Agency

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12 Minutes

Digital Marketing Agency Pricing Models: What You Need To Know

Written By

Sean Martin

There is truly an endless bevy of digital marketing agency pricing models out there to be chosen from. And when it comes to signing with a digital marketing agency, it’s important you know what questions to ask and what price points to stick to. Otherwise, you may end up being taken for a ride by an agency that is in it for their profit instead of your growth. And the truth is - when it comes to your business’s success or their client’s satisfaction - nobody wins there. 


There are quite a few different agency pricing models to discuss. And the list only gets longer when you start to consider how many different specializations digital agencies can have. You have your PPC agencies, your content marketing agencies, your email marketing teams, your web developers, your social media management teams, your web curators, freelancers - I could go on but I think you get the point. With all those different services, there’s bound to be a lot of pricing options to be considered. 


As specialists who offer multiple, integrated cross-platform marketing services, we know how much of a hassle finding the right pricing model can be for a growing business. So, we decided to write up this 12 minute read for you to educate yourself on what pricing models are currently out there. 


And, better yet, what Xspekt’s customized pricing options can do to out-quote the competitors you might be considering. 


Red Flags & Analysis Paralysis

There are two main reasons why we felt that this post was a necessary addition to the X·Act blog. The first was that we noticed a disturbing trend amongst some of our newly onboarded clients: 


While they were eager at our strategies and suggestions, when it came to pricing they already seemed to be apprehensive towards certain pricing models. And, because we offer a customized package of multiple, combined digital services, we often had to explain the nuances behind why certain agencies choose to charge a certain way


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As a new business on the market offering such a wide and complex array of services, our prospective leads often compare us to other “cross-platform package” marketing companies. And, more often than not, we found ourselves having to explain the difference between “package” and “custom” pricing, as they had previously had negative experiences with packages that had seemed too good to be true, and performed far under that bar. 


The hesitation and confusion after being educated on certain pricing models and their differences often left our clients in a state of analysis paralysis as they 1) dealt with the frustration of having paid for the wrong goals and metrics in their past marketing relationships, and 2) froze up in the face of choosing the “right” pricing model moving forward. 


This analysis paralysis is what led us to the second reason for writing this post: agency red flags


We were tired of hearing newly onboarded clients complain about the agencies they had dealt with in the past. Either their previous agency had charged far too much of a retainer for far too little performance, or they demanded more ad spend or percentage of ad spend in order to improve the performance. 


“Too often were we seeing clients deal with agencies that prioritized their own billing over the performance of their client’s campaigns. Certain pricing options prioritize the hours of work put in, others prioritize the quality. Some pricing options prioritize the growth of the actual business, while others prioritize the growth of just the marketing budget, which pays the agency more…”


You want to choose an agency - and a pricing model - that aligns with your goals and the growth of your company. Not one that will only pad the pockets of your partner.


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So, to arm you with as much knowledge as possible for when that conversation finally goes down, below you can find all of the most common digital marketing agency pricing models out there. 


Plus, you can read on to learn a bit about what truly customized pricing and marketing strategies can look like - when you expect the unexpected. ;) 


Basic Digital Agency Pricing Models

Looking at things from the general scope, there are basically six different forms of pricing models that most digital agencies fall under. More often than not, if you want to squeeze any service-specific pricing model into a “type,” one of these categories will do: 


  1. Hourly fees
  2. One time project fees
  3. Monthly retainers
  4. Incrementally increased monthly fees
  5. Milestone / Goal based fee increases
  6. Percentage of spend 


The specifics of the pricing model - scale, timeline, goals, and metrics - will depend on the agency you’re working with and the industry you’re working in. But when it comes to the basic values of any pricing model, you’ll notice that they always fall under one of the above five types. 


Let’s start with hourly fees. Hourly fees are just as they’re described - paying the agency for the amount of time they spend on the account. 


Now, this is horrible for a number of ways. For starters, if you’re a truly optimized digital marketer, time is of the essence and spending too much time doodling around in the account can oftentimes either end up muddling split test data or, even worse, make you miss the window of opportunity altogether. Secondly, this payment structure prioritizes someone’s time spent on the campaign without worrying about their performance at all. I could spend hours and hours doing keyword research for a content client without writing a single post and end up charging them a massive fee without publishing even a single word - let alone improving their business at all! 


You want to pick an agency and a pricing model that is going to place your business’s actual growth as the North Star metric of their own success - and their for their own growth. Not an agency that simply wants to be rewarded for putting in the time. 


Moving onto one time or isolated project fees, you can expect that the agency is focused on the execution of deliverables above all else. This means that they are going to be building something for you to take home and manage on your own - meaning that management might not be something they specialize in. Or, simply that they intend to charge a management fee later on to continue maintaining what they’ve built for you. 


On the other hand, monthly retainers don’t get to count on heavy start-up fees to front load their work. Instead, agencies on retainer fees have to continually prove their worth month in and month out. While this can be a good thing for someone looking to optimize their account, it can also mean a bit of hesitation on the agency to switch things up once they’ve reached a nice performance standard. 


