Is Your Marketing Partner Being Transparent?

Marketing has a well-documented issue with a lack of transparency. The Association of National Advertisers revealed in an independent study that several agency powerhouses were marking up media inventory 30-90% on top of the fees they were already charging.

These practices combined with highly publicized data breaches have contributed to an increasingly contentious environment surrounding agencies and the brands they work with. We’re going to take a look at a few of the questionable practices we see as well as share a few tips for franchisees to make sure they’re getting the most out of their agency partnerships.

Most Common Non-Transparent Local Marketing Fees

Over the past 12 years, I’ve worked with more than 100,000 small-business locations. When it comes to transparency, the most common concern I hear from franchisees relates to cost-per-clicks (CPCs) and marketing fees. This always surprises me when you consider that those are relatively straight-forward metrics in a local marketing ecosystem that’s as complex as ever with tracking store visits and attributing local-level purchase revenue becoming table stakes. Nonetheless, it’s a real problem that’s confirmed through our onboarding process with franchisee clients.

Our insights are gathered when we take over franchisee campaigns from other vendors. When we take over these campaigns, we’re typically already managing the majority of the entire franchise system’s local marketing campaigns. Some franchisees, however, decide to go it on their own with another partner.

When these franchisees make their way to us, we’re able to compare the performance data we’ve gathered on nearly every location in their franchise system to the data from their previous partner. We often find gaps between what these franchisees are being charged and the actual performance of their previous partner’s campaigns. Those gaps come in many forms, but these are the most common issues we come across.

Hidden CPCs and Markups

The most common nefarious practice we encounter is marking up CPCs by hiding the actual costs paid to Google. Here is how we see this being applied:

A transparent fee is included in the billing model. This is often 15 percent of ad spend or something similar. Along with the transparent fee, there also can be a number of non-transparent fees in the form of elevated CPCs. It’s an age-old, black-hat tactic, and it’s very much discouraged and frowned upon by Google. Nonetheless, it’s a tactic that well-established companies such as ReachLocal and Yodel have been known to use for years.

Other companies like Web.com and Hibu also employ versions of this model. In these versions, the client receives clicks and cost metrics, but when broken out, the cost per clicks is misrepresented – appearing much higher than what is actually paid to Google. This relationship creates a circle of “failing” paid search campaigns where the franchisee’s distrust is steered toward Google – not the platform or agency charging as much as five times the actual Google ad spend.

Elevated Ad-Spend Minimums

Many companies are transparent about their fees but are finding other avenues for elevated fees. As mentioned earlier, it’s common for agencies to include a transparent charge of 15 percent of ad spend. But charging 15 percent of ad spend on an SMB campaign that’s only spending $250/month on Google is not going to generate enough revenue to run the campaigns along with the tools needed for successful execution.

Some platforms and agencies are getting around this unsustainable model by setting unnecessary ad-spend minimums and identifying success as generating clicks and impressions – not the leads and revenue that contribute to a profitable returns on ad spend or cost per lead.

The misplaced focus on vanity metrics allows the marketing partner to claim high performance while the irresponsible ad-spend minimum generates their additional revenue. As for the franchisees, they’re left with a significant chunk out of their marketing budget and a disproportionate number of leads to show for it.

The bottom line here is if the fees seem too good to be true, they probably are.

How Do You Evaluate Your Local Marketing Costs and Fees?

Fifteen percent is a common rate structure for paid media management, and that’s been true for many years. But it’s important to make a distinction between large national campaigns and franchisee campaigns that use smaller budgets.

A 15-percent managing fee is appropriate for large national campaigns and can even be lower in some cases. But for franchisee campaigns with relatively small budgets, we more often see other platforms or agencies charging flat monthly fees.

One known example of a competitor’s transparent fee structure is in the form of a flat monthly fee of $200 per location. This model is a common method that’s being used as a fair and transparent fee for franchise marketing management. But in most instances, franchise owners are not receiving account-services-level management of their campaigns or direct access to expert support staff.

Even with the proliferation of bid and pacing automation for campaign management, expert support and management are necessary for building long-term relationships and generating long-term local marketing success between franchise owners and their local marketing partners. Scheduling an appointment to speak with an account manager and receiving call-center-quality knowledge simply doesn’t cut it, but in most cases, that’s what franchisees are getting.

Value and Transparent Marketing

To ensure you’re receiving transparency and value for the fees you pay for your local marketing, here are a few things you can do:

• Make sure the search engine data is coming directly from the APIs into the dashboard you have access to. Ask corporate. They will be able to confirm this. If your CPCs are coming straight from Google Ads (or DoubleClick) then you have your cost transparency.
• Be a part of a system-wide program. There is a bevy of knowledge gained by pooling all of the franchise system owners’ campaigns into one partner and platform. For example, if you spend $500 a month on Google, the insights your partner can gain to optimize against are limited by your conversion data sample size. But if your partner is managing a combined spend of $400,000/month for every location, then you will benefit from rock-solid insights derived from more reliable data, which can then be applied to your individual campaign.
• Lean on corporate. Your national marketing team vets their vendors thoroughly, and they are asking the important questions about transparency when setting up marketing partner relationships. Going it alone with local marketing “experts”, or partners not vetted by corporate, can lead to fees of $1,000 a month just because you like the marketing/sales person you work with. The danger here is you’re never really sure what you’re getting for all of that money.
• Base your campaigns on performance. That may be phone calls, lead-form fills, sales/revenue, driving direction conversions, store visits, or any combination of actions that have real value for your business. Optimizing the campaigns based on driving conversions gives you the insights you need to gauge whether your ad-spend levels are providing a reasonable return.
• Big-picture value. Do some digging in your local marketing platform to see if you’re receiving additional services or benefits in addition to your paid media management and reporting. For example, if review monitoring and responding capabilities are available in your platform, the value of your fees is further validated. Access to a review platform by itself can easily cost a franchise more than $25 per location per month.
• Have a team attitude. Get to know your account team, and work with them to understand the metrics and what they mean for your business.

Everything we do at Location3 is geared toward driving performance, and proving performance in local marketing is predicated on transparency and trust. The more I am exposed to the practices of competing local marketing platforms, the more I understand why transparency, even in the simplest of data points, is so important.

When done properly, local marketing for franchises requires sustaining multiple technologies including ad tracking costs, call tracking costs, platform and database costs, costs for multiple API integrations (Google Ads, DoubleClick, Bing, Facebook, etc.), credit card processing fees, finance and accounting costs, and account management personnel costs.

So remember, nothing worthwhile is going to be free, but hopefully this helps to empower you to find your ideal fee structure and gain the level of local marketing transparency you deserve.