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Agency Fees - Too High?

Agency, % spend, fair price

     
12:55 am on Jul 12, 2011 (gmt 0)

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I am working for a company with $500K plus in spend per month. I was reviewing the agency contract and found they get 10% of spend and 10% of revenue over $250 plus $3K campaigns management fees. I find it WAY too high.

Can anyone speak to what is normal and what I should expect to get for that price? I am trying to renegotiate and would love to have an educated argument.
7:37 am on July 12, 2011 (gmt 0)

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This is very high, however it depends if they are using bid management software (external company) that can take up to 5% of spend, which leaves them with 5%. This is an important factor.
3:06 pm on July 12, 2011 (gmt 0)

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most do either a % of spend, % of sales or flat fees - seems you're saying they do all 3. like anything else, if what they do justifies what they are paid, this might not be a problem. it's not standard, but, by itself, that doesn't mean it's bad.
4:09 pm on July 12, 2011 (gmt 0)

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Even if they were using Kenshoo bid management system, it would be top $15k/mo, so that leaves them $35k in profit from % of spend alone.

I'm not sure why you have % of spend and % of revenue and it seems to be that the cap at $250' is way too low when you're spending $500'. That means you're rewarding your ppc agency for reaching 50% ROI? That's ridiculous. I would replace that with 10% of profit instead. That will incentivize them to do better. No profit, no bonus.

Also, I would remove the flat fee. They make enough as it is to charge a petty fee like that. If they don't like it, I know several agencies that can do it as well for half the amount.
8:26 pm on July 26, 2011 (gmt 0)

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Yes, when compared to an average fee, it is high.

However, finding a reliable and consistently good PPC manager isn't always easy. Shopping price doesn't mean a better ROI.

Are they managing *only* the PPC? Do they develop/design/optimize your landing pages as well? Are they strictly a professional relationship, or do they have any personal history with other people at your company? How does the ROI compare to that of other Marketing campaigns?

It's not always so clear how certain arrangements came to be. Just make sure to look into everything before trying to renegotiate.
 

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