The Guide for Digital Marketing Agency Pricing + 5 Tips for Increasing Agency Revenue
It’s healthy to be concerned about your digital marketing agency pricing approach and whether you’re on the correct track.
How you price your services will primarily impact your capacity to grow a marketing business and, more importantly, your ability to keep clients.
The truth is that there isn’t a single price plan that will work for every marketing firm. In fact, most digital marketing organizations should use a variety of pricing models depending on the service or project being given to the client.
Consider this: why would you charge the same amount for a logo design as you would for managing a company’s Facebook ads? Only by charging on an hourly basis could these two deliverables be priced the same.
However, you should not do so, and this article will explain why and how to get your marketing agency pricing correct the first time.
So, what are the various structures for digital marketing agency pricing, and what one should you use?
In this article, we’ll go through the four most common digital marketing agency pricing models as well as pricing best practices for marketing agencies
Pricing Model Based on Projects (also known as ‘Milestones’)
Project-based pricing is a simple pricing strategy that both the agency and the customer can comprehend. The challenge for the agency is precisely scoping each project and estimating the time it will take to complete.
A fixed-scope project is typically priced on a milestone basis, which means payments are made in stages. One approach to do this is to pay half upfront and the rest when the project is finished.
To determine project rates, you must first determine how many hours you believe the project will take to complete.
Pricing based on an hourly rate
Another simple price model for marketing agencies is hourly rates.
It’s simple: the agency establishes an hourly charge for their services, either for the entire organization or for the individual(s) working on the project.
If the hourly rate is set agency-wide, all agency employees working on a project will cost the client the same amount per hour. If the hourly rate is based on individual contributors, the customer will be charged a sum based on characteristics such as their level of expertise and talent.
Pricing that is based on value Model
Value-based pricing is also known as results-based pricing or performance-based pricing.
Due to the shared risks and rewards, both the agency and the client become incentivized by the end outcome with a value-based pricing model.
Clients don’t have to be concerned about expenses, and the agency can focus on providing high-quality services.
Value-based pricing, on the other hand, is the most difficult approach, which explains why it has been shown to be extremely effective at raising an agency’s profitability.
As a result, the agency must be able to track and measure their performance, which can be difficult when gaining access to the client’s backend and dashboards.
As a result, this will take longer to establish, and customers aren’t always the most prompt in providing all of the information needed for an agency to be successful. However, if you truly care about your clients’ success, you should want access to these resources anyway. Furthermore, the prospective gains are well worth your time and little annoyances.
This is how it works…
The agency must determine what each customer values, such as the number of leads created through Facebook Ads.
Model of Retainer Fee Pricing
Because you’re paid upfront, and the customer can simply budget out retainer payments for each month, retainers are common among marketing businesses.
The client agrees to a pre-negotiated retainer and pays it upfront for either:
- A specific time frame or a set quantity of deliverables. Agencies and clients agree on a defined amount of hours to be worked each month when operating on a time-based retainer. For instance, if your client committed to a monthly retainer of 40 hours at $125 per hour, the monthly retainer charge would be $5,000.
- Retainers that are based on time can be specified in a variety of ways. The retainer might be fixed in stone, requiring a client to use all hours each month. If hours aren’t used, an agency could allow the client to roll them over to the next month.
- If your retainer is based on deliverables, the agency and the client agree on what will be given each month, such as five blog posts, ten photos, and ten SEO backlinks. The problem with a retainer based on deliverables is that the agency is responsible for completing those duties.
- Time-based retainers can be specified in a number of different ways. The retainer could be set in stone, requiring a customer to use all of his or her hours every month. If hours aren’t used, the client may be able to carry them over to the next month.
- If your retainer is based on deliverables, you and your agency will agree on what will be delivered each month, such as five blog posts, ten photos, and ten SEO backlinks. The issue with a retainer based on deliverables is that the agency is in charge of fulfilling those responsibilities.