Why We Don’t Charge Commission on Your Ad Spend
Have you ever asked an agency for a proposal for online advertising and been blown away by the ad spend commission they charge?
While every agency is run differently, it’s important to understand what you are accepting when you sign on the dotted line.
We’re going to break down the types of ad spend commission that are typically used at agencies — and explain why we don’t ever charge commission on ad spend at 9 Clouds.
Types of Commission Structures
First off, every agency will offer a different commission structure.
Your agency will share its structure in its proposal for doing business with you. If you don’t see it, or if the agency skirts around the subject, it’s probably best to find another agency.
Here’s a breakdown of the most common commission structures for digital advertising.
Hourly rate is the easiest to understand, as many agency digital marketing packages are based on hourly rates.
Pros: When signing a contract, your business sets the number of hours the agency will work, which helps if you have a tight or fixed budget. Typically, the fewer campaigns you have, the fewer hours you’ll need. So, if you have only one or two campaigns running, you’ll pay a lower cost.
Cons: If the hourly rate is based on all of the work the agency does for your business, the agency may spend less time on your advertising campaigns if other projects take precedence.
Tiered / Flat Rate
Agency pricing that is considered tiered rate (sometimes called flat rate) is specific pricing that is the same every month. This price may be built off the number of campaigns the agency creates or the number of ads within those campaigns.
Pros: If you have a great relationship with the agency already, a tiered rate can benefit you in the long term. Typically, agencies with tiered pricing have client longevity, which usually means the agency team is seasoned and understands the ins and outs of each ad platform.
Cons: If your company has varying numbers of campaigns every month, a tiered rate might cause your budget to fluctuate.
Percentage of Ad Spend
Percentage of ad spend is one of the most popular pricing structures for agencies that work in online advertising. With this structure, the agency charges based on a specific percentage of your overall advertising spend. In the marketing industry, a 10 to 20% rate is expected.
Pros: This type of commission structure is quite transparent. As a client, you set an ad spend budget ahead of time, so you already know what the commission will cost.
Cons: Many agencies will push to increase your return on investment (ROI) so that you spend more with them, which increases the paycheck you send every month. Also, some agencies will not give you access to the ad account in which they’re working, so you won’t know exactly how well your campaigns are doing. (You should always have access to your accounts, no matter how the agency charges you, for checks and balances.) If you have not set strong goals with the agency, you might not be seeing the ROI you need to be profitable.
The better ROI you see, the more the agency will be able to charge. Performance pricing includes set goals prior to a quarter or year and is paid out if the agency meets the goals discussed.
Pros: If your company is able to see a sale from a click to an online purchase, performance pricing can be a win-win for both parties. No matter the ad spend, the agreed-upon increases in commission are based on how well your campaigns are performing.
Cons: If your company finishes the purchase offline, performance pricing may not make sense for you. For instance, auto dealership marketing can push leads your way, but it can’t actually close the sale. Under this commission structure, you’d likely see a lower ROI.
Why 9 Clouds Offers Flat-Rate Pricing
It’s important to ask questions of the agency you are looking to hire. Without a clear understanding of how it charges, you may be sinking lots of money into minimal results.
Wondering what questions to ask an agency? Check out our free eBook dedicated to all of the questions you should ask when looking to hire (or fire) outside help.
At 9 Clouds, we work with every client to get the best results for you, no matter how big your advertising budget.
We choose flat-rate pricing for a few key reasons:
- Flat-rate pricing helps small businesses with small budgets. If you aren’t able to meet the minimum budget requirement for an agency that prices based on a percentage of ad spend, you can still benefit from our digital advertising services.
- Flat-rate pricing builds trust between the business and agency. When we provide ad spend recommendations to clients, we want to have your best interests at heart, not ours. We only recommend ad budgets that will provide you the best ROI — even if that means spending less!
- Flat-rate pricing boosts ad performance. Because our advertising team isn’t tied to commission, we’re able to work closely with industry experts, including specialists at Facebook, Google, and Bing, on a regular basis. We attend national conferences and go to webinars based on our team specialties. This allows us to be on the cutting edge of new features within each platform.
One other note: We highly recommend all of our clients own their advertising accounts. This allows you to see the data firsthand and, should you choose to move on, to take your account with you for historical data.
Ultimately, our approach to digital advertising — and marketing in general — is all about transparency. In fact, it’s one of our core values!
Take the Next Steps
If you are trying to juggle too many projects for your company, consider offloading to our Sioux Falls marketing team. We work day in and day out across several digital advertising platforms, including Facebook, Instagram, Google, Bing, LinkedIn, and Amazon.
Check out the best questions to ask as you look for an agency that fits your wants and needs by downloading our free eBook.Download the Questions to Ask Your Agency eBook