Profitable Models and Profitable Customers

Dec 13, 2004 • 11:35 am | comments (1) by twitter Google+ | Filed Under Search Engine Strategies 2004 Chicago
 

Anne Kennedy from Beyond Ink was first up to discuss profitable models. She starts off explaining that search is hot, so hot that is distracting. There is just so much money, but not enough employees and time. Traditional pricing models; PR 3x cost, Advertising; 15% of media, etc. They charge a retainer for SEO, a per keyword fee by PPC, they outsourced services they markup and consulting by hour. The more you charge, the more business they get. They have a 2 level SEO plan; (1) 60 - 90 day startup and maintenance and (2) Jumpstart, priced per page. Beyond Ink Algorithm; annual cost total/available hours = per hour cost. Market rate - per hour cost = margin. Total job hours x hourly rate - outside cost = profit.

Next up was Matt Trimmer from ivantage.co.uk. The first five minutes or so he discussed his company, his person experience and how things have changed in the industry. He said he even hired Danny Sullivan back in the day. He discussed how there is tons of misinformation; register your site with a 100 search engines for $99 and selling SEO as PPC. There is a lot of risky tactics out there and for those that dont know what they are doing, need to be very careful. They focus on measurements using web analytics and checking positions. They protect themselves with a contract and price everything based on time. They have an SEO Express, which is SEO on a CPC basis, a product that helps them do this is Your Amigo. They have an SEO Consult which is advice and training. They do SEO Implement where they do the work. PPC Management. Web analytics. Best model for pricing. Consultancy 950 pounds, account management is 500 pounds and I missed the last one. He then goes over the time based pricing and its advantages. Main advantage is that its easy to explain to the customer, easy to justify and easy to avoid a discount. Things that worry him include that he has no real control over customers leaving, PPC commissions and fees worry him, getting good people worry him and one day agencies might build SE Friendly sites.

Andy Beal from Keyword Rankings was next up. When they first started his first goal was to keep the lights on, and used a typical SEO pricing model (i.e. pay us $10,000 for the first 90 days and then $500 per month there after and we will get you top rankings). A lot of those companies left after 90 days, so they needed to figure how to keep the customers on. They kept on bringing on new clients but they needed to make more from the existing clients whom kept on leaving. They needed to remove the cost of entry (i.e. 10k to get in). They needed a pricing model to encourage a long term client. They changed their pricing model to a flat rate per month ($2,000 per month), and then Keyword Rankings knew what to expect month after month. They also did not have to pay a high commission as they used to with the lower monthly rates. No set up costs and easier to get approved. Removed the $XX,XXX for the first 90 days. Low cost monthly payment with 6 and 12 month terms. Clients see it as a long term campaign, and they see a very high retention rate (up towards 90%). The downside to switching to this pricing model is that they have sapped cash reserves for 2 - 4 months. Annual revenue per client increases. Higher retention rates allows them to increase service staff. They started off with about 800k, then 1.8m, then 4m, then 7m, and then 15m. It takes 6 months for Keyword Rankings to become profitable.

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Comments:

Matt Trimmer

01/26/2007 12:20 am

Hi Barry, Happy to blog SEO London events I attend. You bloged my Chicago session some years back.

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