Pay Per Lead | Profit Margins | How To Charge Clients

Pay Per Lead | Profit Margins | How To Charge Clients


– Hi everyone, today I
wanted to talk to you about profit margins and the PPL model and the pay-per-lead model. A lot of you that have been following us have probably dabbled a little bit in kind of charging clients on
a pay-per-lead basis and I wanted today to discuss what the profit margins should be and what they can be if you decide to make that switch. Of course, you know where to go if you need more information. We’ll have a case study link, everything to do with that but today, I wanted to talk to you about the three different
models that we run as a business and what we teach within our program and what you can expect
from profit margins which is why we do this, right? To make money. So the first model that we
run is the up-front model, the pay-per-lead, get paid up front model which is the most
profitable, the most scalable and what we try and push for the most within our agency and we
try and push our students, we try and get them to
do up-front, pay-per-lead and what this means is
that you’ll agree a price with a client of what
that cost per lead is and you will run the
advertising for that client and point the traffic to a funnel that you build on behalf
of your client, okay? And the difference between
what you generate the leads for within your advertising account, whether it be Facebook or Yahoo Gemini or Twitter or Google or Gmail or whatever traffic source you’re using, you own that advertising account and you spend money on your credit card within that advertising account and the difference between
what you spend there and what you generate for the client is your profit margin. So we tend to look at a 50 to 75% profit margin on the up-front model. So if you’re getting paid $50 per lead, you wanna be generating the leads for $25 or less, okay? Because in order to really
make a healthy profit and scale quickly, you need it to be around
these levels, okay? If it’s anything less, then you need to tweak your
ads, your funnel, et cetera. All right? And of course, you have
your company overheads to take into the margin as well. So if you’re generating 100 leads per week and you’re making $2,500
per week in profit, then you’re gonna have
your office expenses, your staff expenses,
your business insurances and everything that goes along with that, including your, in the UK, your corporation tax. So you need to have a healthy margin in order to do well with that model, all right? The second model we run within our agency we call the hybrid model which means that we ask the client to pick up the advertising spend. So there’s less risk and a lot of new people
coming into our program aren’t too comfortable with the risk yet, so they land a client and say, “Listen, we’re
gonna build your funnels “and we’re going to run the advertising “within an account that
you have access to, okay? “You can either put
your credit card on file “or we’ll invoice you for the ad spend. “And we’ll spend that $5,000 a week “or whatever that’s agreed “and we will generate as many leads “as we possibly can “for that $5,000, okay? “And if a lead converts, “then we’ll take a commission, Mr. Client. “We’re not gonna get paid anything “until a client converts for you, “a prospect converts for you “which means we’re paid on performance.” And clients love hearing
this type of lingo because they know that
they’re getting bang for the buck. Every lead that their advertising
spend is generating goes to them and they’ve got better
transparency, all right? And it works really well. We’ve done this a number of times and we’ve had great success, in fact, it’s been
extremely profitable for us and it’s worked for both parties. And that works well. So if you’re looking to run a hybrid deal and a client gets maybe $2,000, 2,000 pounds or whatever
it is per closed prospect, then you need to look to get
roughly 25% of that amount, so that’ll be 500 bucks. Expect them to push that
down lower and lower and you can go probably all the down to about 10% in that case, okay? So at that point, it’s a negotiation. You do need to have great transparency, you need to have a good
gut feel about the client, you need access to their CRM, all this type of stuff that we go into more detail about but with hybrid, you only get paid on the client’s performance, all right? So there’s some figures to work with, between 10 and 25% split on the commission ’cause the client is advertising, sorry, is funding the advertising spend. So it’s important that
they make their money back and they’ve gotta pay for
their own overheads as well. All right, the last one
is the backend deal. So the backend, traditionally
what people think is that us as an agency will cover the advertising spend and only get paid on performance when the client converts a lead and that in my opinion,
is not a great model and I would not recommend you do that. However, one thing that we do do is we segment our leads, okay? So if there are, and I’m maybe getting a
little bit complex here but if there are 1,000 leads
coming into our funnel, we sometimes feel that maybe 50% of those leads aren’t ready
to be sent to client A, instead, they should be sent to client B on a backend deal. So client A will pay
the full cost per lead on the front-end model and we’ll make money there or breakeven and then
we’ll send the other 50% of the leads to a client who’s willing to work
them on a backend deal. So the front-end leads up here actually finance the backend leads and anything that converts
from a backend lead is like pure profit. If you’re smart and you can figure out
how to segment leads, then you’ll make 100% margin on those backend leads, okay? Kind of touched on a lot here today. Hopefully you’ll understand what I’m talking about. You may have some questions. If you see this video on YouTube
or on Facebook or whatever, just comment below and we’ll answer those questions for you. All right, speak soon.

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About the Author: Oren Garnes

6 Comments

  1. How do you segment the leads for front end versus back end? Do the leads more likely to perform/close go to the back end or the front end?

  2. So, the back end model is just selling leads that are of less quality and may take more of an effort on the client's behalf to close at a reduced price to a secondary client? Kind of like a butcher selling his scraps that he's got off the prime rib to somebody on the cheap, for them to make dog food; is that correct? Overall the PPC lead generation model is pretty interesting and reminds me of the old days, when you paid telemarketers by the lead.

  3. Hi great advice. On up front model. The client pay for each lead or call? Right. If they don't close the contract they pay for the leads too. Right?

  4. One of my client want leads.
    I'm planning for lead generation via social media ads and email marketing.

    But the clients asking if we can work on revenue on share basis! How should I Apporach for upfront model?

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