This is a common question many business owners ask themselves. Small business digital marketing is comprised of many difference services, so it’s usually a spectrum of ways they charge. But you may be wondering the different ways an agency can charge it’s clients, small business or not. Well let’s break some of those pricing methods down that Digital Marketing Agencies usually charge.
The Campaign Model:
The first we’ll go over is the campaign model, which is more of a single job type of model. In this case, a client would hire an agency to perform a service or multiple services for a non recurring project. This could be a website build/redesign, an SEO project, a photoshoot, etc… It’s just a project based model. There is usually no recurring fees or any kind of management after the end of the campaign. Think of it like a kitchen remodel. Once it’s complete, the work is done.
What You’d Pay In This Model: Whatever the cost of the agreed upon cost is at the beginning is whatever you'‘re paying. You should expect the agency also only perform the services that were agreed upon before the start of the campaign. Any changes would usually require an additional charge, similar to an a la carte menu item.
The Retainer Model:
This is one of the most common ways agencies structure their costs to clients. Basically, it’s usually a single flat fee to do a recurring job. For example, Bill’s Furniture Shop hires an agency to manage their Instagram. In this case, the agency charge’s Bill’s Furniture Shop a retainer. They realize they structured duties they can expect to perform every month/week/day. Let’s say Bill’s Furniture Shop contracts the agency to take photos of the items in Bill’s Furniture Shop, post once a day Monday through Friday, engage with all comments, and do user outreach to find potential new followers for the account which could later convert to customers. The agency would then charge Bill’s Furniture Shop a flat fee every month to perform these tasks. The Agency may offer this service for $1,500/month. With this model there is no surprise. The client knows exactly what services they can expect to see on their account agency knows exactly what they are getting paid to perform those services. There is usually very little deviation from the original agreed upon scope of work
What You’d Pay In This Model: One flat agreed upon fee. Usually this is monthly and you shouldn’t have any surprises. You should also expect the same level of services monthly so there is very little adjustment.
Performance Model:
The performance model is a variable cost based off of the agreed upon level of effort. Let’s say Bill’s Furniture Shop wants to run paid ads on a search engine. In this case the Agency charges Bill’s Furniture Shop on a performance model. This can vary, but it could be percentage of ad spend, a fixed cost for every call or lead generated, or a hybrid. Most of the time, agencies charge a retainer + a performance structure. The Agency agrees to manage bill’s search engine ads, for a fixed cost of $750 + 10% of spend. So they agency benefits more when Bill’s Furniture Shop agrees to raise their budget. The more BFS (Bill’s Furniture Shop) spends, the more the agency will make. The better the ads’ performance for BFS, the more likely they are to raise their budget to scale the services.
What You’d Pay In This Model: You should expect to (sometimes) pay a flat retainer fee, but there is usually a variable cost based on either a percentage of ad spend or revenue generated. Some months can be higher than others depending on how much you’re willing to spend. The more money spend/made, the more you pay. You’re expected received services are more flexible as you can make more requests in this model as the agency will be compensated for additional effort via the raise in advertising budgets/revenue earned.
Affiliate Model
In this model, both the agency and client agree that there is a flat fee earned for every sale. In this instance, let’s say BFS agrees to pay The Agency $100 for every sofa sold through the agency’s efforts. To track this, the agency would usually be given their own tracking URL and at this point, the agency is responsible for the ad spend. So The Agency’s goal would be get a sofa sale for less than $100 in ad spend. The Agency only knows $100 per sale, they don’t have to take into account BFS cost to make the sofa, the hours of the store, the hourly employees in the store, they only have to worry about spending less than $100 in ad spend to make a sale. For example, The Agency would prefer to have a sale for $50 spent. If The Agency can manage to get a sofa sale for every $50 of ad spend, they would profit $50 per sale. This model is the biggest win for the client but it’s also very selective as the client must have the ability to offer tracking URLs, the inventory to meet the demand if The Agency is producing numerous sales, and the capability to manage the logistics of the sofa sales. Usually the affiliate model is more commonly applied to digital business. Retail E-commerce clients, clients who sell digital products, and other services.
What You’d Pay In This Model: In an agreed upon affiliate program, the client only pays a fixed fee per sale. The Agency is responsible for how they get that sale. So whether or not The Agency has a blog and gets 100% of it’s sales organically, they get them through paid advertising, a YouTube channel, or a mix of all, it has no affect on the client as long as they are delivering legitimate sales.
These are some of the more common ways a small business would be charged by an agency. At the enterprise levels these models may be more dynamic and be much more nuanced but at the everyday business levels these are the types of pricing structures that a client should expect.
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