Pricing models every PPC agency should test

Key takeaways

• Test multiple models – The most profitable PPC agencies don't rely on one pricing model. They test retainers, performance fees, and project-based billing to find the best fit for each client and campaign type.
• Protect your gross margin – Your pricing must cover your team's time, software costs, and ad spend management. A clear PPC agency pricing strategy ensures you don't trade revenue for unprofitable work.
• Align incentives with clients – Performance-based pricing can be powerful, but structure it carefully. Base fees on metrics you directly control to ensure you get paid for your expertise, not market fluctuations.
• Price for scalability – Your pricing model should make your agency easier to run as you grow. Avoid overly complex custom agreements that create administrative headaches and slow down decision-making.

Getting your pricing wrong is the fastest way to burn out in the PPC world. You might be delivering amazing results, but if your fees don't cover your costs and leave a healthy profit, you're just building someone else's business.

Many PPC agencies start with one simple model, often an hourly rate or a basic retainer. That works at first. But as you take on more clients and more complex campaigns, that one-size-fits-all approach starts to crack. You find yourself working late nights on a fixed fee, or arguing with a client about what "management" actually includes.

A smart PPC agency pricing strategy isn't about picking one perfect model. It's about having a toolkit of different agency pricing structures. You use the right tool for the right job. This guide walks you through the models you should test, how to implement them, and how to avoid the common pitfalls that squeeze your margins.

Why is a flexible pricing strategy so important for PPC agencies?

A flexible pricing strategy lets you match your fees to the specific value you create for each client. PPC work isn't uniform. Managing a £5,000 monthly ad spend for a local business is different from orchestrating a £500,000 multi-channel launch for an e-commerce brand. Charging the same way for both doesn't make sense and leaves money on the table.

In our experience working with PPC agencies, the most profitable ones have clear rules for which model to use and when. They might use a retainer for ongoing maintenance, a project fee for a new account setup, and a performance bonus for exceeding aggressive targets. This flexibility does two things. It makes clients happier because they feel the pricing is fair. And it protects your agency's gross margin, which is the money left after paying your team and direct costs.

Without this strategy, you risk two major problems. First, scope creep, where clients slowly ask for more work without paying more. Second, misaligned incentives, where you're penalised for factors outside your control, like a change in Google's algorithm or a client's website crashing. A good PPC agency pricing strategy acts as a commercial framework that prevents these issues.

What are the core PPC agency pricing structures to test?

The three core models to test are percentage-of-ad-spend, fixed-fee retainers, and hybrid structures. Each has strengths and weaknesses depending on your client's budget, campaign complexity, and your agency's operational style. Testing helps you discover which model delivers the best balance of predictable revenue, fair profit, and client satisfaction for your specific business.

Let's break down each model. The percentage-of-ad-spend model is simple. You charge a percentage, typically between 10% and 20%, of the total ad budget you manage. If you manage £10,000 in spend, your fee is £1,000 to £2,000. This model scales easily with client budgets. However, it can misalign incentives. Your fee goes down if you improve efficiency and lower their spend, which isn't logical.

The fixed-fee retainer is the most common agency pricing structure. You charge a set monthly fee for a defined scope of work. This gives you predictable revenue and lets the client budget easily. The key is defining the scope tightly. Specify the number of campaigns, ad platforms, reporting meetings, and optimisation hours included. Without this, you'll face scope creep.

Hybrid models combine elements of both. You might have a lower fixed base fee plus a smaller percentage of spend. Or a fixed fee with a performance bonus. These hybrids can better reflect the true work involved. Managing a complex £20,000 account often takes more skill than a simple £50,000 one, so a pure percentage model fails here.

How do you price a PPC retainer profitably?

Price a PPC retainer by first calculating your true cost of delivery, then adding your target profit margin. Start with the hours your team will spend. Multiply those hours by their fully burdened cost (salary, benefits, software, office space). Then add a margin, typically 40-60%, to ensure the work is profitable. This bottom-up approach prevents you from guessing and undercharging.

Many agencies price retainers by looking at what competitors charge or by using a rough percentage of ad spend. This is a mistake. It ignores your specific costs. Your team's expertise, your overheads, and your desired profit level are unique to your agency. A retainer priced at £2,000 might be wildly profitable for one agency and a loss-maker for another.

Define what's included with crystal clarity. Your retainer agreement should list deliverables: for example, "management of up to 3 Google Ads campaigns, 2 performance reports per month, 1 strategy call, and up to 15 hours of optimisation work." It must also state what's not included, like building new landing pages or managing social media ads. This clarity is the foundation of a profitable retainer vs performance pricing debate, as it sets the baseline for any additional fees.

Review and adjust your retainers regularly. A client whose ad spend has doubled since they started probably requires more work. Don't be afraid to have a conversation about increasing the fee to match the increased management complexity. Specialist accountants for PPC agencies can help you build pricing models that automatically account for this scaling.

When does performance-based pricing make sense for PPC?

Performance-based pricing makes sense when you can directly tie your work to a specific, measurable business outcome that the client values highly, like cost-per-acquisition (CPA) or return-on-ad-spend (ROAS). It aligns your success with the client's success, which can be a powerful selling point. However, it introduces risk, so it must be structured carefully to protect your agency.

The classic mistake is basing your entire fee on performance. This puts all the risk on you. A better approach is a hybrid. Charge a lower base retainer to cover your fundamental costs and time. Then add a performance fee or bonus for hitting agreed-upon targets. For example, you might charge a £1,500 monthly retainer plus 10% of any revenue generated over a £50,000 target.

Base performance fees on metrics you control. You directly influence click-through rate, quality score, and conversion rate optimisation. You have less control over a client's product price, website user experience, or phone sales team's closing rate. Tying your bonus to "total sales" can be risky if other parts of their business are broken.

