Visibility

You’re Missing Opportunities If You Only Use Standardized Pricing

Standardized (or "package") pricing has been the Internet marketing industry norm for some time. It works because it's easy to sign up new clients without writing a custom proposal for everyone.  But if service packages are your only model for new clients, consider reframing them as your "introductory" pricing structure.  Keep the standardized package pricing for at least the first year of the account. This will be the first pricing step your clients take with your company.

Then pitch a pay-for-performance model.

At the end of that first year you're already familiar with the account, know the site very well, and have a rapport with the client.  If they're happy and richer, ask for more money! The pay-for-performance model is based on your client’s profit increase.  As they make more money your monthly fees should change accordingly.  So what’s the key to moving a client from standardized packaging to pay-for-performance?

Measurable ROI.

When you give your client rock-solid proof of high web ROI they will be happy to put more money into what's working.  But during that first year you have to deliver: demonstrate and calculate ROI regularly.

Calculate ROI by subtracting the cost of investment from the gain from investment, then divide by the cost of investment.

((gain from investment) - (cost of investment)) / (cost of investment)

Once you illustrate your marketing campaign's ROI, you’re in a great position to bring up the new pricing structure.  Read on to learn how to apply the ROI formula to three common customer business models.

Standard Service-Based Business

If a client can't track the close rates of their leads, set them up on a CRM solution, such as WorkXpress or SalesForce. The more automated the lead attribution, the easier your pay-for-performance pitch will be. Don't forget to add phone call tracking to your conversion tracking arsenal.  Do this by displaying different toll-free numbers to different types of visitors. For example, a dynamic code snippet can display a different number to each type of visitor based on the referrer - one for direct traffic, one for organic traffic, one for paid search traffic, etc.  These numbers all forward to the customer’s main line, and each call counts as a goal conversion in Google Analytics. So when a call to the PPC number comes in, you can assign a value to it and trace it back to your PPC spend.

WebpageFX has developed our own, low-cost call tracking service that communicates with Google Analytics - calltrackfx.com. Every new phone call pings a goal URL on the client's website.   After you track close rates, goal conversions and website calls, calculating the value per lead is a matter of a few math problems. Each type of goal has a different value.  A contact request or phone call usually counts for more than a newsletter signup or blog subscription because the close rates are higher.

Calculate the value of each type by multiplying the number of closed leads by the average profit per closed lead, then divide by total number of leads generated.

((# of closed leads) * (profit per closed lead)) / (total # of leads)

Here’s what the value of web leads for an HVAC company might look like:

Service request form lead: $165
Contact us form lead: $140
Newsletter signup lead: $25
Phone call lead generated from the customer’s website: $180

With these numbers we can assign a dollar value to our campaign improvement:

Average increase of 20 monthly service requests (value of $3,300)
Average increase of 42 monthly contact us requests (value of $5,880)
Average increase of 9 monthly newsletter signups (value of $225)
Average increase of 95 monthly phone calls (value of $17,100)

So we get a monthly value from the Internet marketing campaign of $26,505.  Subtract $4,500 in service fees and ad spend, divide by the campaign investment of $4,500, and that's an ROI of 489%.  It will probably be next to impossible for you to negotiate a 1:1 monthly service fee of $26,505. But from your client’s point of view, increasing that $4,500 figure will be a reasonable cost to obtain more leads once they know the ROI of the marketing campaign.

Ecommerce Businesses

Ecommerce clients are typically more open to upsells: conversion analysis, link building, or any other services that increase their monthly revenue. Ecommerce ROI is the easiest to calculate. 

To calculate ROI from a strictly ecommerce client, take the increase in monthly revenue, minus cost per product and customer’s overhead, divided by monthly service fees and new or increased 3rd party costs. 

   ((increase in monthly revenue) - (customer costs)) / (internet marketing costs)

If you increase online sales by $50,000 a month, the store has a margin of 24% and you charge $2,000 monthly, the ROI from the campaign would be 500%. This is an excellent starting point for your agency to negotiate your prices.

Non-lead and Purchase-focused Businesses or Organizations

It’s tougher to get solid numbers from non-lead or purchased-focused clients, but it can be done. You'll have to assign a dollar value to each visitor.  One easy way to do that is through the average cost-per-click of your client's top keywords in Google AdWords.

Go into Google Analytics and pull your client's top 100 unbranded organic keywords for the year. Then paste those into the Google Adwords Keyword Tool, display the "Average CPC" column, and export them to a spreadsheet.  Average all the CPC's and you get a rough estimation of the value of each visitor. Then take the increase in daily visitors from the campaign, multiply by 365 days and the average cost per visitor, subtract the campaign cost per year, and then divide by the yearly campaign cost. 

(((increase in daily visitors) * (365) * (average cost per visitor)) – (annual campaign cost)) / (annual campaign cost)

If a targeted visitor on the website is worth $1:

• Increase in 50 Visitors Per Day
           
            365 * 50 visitors * $1.00 = (($18,250.00 a year – campaign cost per year) / campaign cost per year) = ROI%

• Increase in 200 Visitors Per Day

            365 * 200 visitors * $1.00  = (($73,000.00 a year – campaign cost per year) / campaign cost per year) = ROI%

• Increase in 500 Visitors Per Day

            365 * 500 visitors * $1.00 = (($182,500.00 a year – campaign cost per year) / campaign cost per year) = ROI%

You can also calculate non-lead or purchase-focused campaigns by assigning a fiscal value to non-monetary goals, such as:

Visitor time on website
Newsletter signups
Community signups
Pages viewed
Other website metrics

Minimized Sales Efforts with Maximized Results

When your client knows the true ROI of their marketing campaign, they’ll be open to investing more money into it. You’ll have the leverage to present the pay-for-performance model.

As your revenue stream remains strong with minimal sales efforts, your client sees continual improvements in their leads.  A win for everyone.