When to switch between PPC agencies pricing models

What to take away

The four models and what each one rewards

Percentage of ad spend is the most common structure in UK paid search. The agency takes a slice of media spend, so income rises with your budget. That alignment cuts both ways: it rewards growth, and it can reward spend that does not convert.

Fixed retainers pay for capacity rather than outcomes. You buy hours or a scope of work, and the agency absorbs overruns. This suits steady, predictable workloads.

Hourly rates suit project work, audits and migrations. They are transparent but hard to budget, because the invoice depends on how long the work takes.

Performance fees tie payment to a defined result, such as cost per acquisition. They demand clean tracking, agreed attribution and a baseline both sides accept.

Each model also shapes how an agency grows. On a retainer, extra revenue usually means extra clients or extra staff. On a percentage deal, one account can grow with the budget.

Typical retainer and percentage bands sit in our PPC agencies: costs and budget guide for England, which sets out the commercial assumptions behind each structure.

When each model fits

For example, a team paying a £2,000 monthly retainer on a £20,000 media budget is paying 10% of spend. Move the same account to 12% and the fee becomes £2,400 a month. Both figures are illustrative, not market rates.

Who settles the platform invoices matters too. If the agency pays the platforms, a percentage deal is simple to administer. If your finance team pays directly, a retainer avoids reconciling two sets of invoices.

The data you need before switching

Pull a year of spend, conversions and fee invoices. Check whether the agency's reporting matches your own analytics. Include platform invoices as well, because fees and media often arrive on separate documents.

Ask how a billable hour is defined, how platform credits are treated, and whether media spend includes VAT. These details decide which model is genuinely cheaper. Our breakdown of PPC agencies hidden costs: data and sources lists the line items buyers most often miss.

Compare across a full year, not a peak quarter. Seasonality flatters one model and penalises the other. A spend spike in November makes a percentage fee look dear, while a quiet January makes it look cheap.

Ad copy and landing pages fall under the CAP Code, and if you disagree with a ruling, the independent review process is set out on the ASA independent reviews of decisions page. Agencies that write ad copy should know this route exists.

Before and after a model change

Run the after column against your own numbers before you sign. A model that looks cheaper at current spend can invert if budgets rise.

Ask the agency to price both models on your last twelve months of invoices. That gives one comparison built on real numbers rather than a pitch.

Compliance and skills checks

Any pricing conversation involves sharing account data. Where that data identifies individuals, the Data Protection Act 2018 governs how it is processed, so agree retention periods and access rights in the contract.

Capability matters too. Where you ask an agency to upskill your staff, routes such as LinkedIn Ads certifications show what structured training looks like. Treat certification as a signal of process, not proof of results.

Common questions

Is percentage of ad spend always the most expensive model?

No. It depends on the percentage and the budget. A low percentage on a large budget can cost less than a retainer on a small one.

Can I mix models with one agency?

Yes. A common arrangement is a retainer for strategy plus a percentage for media management. Keep each element separately invoiced.

How much notice should a model change need?

One full billing cycle at minimum, ideally a quarter boundary. That gives both sides a clean, comparable reporting period around the change.