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The answer is that you can't do any of your clients justice. As you correctly noted, you are competing against yourself.
In the case of the company mentioned above, they have had to intentionally dilute certain keywords for some customers in order to make another, more demanding customer happy.
The end result is that my site and many others have managed to successfully displace almost all of their sites without much effort.
Only a greedy man will take money without giving his customer his best work and only a stupid man is willing to lose customers due to his greed! In the end, nobody is happy ... including you!
Offer exclusivity and charge for it! That way, your customer is guaranteed your best work and you are guaranteed quality customers who are willing to pay for results! Everyone wins!
I'm just branching into SEO work and I've struggled with how to charge an ongoing fee with multiple clients. While I haven't firmed up my fee structure yet, I expect I will do one of the following:
- not compete on the same keyphrase. There's enough keyphrases in the industry that they can always focus on another one. The market I'm in is ultra competitive so I don't have any current plans to go after the big three phrases - there's lots of traffic on the other phrases.
- charge a flat fee and not an ongoing fee. The client I'm focussing on will be the one who's campaign I'm working on right now.
Either way, I won't be charging based upon placement, but instead on work. i.e. $X for site review, $Y for so many links, etc. If that gets you to page 1, great. Otherwise, you'll need more links under a new agreement.
Yes, it's not very scaleable. However for now I prefer to charge a bit higher fees and work with fewer clients. I won't be working with 100's of clients even though I potentially could have the business.