Pay per lead, flat fee or revenue share: how marketing agencies charge, and when each one is worse for you
There are more than three models. The nine below cover almost every proposal you will be sent. The right question is not which is cheapest but what each one pays your vendor to do more of, and who carries the risk of a month when nothing sells. Every model here has a column for when it is wrong.
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What actually separates these models?
Two things: what the vendor is paid to produce more of, and who carries the risk of a month where nothing sells.
Every other difference is downstream of those two. A model that pays for leads produces leads. A model that pays for appointments produces appointments. A model that pays for closed revenue produces arguments about what closed, unless somebody wrote the definition down first.
Nobody is being cynical here. A vendor responding to the incentive in their own contract is behaving normally, which is why the contract is the part worth reading twice.
What are the models, and when is each one wrong?
Read the third column, then the fifth. The fifth is the one that is missing from almost every pricing page.
| Model | How you pay | What it pays them to produce | Right when | Wrong when |
|---|---|---|---|---|
| Shared pay per lead | A price per contact, sold to several buyers at once. | Volume, not fit. The vendor is paid the same whether you sign the case or the sale. | You have idle capacity this week and will accept a low close rate to fill it. | It pairs an attractive cost per lead with a poor close rate, which is the worst possible pairing for cost per sale. You are also racing three strangers to the phone. |
| Exclusive pay per lead | A higher price per contact, sold only to you. | Volume within a definition. What counts as a lead is the whole negotiation. | You can define a lead tightly in writing, and you can audit it. | The definition is loose. Under a loose definition, a wrong-number enquiry is billable and you will argue about it every month. |
| Pay per appointment or per show | A price per booked call or per call attended. | Calendar entries. The setter is rewarded for booking anybody. | Your offer converts on a call and you simply need more conversations. | Your close rate is low. You will pay full price for the conversations that were never going to buy, and the incentive runs against you. |
| Flat monthly fee | The same amount every month, whatever happens. | Doing the work well enough to be kept. Not volume, and not the size of your deals. | You want predictable cost, full ownership of the accounts, and an adviser whose advice does not change with their invoice. | You carry all of the risk. In month one you pay the same as in month twelve, and if the fee is a large share of your media budget you have bought management and not traffic. |
| Percentage of ad spend | A share of what you spend on media, set as a percentage of the budget. | Spending more of your money. This is the only model on this list whose incentive is openly against the buyer. | Almost never, for a small advertiser. | Always worth questioning. Ask what happens to the fee in a month when the right answer is to cut spend in half. |
| Revenue share on closed sales | A percentage of sales the system brings, invoiced after they happen. Our offer Wealth Marketing AI takes 30% of every sale the system brings, with no retainer, for coaches and consultants. | Closed revenue. It is the only model that is paid after you are. | Your offer converts, you can take the calls, and you would rather pay out of revenue than out of savings. | Attribution is contested, your price is low, or you close badly. It can also make you reluctant to raise prices or to sell more of what works, because the share rises with you. |
| Commission only, paid on results | Nothing up front, a share or a fee on each outcome. | The outcomes that are easiest to produce, which may not be the ones you want. | You are unproven and cannot risk a retainer, and you accept less senior attention. | You need patient, unglamorous work done, which is exactly the work nobody does for free. Commission only quietly reprices your attention as well as theirs. |
| Reduced fee plus a share | A smaller monthly fee, plus a percentage of results. | Both. Usually the fairest split of risk on this list. | Neither side can carry the whole risk and both want the other in the boat. | The blend is used to hide the real cost. Model twelve months at your expected volume before agreeing to it. |
| A share of legal fees, in law | A percentage of a recovery. | Not applicable. | Never, for a marketing company. | Always. ABA Model Rule 5.4(a) says a lawyer or law firm shall not share legal fees with a nonlawyer. |
What should you settle before you agree to any of them?
What exactly is the billable event, in one sentence?
A lead, an appointment, a show, a signed case, a sale. Write the definition down and then write down three edge cases: a wrong number, a duplicate, and a refund. Most disputes about money are actually disputes about this sentence.
