How to Price Digital Marketing Services?
Pricing is one of the most plaguing questions out there when it comes to building an agency, or any business for that matter.
Setting (or changing) the pricing for your business can feel daunting. After all, the stakes are high…
What happens if you lose clients who don’t want to pay the new rates?
What if you set out with one type of pricing structure, but end up realizing it doesn’t work?
And what happens if you screw up the calculations and underprice?
These questions, and more, keep new and scaling agency owners up at night.
To help, we’ve collected some base-level information to help you decipher which pricing structure might work for you.
Let’s start with one of the more prevalent pricing structures…
Arguably the most intuitive model, hourly pricing works much like any freelancing or employment position. Each employee at the agency has an hourly rate, and the client pays the hourly rate for whoever they work with.
Keep in mind, the hourly rate needs to take into account the overhead costs of that employee.
This one’s pretty simple…
Hourly Rate x # of Hours = Price
Here’s Why It’s Great
In the agency world, time is money. By charging hourly, you are getting out exactly what you put into your work. That means even if a client has a million questions, and emails you 7 times a day, at least you’re getting paid for it, right?
This pricing method works great for practically every agency because it’s flexible. Whenever you’re ready to scale, simply raise rates or hire more employees.
What’s the Catch?
Tracking hours can be a pain in the butt and can also take up valuable time. It can also be difficult to get buy-in from a client unless you have fairly accurate time estimates for projects.
Flat Rate or Project-Based Pricing
One of the more prevalent pricing systems for newer agencies, project-based pricing typically involves charging a flat rate for each short-term project you work on with a client (like setting up a website or creating some design deliverables for a campaign.)
Flat rate pricing is similar, but usually applies to more long-term business relationships. Typically, this structure charges a flat rate for long term management of projects (like SEO Management, Weekly Blog posts, or Paid Ad management.)
Typically, the price is determined based off the average number of hours it would take to complete the project.
Hourly Rate x Estimate # of Hours + Margin = Price
Here’s why it’s great
Straightforward pricing makes paychecks more predictable. It’s also quick to calculate and easy to understand.
Not to mention, a straightforward fee is a lot easier to convince a client to pay. So, if you’re looking to get your foot in the door, this pricing model might work for you.
Read more here.