Use performance pricing strategically. It's excellent for winning new clients who are skeptical. It demonstrates confidence. It's also great for growth-stage clients where you believe you can significantly move the needle. For established, steady-state accounts, a straightforward retainer is often simpler and more predictable for both parties. The choice between retainer vs performance pricing often comes down to the client's appetite for risk and your confidence in the results.

What are the pros and cons of project-based billing models?

Project-based billing charges a fixed, one-time fee for a defined piece of work, like a new account audit, campaign setup, or migration to a new platform. The main pro is clarity. Both sides agree on a deliverable and a price upfront. The main con is that it doesn't provide recurring revenue, which is the lifeblood of a stable agency.

These project-based billing models are incredibly useful for specific scenarios. Use them for one-off consulting projects, such as diagnosing problems in a client's existing account. Use them for implementation work, like building out a new campaign structure from scratch. They allow you to charge for intense, focused work without the commitment of a monthly retainer.

To price a project profitably, you must estimate the time required very accurately. Pad your estimate. If you think a campaign setup will take 25 hours, quote for 35. Projects almost always uncover unexpected complexities. Clearly define what "done" looks like. Is the project complete when campaigns are built, when they are launched, or after the first week of optimisation?

The smartest agencies use project fees as a gateway to retainers. Offer a discounted audit or setup project. This lets the client experience your work with lower risk. Then, propose a retainer for ongoing management based on the improvements you've identified. This project-to-retainer pipeline is a proven growth tactic. It turns one-off revenue into predictable monthly income.

How should you mix and match pricing models?

Mix and match pricing models by using a core model for your primary service, then layering on additional fees for extra work or exceptional results. Your primary PPC agency pricing strategy might be a fixed monthly retainer for core management. On top of that, you could charge project fees for one-off builds and performance bonuses for beating targets.

Create a service menu. This makes mixing models easy and professional. Your menu might list: Standard Retainer (£X/month for A, B, C), Advanced Retainer (£Y/month for A, B, C, D), Campaign Setup Project (one-time fee of £Z), and Performance Bonus (10% of revenue over £T target). Clients can see their options clearly, and you avoid awkward conversations about extra charges.

Tailor the mix to the client lifecycle. A new client might start with a setup project and a first-month retainer. A long-term client on a steady retainer might be offered a performance review project every six months. A client wanting aggressive growth might opt for a retainer-plus-performance model. This tailored approach shows strategic thinking.

Document everything in a clear statement of work (SOW). The SOW should state the base model, any additional project fees, how performance is measured, and payment terms. This contract protects both you and the client. It turns your creative pricing mix into a professional business agreement. For frameworks to build this into your financial plan, our financial planning template for agencies can provide a useful starting point.

What metrics should you track to know if your pricing works?

Track gross margin per client, utilisation rate, and effective hourly rate to know if your pricing works. Gross margin tells you how much profit you make after direct costs. Utilisation shows how much of your team's available time is billable. Effective hourly rate reveals what you actually earn per hour worked across all your pricing models.

Gross margin per client is the most important metric. Calculate it by taking the fee you charge and subtracting all direct costs for that client. Direct costs include the PPC manager's time (based on their salary), any freelance support, and software tools used specifically for them. A healthy PPC agency should aim for a gross margin of 50-60% per client. If a client is below 40%, your pricing is likely too low or the work is too inefficient.

Utilisation rate measures efficiency. If your team of three has 480 available working hours in a month, and 300 of those hours are spent on client work, your utilisation is 62.5%. Industry benchmarks for agencies often sit between 60-75%. If your utilisation is very high (over 80%), your team is at risk of burnout. If it's low (under 50%), you have spare capacity and may need more clients or to adjust your service offerings.

Calculate your effective hourly rate. Add up all your revenue from a client over a quarter. Then add up all the hours your team spent on that client. Divide the revenue by the hours. This tells you the real value of your time. If your target rate is £100 per hour but this calculation shows £65, your pricing or your scope is off. You can read more about operational metrics in our agency insights.

How do you have the pricing conversation with clients?

Frame the pricing conversation around value and outcomes, not hours and tasks. Start by confirming the client's business goals. Then explain how your chosen pricing model directly supports achieving those goals. Present your fees as an investment in their growth, not a cost to their business. This shifts the discussion from price to value.

Be confident and transparent. Explain why you use a particular model. You might say, "We recommend a fixed monthly retainer for your account because it gives you predictable budgeting and guarantees our team's focused attention on ongoing optimisation." Or, "We suggest a hybrid model with a performance element because we're confident we can exceed your ROAS target and want to share in that success."

Present options when appropriate. Offering a choice between two clear packages (e.g., "Basic Management" vs "Growth Partnership") can make clients feel in control and help them self-select into the right tier for their needs. It also often leads them to choose the higher-value option. Always lead with your recommended package first.

Get agreement in writing before starting any work. A signed proposal or statement of work prevents misunderstandings later. It should detail the model, the scope, the fee, the payment terms, and the duration. This professional approach builds trust and sets the relationship up for success. It turns your well-designed PPC agency pricing strategy from an internal document into a client-facing agreement.

Testing and refining your pricing is a continuous process, not a one-time task. The most successful PPC agencies review their pricing models every six to twelve months. They look at what's working, what's not, and what the market is doing. They aren't afraid to drop unprofitable models or introduce new ones for new services.

Your pricing is the engine of your agency's profitability. Getting it right means you can invest in better talent, better tools, and deliver even better results for your clients. It's the commercial foundation that lets you build a sustainable, growing business that you enjoy running. If the financial side of this feels daunting, remember that specialist support is available. Accountants who specialise in PPC agencies can help you build robust, profitable pricing frameworks tailored to your specific business.