Who attributes it, and what is the tie-break?
Whoever owns the tracking owns the argument. Decide now what happens when a client says they found you another way, and what window an attributed sale sits inside. On a revenue share, also agree what is owed on sales that close after the engagement ends.
What is the stop rule?
What you expect by day 30, 60 and 90, in writing, before anything starts. This matters most on a flat fee, where nothing about the invoice changes if the work is not landing.
What happens to the accounts if this ends badly?
The ad accounts, the pages, the tracking numbers, the pixel and the records should be yours throughout, with the vendor holding access you can remove the same day. If any of that sits in the vendor's account, the pricing model is not your biggest problem.
Is the model legal in your category?
In law it is not a preference. A marketing company cannot take a share of legal fees. The rule and what it means for how any agency must be paid is here.
Which models do we use, and what is wrong with them?
A flat monthly fee in four verticals and a revenue share in one, and both carry exactly the downsides listed in the table above.
The flat fee is worse for you than a performance model in one specific way: we are paid the same in a month where nothing works. That is why we write the stop rule down before starting, and why we would rather be asked about it than not.
The revenue share is worse for you than a flat fee in a different way: if your price is low, or your close rate is poor, a percentage of sales costs you more than a fee would and it gets more expensive as you improve. If that is your situation we will say so rather than sign it.
We are not telling you the model we use is the right one. We are telling you which of its problems are real, because you will meet them either way.
Which pricing model is best for the buyer?
None of them, in general. A flat fee is best when you want predictable cost and full ownership and you can carry the risk. A revenue share is best when your offer already converts and you would rather pay out of revenue. Pay per lead is best when you want volume this month and can absorb a low close rate.
The useful question is not which model is best, it is what each model pays your vendor to do more of.
When is a revenue share bad for the buyer?
When attribution is contested, when your price is low, when you close badly, or when you plan to raise prices. A share of sales grows with your success, which quietly taxes exactly the improvements you were trying to make, and every disputed sale becomes a negotiation.
It is also bad when the sale is slow. A share on revenue that lands nine months later means the agency is funding your business, and they will price that in or leave.
When is a flat fee bad for the buyer?
When you are carrying all of the risk and the fee is a large share of the money you have. In month one you pay the same as in month twelve, and if the fee is bigger than the media budget you have bought management capacity rather than traffic.
It is also bad when it removes any urgency. Ask for the stop rule in writing before you start, so month three is a decision rather than a conversation.
Why is a percentage of ad spend a problem?
Because it is the one model whose incentive is openly against you. The agency is paid more when it spends more of your money, and the right answer in a bad month is often to spend less.
If you are offered it, ask what happens to the fee in a month when the correct decision is to cut the budget in half. The answer tells you what you need to know.
Can a marketing agency be paid a share of legal fees?
No. ABA Model Rule 5.4(a) states that a lawyer or law firm shall not share legal fees with a nonlawyer, and a marketing company is a nonlawyer. What a firm may pay for is advertising: Model Rule 7.2(b)(1) permits a lawyer to pay the reasonable costs of advertisements permitted by the rule.
The full answer, with the rule text, the comment about lead generators and the state variations we could source, is on can a marketing agency take a percentage of legal fees.
Which models does Wealth Marketing AI use, and why two?
A flat monthly fee in four verticals, and a revenue share in one. Law firms pay $5,000 a month, research peptide brands $5,000 a month, mobility dealers $3,500 a month and Dubai real estate agencies USD 5,000 a month, each flat and each funding their own media. They pay a flat fee because the deal values are large, uneven or legally constrained, and a share of them would be either unfair or not permitted. Coaches and consultants pay 30% of every sale the system brings, with no retainer.
Both of ours have the downsides listed above, and they apply to us exactly as written.
Working out which model fits your business.
Twenty minutes on your deal value, your close rate and who should be carrying the risk. If the honest answer is that you should not be buying any of this yet, that is a fine outcome for a call.