some Risk Inc.



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See the ‘top signals’ informing your Google Ads bidding strategies

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Google’s smart bidding strategies use a host of signals to inform bids with each auction. Now, Google is starting to show which signals are driving performance to optimize bids for people more or less likely to convert.

Top signals. The signals shown might include device type, location, day of week, time of day, keywords, remarketing and Customer Match lists and potentially some other signals. You might also see combinations of signals such as time and keyword. Signals in red are less likely to convert in that strategy, while signals in green are more likely to convert.

(Click to enlarge.) Top signals for portfolio bidding strategies now show in Google Ads.

Where to see top signals reporting. The top signals will show in the bid strategy report. Keep in mind, that report is only available for portfolio bid strategies. The bid strategy report is located from Tools > Shared Library > Bid Strategies. Then select a portfolio strategy.

Google said it will show for Target CPA and Maximize conversions on Search, but you may be able to see top signals for other portfolio strategies. The example above is just for eCPC, in fact.

Why we care. Understanding which contextual signals have particular influence on your automated bidding can give you insights into your target customers and potentially inform your strategy. For example, if you see a keyword being “down signaled,” it may just be a poor match for that particular bid strategy, or perhaps there are ad or landing page optimizations you could make to improve its likelihood to convert.

You might also see trends that can inform other marketing efforts such as email send times. The screenshot above, for example, shows weekends are a strong signal. That could be a good time to test email flights rather than on weekdays.

More about pay-per-click advertising


About The Author

Ginny Marvin is Third Door Media’s Editor-in-Chief, running the day to day editorial operations across all publications and overseeing paid media coverage. Ginny Marvin writes about paid digital advertising and analytics news and trends for Search Engine Land, Marketing Land and MarTech Today. With more than 15 years of marketing experience, Ginny has held both in-house and agency management positions. She can be found on Twitter as @ginnymarvin.



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Google’s ‘Duplex on the web’ enables the Assistant to buy movie tickets for you

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Google is making it possible to use the Assistant (via Duplex) to buy movie tickets online. Back in May at Google I/O, the company announced that it was expanding the AI-powered Duplex beyond restaurant reservations to booking rental cars and buying movie tickets.

Duplex on the web. Called “Duplex on the web,” users will be able to use the Google Assistant for new reservations and purchase categories. Movies is the latest example.

As shown below, Android users in the U.S. or U.K. can ask the Assistant for movie showtimes or search movies in the Google app. The Assistant will then lead searchers through a “buy tickets” process that involves theater selection, movie times and, if available, seat selection. A saved payment card needs to be in Chrome to work in this case.

Expanding to many more categories. It’s not clear that users will prefer this process to manually booking tickets. However, it illustrates how Google is bringing the sophistication of its Duplex technology to the broader mobile internet.

It’s also not clear how much back end integration needs to be done by publishers to enable this; I suspect not that much. Regardless, I’m sure Google has a roadmap that extends to many other categories where online scheduling, reservations and basic transactions are involved.

Rand Fishkin has been speaking, including at SMX East, about how Google has evolved from “everyone’s search engine to everyone’s competitor” and the SEO implications of this. My view is a bit different.

Why we should care. Google has now talked repeatedly about “helping users get things done in search and with the Google Assistant. This is about making search more transactional and owning the transaction. Google is doing this in shopping and across the board in local (e.g., food ordering).

Google is trying to remove friction and compress the process between search and a sale. It’s handing that process off much less and less to third parties and site owners. This helps Google 1) improve the consumer experience, 2) keep users within its system, 3) create a closed loop for analytics and 4) generate fees or revenue from commerce, which has implications for smart speakers.

If these capabilities (i.e., Duplex on the web) take off, publishers and brands will need to be partnered or integrated with Google actions/services or risk losing the transaction to a competitor. It will also mean that Google owns the customer.


About The Author

Greg Sterling is a Contributing Editor at Search Engine Land. He writes about the connections between digital and offline commerce. He previously held leadership roles at LSA, The Kelsey Group and TechTV. Follow him Twitter or find him on LinkedIn.



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SEO

Google Search Console adds Product results filters to performance report

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Google announced it has added new filters to the performance report within Google Search Console to show you how well your product results are doing in search. Google now captures and displays click and impression data when rich results display based on your use of product rich results markup.

The report. Find this data under the Performance report by clicking on “search appearance” and then on “product results.” You’ll see clicks and impressions and can further segment by device, geography and queries.

What it looks like. Here is a screen shot of the report:

What is a product rich result? Below is a screenshot of what a product rich result looks like, but you can learn more about this in this developer document. Product rich results typically show product ratings, price, availability and some description information. Note that product rich results are not new, just the report in Search Console.

An example of a product rich result in Google search results.

Why we care. The more data the better for SEOs and publishers, and this gives us more granular data on the impact of us adding product rich result markup to our pages. Google said this will show you how much traffic comes from experiences with rich data like price and availability and how does shopping traffic change over time, and the shopping search queries your website shows.


About The Author

Barry Schwartz is Search Engine Land’s News Editor and owns RustyBrick, a NY based web consulting firm. He also runs Search Engine Roundtable, a popular search blog on SEM topics.



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