A blog about smart marketing and conversion optimization.

Back in the aughts, charging on a percentage-of-spend basis was all the rage for online marketing agencies.

In that model, clients pay some percentage of their search engine marketing (or overall digital advertising) spend each month. The percentages would look something like this:

• Up to $100,000 in ad spend, agency charges 6% or $6,000 per month
• Up to $250,000 in ad spend, agency charges 4%
• At $1M in monthly ad spend, agency charges 2%

These are just ballpark figures — of course, every search marketing agency charges differently.

Here’s the hypothesis behind the popular percentage-of-spend model:

1. As the account grows, the agency makes more money, and the client is happy because growing spend inevitably suggests growing conversion totals and revenue.
2. It’s a simple method for approximating how much work the agency might have to invest in managing and structuring an ad campaign. Lots of spend suggests greater sophistication in Google AdWords.
3. Finally, this is a way for agencies to charge a premium to large companies with large budgets.

Clever Zebo never has, and never will, charge on a percentage-of-spend basis. Here’s why this agency pricing model fails the client:

1. Agencies are incentivized to recommend higher budgets. The higher the spend, the more the agency earns. There’s an indirect correlation with the success of ad performance here, but the most direct incentive is to keep spending more, no matter what.
2. If spend drops, agencies must de-prioritize the account. Even if the ad spend drops for entirely logical business reasons and not due to poor performance, the agency suddenly has a smaller fish on their hands than they bargained for up front. It’s a difficult negative incentive — reduced compensation despite improved performance.
3. As ad spend increases, the total cost to the client goes up. Usually, hiring an agency starts to pay off in ROI. If clients pay an agency more money as their ad spend rises, this hurts overall ROI. The fee to the agency must be considered in the ROI calculation.

We believe that a flat monthly fee creates the right behavioral incentives on the part of a marketing agency. The results we’ve seen with a flat monthly fee model are:

1. Clever Zebo must demonstrate success quickly. The faster we show solid results and growth, the more confidence we build that the program can work and should be expanded.
2. Our clients tend to see increasing ROI as the relationship goes on. Maybe the first month is a wash because the fee our clients pay us goes toward laying the groundwork for success and setting up and optimizing existing efforts, but once campaigns are optimized and conversions start to go up, the fee to us remains the same month after month, so the ROI graph goes up and to the right.
3. Clients tend to feel like they’re entitled to as much of our time as they need in order to achieve the results we were hired to get. When there are no per-hour charges, or caps on total consulting hours an account can consume before prices go up, Clever Zebo is able to prove we’re confident in our service and the expected results.

For example, one recent client saw tripled conversion totals and a 48% better CPA in AdWords within the first month. Another saw a 249% lift in Facebook Ads conversion rate and a 67% drop in AdWords CPA within two months. If our fees rose with ad spend as clients saw these efficiency increases, our clients wouldn’t see the same margin on hiring us. With fees that stay the same month after month, Clever Zebo is challenged to demonstrate  significant improvements in efficiency in order to keep each client’s business.

Maybe you’re in a summer slump, maybe growth has flattened, maybe you just want to keep your foot on the growth pedal … regardless, revenue is the lifeblood of your business, and it makes sense to grab all the low-hanging revenue fruit.

Here are 5 proven ways to get that B2B revenue engine working.

1. Prospecting Email

You know your target industry, decision maker title, geography, etc. Don’t be afraid to introduce yourself, company and product or service. If you offer real value and have a good grasp on who needs that value, the email will be welcome.

Homework:

A. Use LinkedIn, Google and other online tools to identify email addresses.

B. Write an awesome, personalized email that gets to the point and makes a phone call irresistible.

C. Press send.

2. Retargeting

Because you’re only serving ads to people who visited your website, it’s low-cost and can be the very thing that yields a lead.

Homework:

A. Write awesome ad copy that reinforces your brand.

B. Make it look great.

C. Set the ads live via AdWords (and probably Facebook and Twitter as well).

3. Reach out to your network

Homework:

Go through …

A. Your LinkedIn contacts

B. Former customers

C. Past referrals

D. Old friends you haven’t talked to in a while

… and say hi!

4. Get published

A. Identify the blogs and publications that reach your audience

B. Come up with a few killer pitches

C. Reach out and share your ideas

5. Stay calm

If you’re anything like me, you have a nasty tendency to freak out if biz gets slow. Resist it. Why?

A. Business, like life, has a tendency to go in cycles. If you’re in a down cycle, enjoy it because before you know it, you’ll be going 100 MPH and wishing you’d taken those calm moments to recharge.

B. You can suffer later, or you can suffer now AND later. I vote for less suffering.

C. We tend to make bad decisions when we panic. Be strategic, put all the groundwork in place, take advantage of the time at your disposal, and you’ll be amazed what you yield.

Once upon a time, many agencies “owned” the SEM accounts they managed on behalf of clients. e.g. Clients often didn’t have logins to their own accounts. When they tried to switch agencies, they had to start over with completely new accounts.

There is absolutely no good reason why you, the client, should not own all of your advertising accounts and related account history. Any work we, the agency, do in those accounts belongs to YOU.

I thought we, as an industry, had long ago abolished the notion or any derivative argument that an agency “owns” a client’s advertising account and related data. I’m writing this post, however, because I’m extremely saddened and frustrated to find that those days are not behind us.

While I can’t change the behavior of other online advertising service providers, I can make it clear what Clever Zebo stands for:

1. You own ALL of your accounts. They’re in your name with your billing details and with you as the admin.

2. All of the work we do in your accounts belongs to you.

3. We support you before, during and after we work together. We completely understand that you may take our responsibilities in-house or transition to another agency. Even if the engagement together ends, we want you to succeed.