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agency pricing models

An SMB’s Guide to Digital Marketing Agency Pricing Models

You’ve decided to hire a digital marketing agency to help you with your campaigns. You’ve done your research. Now your vendors have their proposals ready, and they have different digital marketing agency pricing models.

Which among the agency pricing models is best for your goals? If you need the answer to this question, you’ve come to the right place. This blog post will discuss the different agency pricing models, so you can identify which one works best for your business goals.

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What is an agency pricing model?

An agency pricing model is a framework that specifies how the price of a project is computed and which variables affect the price. A marketing agency chooses a pricing model that its customers, like you, are willing to pay for.

For small- to medium-sized businesses (SMBs) like you, it’s important to understand agency pricing models so you can negotiate with your vendor and maximize your return on investment (ROI).

4 digital marketing agency pricing models

Here are the four most common agency pricing models:

  1. Hourly rate pricing model
  2. Project-based pricing model
  3. Value-based pricing model
  4. Performance-based pricing model

A summary of the different digital marketing agency pricing models is in the table below:

Digital agency pricing model Quick definition Best for
Hourly rate An agency charges you for its staff’s time by the hour. Outsourcing a fixed number of service hours
Project-based An agency estimates the cost of an entire project for a customer Projects with a definite end date and budget
Value-based An agency sets prices based on your perceived value of its service Projects that need a reputable agency with a successful streak
Performance-based An outcome-based framework that pays agencies based on the tangible value they’ve delivered When you have identified clear business goals for your agency to fulfill

Let’s go through each pricing model.

1. Hourly rate pricing model

An hourly rate pricing model is when an agency charges you for its staff’s time, by the hour.

For example, if you outsource content writing to an agency, it can charge you the hourly writer’s rate. If you need more than one service, say content writing and blog maintenance, an agency can calculate an hourly rate by averaging the value of one hour of work of the team members involved in your project.

When an hourly rate pricing model makes sense

An hourly rate pricing model is straightforward. An agency can offer this pricing model to your business if you require a fixed number of hours of their service, like providing a certain number of support hours for website maintenance or customer service support.

2. Project-based pricing model

Project-based pricing is when an agency estimates the cost of an entire project for a customer. The digital marketing agency calculates the hours required to complete the project. Then, they multiply the number of hours by the agency-wide hourly rate or the rate per contributor.

Agencies typically add a buffer margin to the final fixed amount. Half of the total bill is usually paid once the contract is signed, and the other half is paid upon project completion.

When a project-based pricing model makes sense

An agency may offer you a project-based pricing model if you’re working on a campaign that has a definite end date. This pricing model also makes sense when you must stick to a budget.

For example, let’s say you’re in the business of software as a service (SaaS) and outsourced your white paper and ebook creation to an agency that must be completed within an agreed-upon deadline. Your marketing vendor may propose a project-based pricing model for your content projects.

Pro tip: Clarify with your marketing agency the inclusions in the cost. Does it include revisions or project extensions? You may also ask for the possible sources of additional cost and negotiate if needed so that you won’t overspend on your projects.

3. Value-based pricing model

Value-based pricing is when an agency sets prices based on the perceived value of its service.

For example, you’re tapping a digital marketing agency for their lead generation efforts. The value that you’re looking for from the agency is leads. The higher the quality and quantity of leads the agency delivers, the higher they can charge you.

When a value-based pricing model makes sense

Agencies that use value pricing typically have a reputation for providing excellent services. For example, a crisis communication agency that has earned a name for restoring multiple companies’ reputations may use this pricing model.

The agency’s success streak can assure prospects like you that they can deliver the desired results.

4. Performance-based pricing model

A performance-based pricing model is an outcome-based framework that pays agencies based on the tangible value they’ve delivered. The results are typically measurable, like cost per click (CPC), cost per view, and cost per lead (CPL).

When a performance-based pricing model makes sense

A performance-based pricing model makes sense when you have identified clear business goals for your agency. Together, you can identify the metrics that determine your success and the reward you’re offering when your goals are met.

WebFX helps companies like yours reach their business goals

“Our marketing department has a lot of key performance indicators that WebFX has always helped us achieve… WebFX has always worked hard to make sure that we’re getting what we need out of the partnership, not just what may seem like the best result.”

HydroWorx

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Which agency pricing model is best for your business goals?

Now that you have a background on the different agency pricing models, you can identify the best digital marketing agency pricing model for your business goals.

In addition, you can negotiate when needed to get the most out of your investment. If you still need help with your digital marketing campaigns, consider teaming up with WebFX.

We are transparent with our pricing and services, so you know what to expect from our partnership. Focused on delivering results that grow your bottom line, our team of 500 experts will take the time to understand your business, industry, goals, and competition so we can drive revenue for your company.

Contact us online or call us at 888-601-5359 to speak with a strategist about our digital marketing services!

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