Overview of Pay for Performance vs. Other Payment Models
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This is one of the most straightforward and typical ways for providers to charge their clients. The fees are often charged bits at a time as the project goes along. This is the “bill for services” model used by professional service providers in most industries.
The problem with this kind of payment model is that it’s asking the client to take on all the risk. The SEO Company gets their payment regardless of whether or not their efforts and time produce anything of value for the client – which is how and why business website owners come to perceive SEO providers as either untrustworthy or worse. For even a top-performing SEO company, asking the client to simply “trust” that the SEO service will deliver what they say, and to pay up – well, that’s asking a lot. Skepticism is justifiably aroused in this scenario.
Hourly Based Consulting
This pay model is often used when “light” SEO services are performed, especially in terms of initial evaluation of a site. Sometimes a business owner may want an overall idea of what needs to be done on the site, which keywords to focus upon, and so forth. This often feels safer to a business owner, given the alternative of thousands or tens of thousands of dollars from the start, without taking the SEO provider for a test drive. Hourly-based consulting can also be employed if the business owner has in-house SEO personnel to employ SEO tasks, but may still need a blueprint for SEO processes and strategies from a professional expert. Hourly based consulting pay models are generally acceptable, as long as an SEO company is charging a reasonable amount for this limited scope of service.
A monthly retainer is charged by SEO companies that are employed by a client over a long period of time for ongoing SEO strategies and implementation. This makes a lot of sense in regards to the fact that SEO is needed on an ongoing basis. Some companies may reduce or raise the retainer in a given month, based upon the extent of activities. This is also more preferable vs. paying all service fees up front. This “pay as you go” model at least allows for the client to measure the SEO service company’s work and performance as time passes.
This is another commonly used model of payment for SEO services. This is usually applied when SEO/SEM providers are hired for a predetermined amount of work … optimization of written content, link-building services, etc. The SEO Company offers a single price for whatever individual services and processes are employed. The potential problem again is, whether or not that individual service really justifies the result risk on the part of the client. If an SEO service is hired to provide only link-building, will those links be supporting an SEO campaign and strategy already in place? It is hard to judge individual services such as this, as to how much they really promote the site, or how much advantage is gained by an individual service in comparison to the often steep contract fees that are charged.
This one is the least often employed, because in order for it to be a successful arrangement, it must be nothing less than a business partnership between the client and the provider. Online marketing and SEO companies that use a profit-sharing model are paid a portion of the revenues brought into the website after services are implemented. This model speaks highly about a provider’s confidence to deliver results, and, of course, is definitely a “fair” way to negotiate payment of services. This model tends to work well – if and only if, it is set up as specified above: like a business partnership. And, obviously, also only if the business website brings in – or will bring in – considerably high revenues. A lot of extremely high profile SEO companies and businesses arrange this kind of business partnership. This model is not a good idea for small to medium businesses and beginning to mid level SEO providers, for obvious reasons.
This model is far from the perfect arrangement, however. One problem with profit sharing is how to assess offline revenues; a portion of which may also be a direct result of SEO services. Implementing SEO using Google Places and Google Product Search, for example, can significantly increase offline revenues. In order for offline revenues to be accurately distributed, revenue tracking and measurements would have to be equally transparent to both parties – something many business owners are not comfortable with. Or, the SEO provider must simply trust the business owner regarding revenue figures – something that many SEO providers are not be comfortable with. After all, this is a business and businesses rely on absolute accountability which is a gaping hole in this model.
Another problem can be with the business itself – if there are complications or under-par performances in outside business departments or extensions, this can severely impede or interfere with SEO efforts, and prevent improvements in conversion rates. Any SEO service – or business client, for that matter – that decides to go with profit sharing – should ensure that the business is running smoothly and optimally on all fronts – both online and off. Specifically, SEO companies cannot generally agree to a profit-sharing model because they cannot control or even influence factors completely beyond their control such as pricing, service, product or service quality, returns, customer service, reputation and many additional factors. Partnerships are based on trust and trust is based on knowledge and experience. Rather than a condition at the beginning of a client relationship, a profit-sharing model should be a goal of the client and the SEO Company to grow into … success begets success.
Assessing Pay for Performance Models
Pay for Performance SEO models can be a bit of a delicate topic for many SEO providers. There are plenty of stories out there from online marketing providers and consultants, as well as from former SEO clients. The stories reveal very negative experiences with this particular payment model – from the provider’s perspective, and from the perspective of the client, both of whom walk away feeling burned and used by the other. However, the problem is not that paying for performance arrangements are innately unsuccessful. There is almost always one of two reasons why pay for performance models take a wrong turn; unclear deliverables, and control.
When either the client or the SEO provider does not clearly define payable results, it will almost always end poorly for both. If the SEO provider is hired on a pay for performance basis, and successfully boosts incoming traffic, but the website sees no change or improvement in conversion rates or revenue, then certainly the client will feel cheated. Likewise, if an SEO provider is hired and paid based upon SE rankings, which may only be made by a few keywords, but the site has a massive increase in traffic and sales – then the SEO provider will feel burned when he or she is not compensated for the increase in traffic and sales that is obviously due to their work. Both of these scenarios are quite common, and are due to a lack of clearly defined pay for performance criteria. It is important to measure quality as well as quantity. SEO providers can bring all the traffic and rankings to a site that are possible, but if the website owner sees no growth in revenue – then the SEO is of little value.
