I didn’t mean to imply that Miguel’s model is wrong. The title of his post or the picture in the post simply said something like “Everybody is getting ripped off by all other agencies but ours” and that is what I meant to say was wrong. Not their pricing…

I concur with your statement, and I believe I said it multiple times in different ways throughout the post:

“…it doesn’t matter how you charge. If you don’t perform well it doesn’t work for anyone.”

Nice way to say it simply – and I believe it, without any doubt!

I think that the hourly model sounds as if it works well for Miguel and his team, and it sounds as if semvironment is working well within the pay for performance model. I think it comes down to what works best for each individual/client/agency. You can certainly make a case for and against each one.

For example, you can say 15% incentivizes the agency to spend as much as possible, but would the client continue the campaign if the numbers weren’t working for them? Incentivizing the agency to perform at the highest level so the client wants to spend more money seems to be a good basis to start from.

Pay for performance is great for the client as well, the risk is low, and it can be very profitable for everyone involved, but can be challenging for the agency to track.

Hourly work has its advantages as well, but you could argue that the agency is only incentivized to work more hours, right?

Bottom line, it doesn’t matter how you charge. If you don’t perform well it doesn’t work for anyone. I’m glad that there is more discussion of late with these different models. The more options we all have on the table the better!

Plus the situations I posed where a client that only requires like an hour or two of management each month but that spends upwards of $25k/month is definitely not in the client’s best interest.

Thanks for stopping by to comment.

I didn’t mean to challenge your model – I was somewhat challenging the derogatory tone of the post…I felt that while reading the introduction to your new model that all other agencies were wrong but you were right and that isn’t the case.

I’m really glad you came by to state that hourly let’s you manage a wider target market as far as clients go. I didn’t think of that. There are clear agency benefits to each pricing model.

My post is simply meant to say that I really don’t care what an agency’s pricing model is, as long as they have the client’s objectives in mind and they can profit from working towards those objectives. No attack here on what another agency’s model is like vs ours.

BTW – performance based model isn’t ‘partnership’ based but it certainly feels like it is. Essentially, like you stated in your comment, you have to find the point where agency control is lost and price from there…it is a little overzealous for a client to demand you base your profitability and business on something that they have control over. And I think that makes sense to them. Clients want you to do the absolute best you can with what you can control or with whatever they are willing to give you control over in any pricing scenario.

Our model came from the challenge that there are clients that spend only $7k/month but that require a TON of work to keep their campaigns running at an optimal level with many changes each month. And then there are clients that spend $25k/month but that do not require much work to manage. When you manage a large number of campaigns like we do things dont always balance out on our books for the amount of work that we do.

We really feel like we have developed a great model and that it will really help us with the larger clients. We appreciate you post, great work.