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Most importantly, anyone considering such a pitch should ask for representative clients in competitive searches. Sure they will provide the 'hand picked' ones, but it gives you a chance to go in - and in 5 minutes - determine what they are doing and how they are doing it.
If it appears they are legit, you can then go the next step. If they don't have any success stories to pass along, then they are probably not going to help you at any price.
Steve
<added> As IanTurner alluded to, many of the better SEO firms are booked 3-months out in referral business alone, without having to go on a telemarketing campaign.
</added>
I like to waste their time and give these guys a run for the money (I figure its returning the favor) so even though interest is lacking at best on my end generally I pose the question "where do you rank for [Desirable Term]?". Invariably they respond - we dont compete for that particular term but we are number one for [extremly undesirable low traffic non competitive string of 17 terms / and or company name]. That or they explain that google is their enemy and has banned them because they are a direct competitor. They are calling or spamming or purchasing adwords because they are unable to demonstrate what they claim they can do so effectivly for your site.
These guys come out of the woodwork trying to optimize your site (incedentally ours already ranks well had they checked but alas they did not) - but are unable to do so in their own field. I think my company - years past - has contracted three times from third parties who solicit in this manner and said parties were unable to land even the most marginally competitive terms. Perhaps our expirience was unique but Im a skeptic.
If I desired to pay for SEO and was in a competitive field I would look at the players who are most appearent on relevant searches, and definitivly not those who generate traffic and solicit via means not related to the service they provide. It is one of those very unique fields where you can gauge the effectiveness of a company directly, and all the referrals in the world don't amount to a hill of beans, because anyone cand land terms - only a select few can land significant traffic.
That said I think that marketing a site inhouse is infinatly more effective then what third parties will provide, particularly if the site was not designed with SOE type criteria in mind. This is because many changes that will help you will be omitted by third partys - and as an end user its difficult to gauge their necessity. Very few companies will ask you to restructure your site and implement mod_rewrite rules (because it is a very extensive change) but this might be exactly what your site needs.