How To Price Your Agency’s Service: Chapter 1

Implementing the right pricing model in your digital marketing agency would mean the difference between achieving sustainable growth or barely being able to keep your head above the water! Let’s take a look at the six most popular pricing models.

As a new digital marketing agency, you might be finding it very challenging to grow your business. The truth is that implementing the right pricing model would mean the difference between achieving sustainable growth or barely being able to keep your head above the water!

Establishing pricing is never an easy conversation and to be honest, we have all debated and played around with different pricing models to see what seems to be more sticky with our customers. However, choosing the right pricing model goes far beyond just achieving growth. The truth is that bad pricing can also affect other aspects of your business such as your service, project management, employee retention, and more.

With this in mind, it becomes quite obvious that pricing is not something that should be overlooked. You might be asking yourself what are my options? And, how do I know what pricing to choose from? And well, you have come to the right place.

When deciding what pricing model you would like to use for your agency, there are various factors that will influence how much you choose to charge your clients.

The pricing will generally vary depending on how diverse your product offering is. For example, if you offer services for social media management and SEO optimization, you might choose to use different pricing structures for each service. In short, your pricing model will vary depending on what project you would be undertaking, the niche your client is in, and any other additional services they require.

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Let’s take a look at the six most popular pricing models for digital marketing agencies to help you evaluate what pricing best fits your needs:

1. Hourly Rates

In short, implementing an hourly pricing model involves establishing an hourly rate for your services and charging your client for every hour worked on the project. As an example, if your rate is $20 per hour and you work 20 hours on the project, you would bill your client $200.

Simple right! The hourly pricing model is the simplest and most popular pricing model amongst new digital marketing agencies. Not only is it easy for digital marketing agencies to implement hourly rates, but clients are also attracted to this pricing model as they know exactly how much they are paying for your work.

The biggest disadvantage of implementing hourly rates is that you run the risk of the project taking longer than anticipated. So, if you decide to use the hourly pricing model make sure that you clearly communicate your expectations with the client. It’s important to outline how many hours you expect the overall project to take, how the client can monitor the progress and check on hours worked, and lastly what would happen if the project took longer than expected.

It can be very hard to scale your business on an hourly pricing model, however, the number one key to success is to accurately keep track of all the hours worked. After all, time is money! If you spend additional hours on a project that is not accounted for you won’t get paid.

Best for:

  • Digital marketing agencies who work with clients that require a lot of revisions time or are quick to change the direction of the project.
  • New digital marketing agencies that have not yet established accurate project timelines.

2. Fixed Rates

A fixed-rate pricing model looks into charging your clients a single fee per project. As an example, if you are a digital marketing agency that offers campaign development, you will choose to bill the client a flat fee for the services rendered.

Using a fixed-rate pricing model allows agencies to charge based on the expertise needed for the project rather than focusing on time. The key to implementing a successful fixed-rate pricing model is establishing clear deliverables and having clear timelines set out on how long you expect each project to take.

Some clients might opt to use a fixed-rate pricing model as it allows them to trial your services before investing in your agency long term. While others might be a bit apprehensive as it is hard to deduce if the pricing is fair in relation to the value you are adding.

Best for:

  • Digital marketing agencies that focus on specialized services and are able to offer clear timelines.
  • Digital marketing agencies that have clear deliverables per project.

3. Performance-Based Pricing

Using a performance-based pricing model directly ties the price you charge your clients to your agency’s results. As an example, if a client has hired your agency to help them increase the number of sales they received, your earnings will be a result of how many sales the company has done.

In order to succeed with a performance-based pricing model, agencies need to ensure they are confident that their services can deliver results. Charging clients based on their results means you need to be able to clearly define the conversion metrics that will be measured, which platforms will be used to measure its performance, and the value associated with each result.

An image of a hand countring dollar bills.

One of the biggest advantages of implementing this pricing model is that clients are more attracted to performance-based pricing as your agency shares some of the financial risks. However, one of the biggest disadvantages is that if you are not able to deliver results, you will not get paid for your work.

Best for:

  • Digital marketing agencies who are able to measure their efforts using performance metrics. Common performance metrics include conversions, leads, sales, lead forms and more.
  • Digital marketing agencies who are able to show that they deliver results through marketing metrics.

How To Price Your Agencies Service: Chapter 2

Don’t go anywhere! If you are interested to learn more about the remaining pricing models check out the second chapter of our series: How To Price Your Agencies Service: Chapter 2.

In Chapter 2 we will look into three other pricing models such as retainer-based pricing, value-based pricing, and mixed rates, as well as the different ways you can charge your clients for your services. You don’t want to miss out…

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