You want to encourage strong performance, but not at the cost of stagnation. 


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Certain agencies like to start out on low retainers with clauses included into their contract that their fees increase after 3 months or 6 months, etc. This may seem like a deal to you because you can save money on the front end of any project. But it’s important to clarify if these fee increases are based on performance, or just time. 


Otherwise, you may end up dealing with an agency that manages to increase their fees simply by sticking around for a few months, even if they haven’t optimized a single part of your campaign. This is why milestone increases are preferred when it comes to incrementally increasing management fees. 


Lastly, we have the percentage of ad spend agencies. These agencies choose to charge based on how much you’re actually spending in any marketing campaign. If you’re in the PPC space, it’s ad spend, if you’re in the content space, it’s your budget for content creation, curation, and promotion. 


The problem with this pricing model is that neither the agency nor the client is truly rewarded based on the performance of the campaigns. To get more money, the agency has to convince the client to spend more - even if it doesn’t necessarily point to improved performance. Likewise, the client doesn’t know whether or not the agency is working towards improving the actual ROI and performance of their campaign, or simply increasing their budget (and therefore how much the client must pay them).


When it comes to choosing the right agency pricing model, it’s important you choose an agency that supports your business’s actual growth and not just the boosting of vanity metrics and marketing budget. 


You don’t want your marketing agency to be growing more from your relationship than you are. 

 

Service Specific Pricing Models

Now, I mentioned before how the actual pricing models of service-specific digital agencies can get quite nuanced. However, each of the most common digital marketing agency pricing models still fall under one of the five categories we just discussed. 


If you want to play a fun game, you can try to figure out which pricing model falls under which of the five categories to see where the real values of the agency are focused. See if you can master the ability to see through the sales jargon of even the best marketers. 


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What An Agency’s Choice In Pricing Model Represents 

Now that we’ve gone through and discussed all of the major pricing models available in the digital marketing industry, it’s time to discuss what each of them mean.  


It’s simple really: the pricing model any digital marketing agency chooses to employ is often the most direct representation of where their values lie - whether they be in favor of their profit, or your performance.


If you find yourself signing with an agency that is constantly convincing you that the pricing model they work with is the most profitable model for you, you should already be skeptical. If they continue to increase their billing without at least doubling your improvements first, then you have a serious problem. 


You want an agency partner that is hungry to earn more money - but only by continually out performing your goals and growing your business, not by finding new ways to sneak in some extra fees. Nobody wants a hog as a partner. 


As my father used to tell me at the dinner table: “Pigs get fed, but hogs get slaughtered.” 


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Besides, given the current customizability of modern day marketing, the needs of the modern consumer - and therefore the modern day marketer - isn’t it time you find a pricing model that is equally as customizable?


The ‘X’ Factor (Truly Customizable Pricing)

At Xspekt, we know that today’s modern day consumers don’t respond to the average joe marketing campaign from 2012. The truth is that what used to be considered the “premium” digital marketing campaigns are already considered “boilerplate,” “late edition,” and “hasbeen.” and relying on the old agencies and old pricing models that created those campaigns is going to generate the same type of results: lackluster


Instead, we customize each of our proposals not just in strategic suggestions, but in services offered, pricing, and scale - to best tailor our campaigns’ goals and budget to your business’s needs. No two clients, campaigns, or quotes are alike. As it should be. It only makes sense that if you want to create something perfect and customized from the bottom up, you start with the very first check you sign to your partner. 


And we do just that - completely customized cross-platform goals, budgets, and campaigns from the very first signature to the very last sale.  


BONUS: Proving Yourself To Each And Every Client

Here’s a little reminder of something that some of the more successful agencies may have forgotten on their climb to the top: It was originally a few select clients who chose to give you a shot that allowed you to start the gravy train you’re riding on. 


And I’m willing to bet that you were more than willing to “customize your pricing” for them way back when. Because back then, you remembered - at the forefront of your mind - that it was the client’s satisfaction, above all else, that would make or break your agency. It was all about making the client’s campaigns a smashing success. 


The paycheck and the retainer were only secondary to the brand building done with each successful campaign and each satisfied client. 


Now, why on Earth did you stop thinking like that? 


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With each custom build and each custom budget, we give ourselves the chance to prove ourselves to each client. We know that we may not be getting the full value for our services at the beginning of every contract, but we know that we are making more than our money’s worth back in returns when it comes to how many clients are so happy they choose to sign on for 6 more months at a time. 


You should never be too good to prove yourself to any client as you onboard them. Take your time and show how valuable you are as a partner before you go and ask for the big bucks. 


If you’re really the marketer you sell yourself to be, you should welcome the challenge anyhow. 


Takeaways - Know What You’re Looking For

When it comes to choosing the right digital marketing agency for you, it also comes down to choosing the right digital agency pricing model as well. This isn’t to say that you should pick any agency who’s pricing model fits your budget. Instead, you should take the time to use the pricing model any agency offers you as a litmus test to discern where their values truly lie. 


When it comes to picking the right digital marketing agency pricing model, it’s not so much about knowing what types of models are out there, but about what type you are looking for. 


x-act by xspekt

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