The Hidden Conflict in PPC Agency Pricing: Why Percentage of Spend Models Are Killing Your Profits

The Hidden Conflict in PPC Agency Pricing: Why Percentage of Spend Models Are Killing Your Profits

There's something rotten in the state of PPC agencies, and it's time we had a proper chat about it.

The Problem with Percentage Pricing

Imagine you're watching West Ham play. Now picture paying the strikers based on how many times they shoot, not how many goals they score. Sounds mental, right? Yet that's exactly how most PPC agencies structure their fees.

The Standard Agency Model

Most agencies charge 10-15% of your monthly ad spend. On paper, it seems fair enough:
• You spend £10k? They earn £1,000
• You spend £100k? They earn £10,000
• You spend £200k? They earn £20,000

But here's where it gets proper dodgy.

The Misaligned Incentives

1. Budget Inflation
   When your agency earns more from higher spend, guess what their primary recommendation will be? "Increase your budget." Whether you need to or not.

2. Efficiency vs Income
   • Improving campaign efficiency might mean spending less
   • Spending less means lower agency fees
   • Lower agency fees mean...well, you get the picture

3. The Growth Trap
   Agencies claim this model "aligns interests" because they grow when you grow. But there's a crucial difference between:
   • Growing through increased efficiency
   • Growing through increased spending

The Real Cost

Let's run the numbers on a typical scenario:

Starting Point:
• Monthly spend: £50,000
• ROAS: 2.5
• Agency fee (10%): £5,000
• Revenue: £125,000

After "Recommended" Budget Increase:
• Monthly spend: £75,000
• ROAS: 2.3 (slight decrease due to scaling)
• Agency fee (10%): £7,500
• Revenue: £172,500

Looks good on paper, right? But let's look at profit:

Before:
• Revenue: £125,000
• Costs: £55,000 (ads + fee)
• Profit: £70,000

After:
• Revenue: £172,500
• Costs: £82,500 (ads + fee)
• Profit: £90,000

The agency's making 50% more, but your profit only increased by 28%. And that's assuming the scaling goes well.

A Better Way Forward

At JudeLuxe, we've banned percentage-based pricing. Instead, we focus on:

1. Fixed Fee Structure
   • Based on account complexity
   • Transparent deliverables
   • No hidden incentives

2. Performance Bonuses
   • Tied to profit improvements
   • Based on efficiency gains
   • Aligned with business goals

3. Transparency First
   • Regular efficiency audits
   • Clear reporting on savings
   • Focus on profit, not spend

The Results Speak for Themselves

Our clients typically see:
• 20-30% reduction in wasted spend
• Improved ROAS within 60 days
• Better profit margins
• Clearer understanding of their PPC investment

Questions to Ask Your Agency

1. How do they calculate their fees?

2. What happens to their fee if they reduce wasted spend?

3. How often do they recommend budget increases?

4. Can they show profit improvements, not just revenue growth?

Time for Change

The PPC agency model is broken. It's time for agencies to put their money where their mouth is and tie their success to their clients' actual success - not just how much they can get them to spend.

Ready for a Different Approach?

If you're tired of agencies whose recommendations always seem to end with "spend more," it's time for a change. Visit judeluxe.com/contact to learn about our transparent, results-focused approach to PPC management.

Because in PPC, like in football, it's not about how many shots you take - it's about how many goals you score.