Do you know what the medieval blacksmith and the digital marketing agency have in common?
Services have always competed on price, at least to a degree. And they always will.
Digital marketing agencies are always coming up with creative ways to price their services. But, at the end of the day, it comes down to the question of results and time. And, for some agencies you don’t want to work with, it boils down to time only.
You would think after hundreds of years, it would be more than that. But, it really isn't.
The issue is, most marketing agencies have gotten really good at hiding the fact that they are charging hourly rates.
The really good marketing agencies have figured out the two-pronged formula of results plus time. And, these agencies are the ones who have successfully escaped the hourly quagmire.
Which one is the best fit for your business? That’s what we’re going to try and figure out in this post.
Cheap agencies are cheap for a reason. That’s a key to remember.
If you think an agency is charging too much, consider how much bad marketing will cost.
With that out of the way, let’s explore some of the benefits you can enjoy when you explore partnering with a growth or digital marketing agency:
- Business Growth: Partnering with an agency is a great way to grow your business. You can get the benefits and skills of a full-service marketing team even if you’re not ready or able to hire one in-house.
- Growth Levers: The right digital marketing agency will focus on all six levers of growth, awareness, acquisition, activation, revenue, retention, and referrals.
- Staying Competitive: The modern marketplace requires you to stay on your toes when it comes to marketing approaches. An effective agency will be up-to-speed on the latest tactics and strategies, allowing you to stay relevant.
- Adopt Proven Processes: Your agency partner will have tested and retested their processes on client after client, ensuring you get the best results the first time.
- Outgrow Your Partner: The right digital marketing agency will partner with you and help you grow until you can hire an in-house team to replace the agency, allowing for a smooth transition as you scale.
Factors that Influence Pricing
Not all digital marketing agencies are created equally. As we hinted above, it’s possible to find a marketing agency on the cheap. However, the cheapest solution might not be the right solution for you and your business. On the contrary, a cheap agency might end up costing you more in the long run if their campaigns and efforts fail to deliver.
So, what factors can you expect to influence the pricing of digital marketing agency services? Let’s take a look at a few of the factors that result in different pricing.
Related Read: The Most Common Problems of Building a Growth Strategy
- Experience: How long as the agency been in business? How many clients have they worked with? How many of those clients have seen incredible results? The answers to these questions will all influence pricing.
- Generalist vs. Specialist: Working with a single “jack-of-all-trades” will be less expensive than working with a team of specialists who are highly skilled in specific areas like content marketing, growth-driven design, and social media marketing.
- Business Size: How small or large is your business? The answer to this question will dictate your marketing needs. The larger your business, the more you can expect to spend on marketing.
- Timeline and Expectations: Are you expecting crazy results crazy fast? Then you can expect to pay some crazy money. On a more serious note, our pricing model at Lean Labs offers options based on speed. The cheapest option promises growth at a slower rate than our most expensive package. It’s just not possible to get great results fast without making a significant investment.
- Services Offered: If you’re looking for a full-service agency, you can expect to pay more than if you’re simply hiring a consultant to help with SEO. The more services you need, the more expensive your solution will be.
- Strategy Complexity: Finally, how complex is your strategy? Are you looking for a simple content strategy, or do you need a website overhaul, CTAs, content strategy, social media campaign, and more? The more complex and interwoven your strategy, the more you can expect to pay.
Good marketing always pays for itself.
Pricing Models for Digital Marketing Agencies
Some agencies, and a lot of freelancers, charge an hourly fee. If you want them to redesign your website, their quote will come with an hourly rate. This is different than the fixed pricing model because any scope changes go straight to the client’s checkbook.
This kind of engagement is easy to manage for the agency, and sometimes a pain for the client. Because if someone isn’t done right, or if something underperforms, the pain isn’t felt by the agency because they keep billing the client for the extra work.
Hourly relationships are generally the model of smaller agencies or freelancers.
Fixed pricing is what some smaller agencies have adopted. They will give you a bid for a website project or marketing proposal. They will do the work for a set amount.
This is usually an easy project for the agency, and a mixed bag for the client. Because the scope and expectations have to be managed to keep scope creep at bay.
If there are any changes or additions, you have to stop and agree to the final price (and the final deliverables) before continuing. And, if the end result doesn’t meet expectations, it’s often an argument over the original quote vs. all the changes that were requested during the project.
A lot of midsize to large marketing agencies have adopted this kind of pricing model. It can take a bunch of different flavors, but the end result is the same.
In this instance, hours are transformed into some form of spendable currency - like “points.”
A website project is estimated to take X hours to finish, so the price of that project is translated into X amount of points. Usually, 1 for 1 - one hour equals one point.
The beauty of this model is that it’s a lot more flexible without a bunch of revisions or conflicts over scope creep. For example, in the middle of the project, if the client wants to add a page to the website that wasn’t discussed earlier, no worries, we can just apply points to build that page.
In many cases, points are used as an ongoing retainer. Every month, for $X, the client gets X points. And, they can spend them on whatever they need or want. And, if there are not enough points to complete the work in the current month, you can easily borrow points from the next month, or purchase a bunch of points, etc.
The positive side to points vs. hours is that, if an agency tells you a new web page will cost, say, 15 points; and if that page isn’t completed in 15 hours, the agency assumes the cost and risk of going over-budget.
Related Read: Six Best Tools for Creating Websites That Convert
That’s why clients like this so much. The agency has to deliver the 15 points worth of work regardless of whether or not it took 15 or 20 hours to complete.
A lot of agencies use value-added pricing to assume some of the risk of the project, and therefore, some of the reward as well.
Where an agency may normally charge you $500 an hour for their services, they may discount that down to $200 per hour, with a value-added bonus attached.
It usually goes something like this: We’ll do it for $200 an hour, and 10% of the revenue directly attributed to our actions.
Some people balk at that because percentages sound scary.
But, the truth is, value-added pricing is based solely on delivering revenue. It’s performance-based pricing, and like in the previous example, it usually equates to a much higher ROI than any of the other pricing models.
Digital Marketing Agency Pricing: Don’t Hire a Marketing Agency on Price Alone
I challenge you to think about digital agency pricing in a different way—a better way: Instead of comparing hourly rates, compare the cost of results.
What does that mean?
If you paid an agency $150 an hour, and they drove a $200 return for each hour investment, that’s pretty good. And, a lot of people would be happy with that ROI.
However, if you could pay a different agency $500 an hour, and they would bring you a $2,000 return for every hour spent, which one would you rather hire?
Do the math:
By the time you pay the first agency $1,000.00 in fees or retainer, you would have made $1,332.00.
By the time you pay the more expensive agency $1,000.00 in fees or retainer, you would have made $4,000.00.
Just because the second agency charged more than 3X what the first agency charged, the results more than pay for the difference.
Good marketing always pays for itself.
What’s more, a great digital marketing agency will guarantee results and do whatever it takes to see you win. At Lean Labs, we believe in a core value we call Value Over Profit.
What does that mean?
We win together, or we don’t win at all. We won’t just pocket your money if you’re not seeing results. Instead, we’ll put in the extra sweat it takes to see results—on us.
To see how we get those great results for our clients time and time again, check out our free resource, the Growth Playbook! This resource will help you learn how to plan and budget for growth, and gives you the tools you need to see massive growth shifts in your business.