The other factor that has a huge impact upon the outcome of a pay for performance model is control. How much control is given to the provider or kept by the client will directly impact the success of SEO. For example, let’s say a provider is hired to provide complete and total SEO and SEM services for a clothing designer’s website on pay for performance. They invest time, money and energy into revising the whole site for several months. Then in one evening, the clothing designer decides to change the entire front end of the system and move it to another server. This deletes all the work that the SEO provider has just put in for the past few months. Because the SEO Company did not have control over that aspect of the site, the rug is pulled out from under them. A few SEO companies have said that in order for the SEO Company to have full control over the provision of their SEO and SEM services, it means being permitted to track and measure all sales and revenue records, a hand in merchandising, customer service quality, product or merchandise QA, and much more. Why? In order to ensure that none of the SEO efforts are undermined by other facets of the business. This is obviously a ludicrous expectation, and also not necessary for successful pay for performance agreements.
How SEO Pay for Performance Models Can Make Everyone Happy
Bad pay for performance arrangements between an SEO provider and a client is like a physical therapist that is hired to help a client with broken arms and legs gain better physical movement. The PT works with the client directly for short periods at a time, but also provides the client with a regiment to do on his own. The client finds the regiment too difficult, doesn’t do it, and his physical capacity does not change. He then complains to the PT that the therapy has not really helped him. Meanwhile, the PT wonders why he was hired at all, if the client will not do what is recommended, or even necessary. The same goes for an SEO provider who is hired on a pay for performance basis for a business or website, without clearly defining goals, payable results, measurable deliverables, and control of processes. Because of so many different situations that are possible, both clients and providers should take precaution when agreeing to pay for performance arrangements.
Online marketing and SEO services from Optimum7 offer a unique pay for performance arrangement that has worked well for both clients and Optimum7 and should work well for other SEO providers. Instead of arranging payment entirely upon pay for performance, or entirely on a retainer or regular payment model, we agree to base up to 40% of our services contingent solely on clearly defined, independently measurable results.
Optimum7 has used varying criteria since we first instituted Pay for Performance Fees in 2008. Back then we based everything on keyword rankings using an “agreed-to” keyword list or universe after extensive keyword research. The basis of the model is that the higher you rank, the more you pay on a keyword for keyword basis. To keep everything fair and manageable from a budget standpoint, we capped the fees so if we ranked for 100% of the keywords on page 1, there would be no fear that the fees would be unmanageable. This model worked very well and we still use it with those of our clients that prefer it.
We offered a new model that will use with new clients right now which is based on the measurable increase in traffic as measured by Google Analytics … not just any traffic either … only organic traffic coming from the search engines. It has several major advantages … (1) Since 90%+ of all organic traffic come from page 1, then we are raising the bar on performance and remove any suspicion having to do with long tail keywords that are easy to rank for yet have poor search volume … remember pay for performance is as much about trust as it is fairness and accountability and (2) the measurement criteria involves the comparison of the most recent 90-days to the previous 90 days … and … the comparison rolls forward every month so that Optmum7 is constantly charged with a higher and higher set of numbers to hit which is directly in line with what the client is looking for to begin with. There is no such thing as resting on your laurels or being paid for achievements already achieved.
So, what about conversions? That is the ultimate measure, correct? As discussed, many things can go wrong that interfere with pay for performance based on conversions. It has to be a good deal for both parties. The fees are risked by the SEO Company and the client must be willing to be for that performance. Any inadvertent or intentional (yes, it happens) tampering with the analytics code destroys any accurate measurement of the actual conversions.
For this reason, we mainly stay with Pay for Performance based on increases in organic traffic based on a sliding scale and with a cap to protect our client’s budget.
Most importantly, we understand that conversions are the ultimate measure of success. It is also true that getting relevant traffic to the website is not enough. We also recognize that no client will continue our services after the first year if we don’t deliver the conversions with the traffic. This is precisely why we include Conversion Optimization as a standard part of our SEO Service Levels.
Some SEO companies advise against pay for performance because they insist this is a common model under which newbies and inexperienced providers work – or they simply feel they are too experienced and professionally secure to have to accept pay for performance arrangements. Still others balk at the idea saying that there are too many variables within SEO; search engines can never really fully be controlled by anyone – which is very true. While this perspective still assumes the client should accept all the risk, search engines are indeed, impossible to fully control. However, they can be worked with over time to produce some real degree of predictability in results. We do not promise an exact ranking within an exact time frame, an exact volume of traffic, or that we will turn any minuscule website around within a week … NO ONE CAN.
Our Performance Based Fee approach provides our clients with a partner that really has some “skin in the game.” Rather than a bonus, it is a part of our fee that we consciously split up to provide our clients and our prospective clients the confidence and peace of mind that they have hired an SEO Company willing to join with our clients in the result risk of SEO.
Contact us for a truly effective Internet Marketing and SEO strategy, we can help.