Digital Agency Fee Structure

The price is right! Or is it . . . ?

Several factors comprise a digital agency fee structure, and it has to make sense for your brand and your target customer. Because if the price isn’t right, your online revenue will be up sh$t creek without a paddle.

So, if you’re stumped for how to accurately price your services, you’re not alone. It’s a really common problem for marketing agencies.

After all, you’re not creating kicka$$ landing pages and stellar content creation out of the kindness of your heart. Although you love your clients, you aren’t running a charity here.

You started your agency it earn an income, right?

So, even though the digital market is highly competitive, you need to set reasonable prices to attract customers and stay in business.

You also need to make some profit, remain motivated, and meet your operating costs.

It’s a tall order. But you can do it!

We’ve put together a few examples of how you can refine your pricing strategy that makes clients (and your bank account) happy.

What is an Agency Fee Structure?

The simple definition?

An agency fee structure is the amount you charge clients for external marketing services. Then, the fees are further broken down into smaller prices for specific deliverables.

Although it sounds simple, drafting your agency fee structure requires in-depth research about the:

  • Different factors that affect pricing
  • Specific types of services offered
  • Various pricing models

There are numerous ways to come up with agency fees. But we’ll focus on the most effective parameters that will reliably boost your online revenue.

What Type of Marketing Service Are You Providing?

Digital marketing is a cost-effective strategy that has helped millions of brands connect with a much larger audience. An audience that’s way larger than businesses could ever hope to reach through traditional marketing methods.

Sounds amazing. But the issue is, individual digital marketing techniques, and fitting into a broader strategy effectively, is complicated.

And pricing those services? Complex to say the least.

In order to price your services appropriately, you’ll have to start with a budget.

First, identify the main marketing service you are providing. This will guide you in the right direction when creating your agency fee structure.

As a marketing service provider, it’s essential to:

Understand Business Volume

Are you running aa low or high-volume business? Understanding your business’s volume will help you create a fee structure that makes sense for your business.

When starting, your business will likely be low-volume. So, you’ll need to sacrifice a part of your profit to reduce costs and attract more customers.

If this is where your business is currently, we suggest considering value-based over price-based pricing to build your client portfolio, accumulate knowledge, and level-up your experience.

Alternatively, if you have a high-volume business, you can set your prices higher. Aim for a 20 percent profit margin, since you’re already offering many services to many customers.

Understand the Market and Your Fees

What market are your serving? Smaller clients have smaller budgets, while the reverse is true for enterprise brands.

If you’re serving startups, small businesses, or mom and pop shops, you’ll have to set your prices accordingly since this type of market can’t bear higher fee structures.

Additionally, if you’re targeting a specific geographic area, this will also impact your fees. For example, startups in small and mid-sized cities can’t bear the prices that startups in metropolitan areas can.

So. understanding the market will tell you what price tolerance your geographical location can accommodate.

For example, digital marketing consultants globally charge between $100 and $400 per hour, with an average of $150. The average charge in the US alone is about $161.

With such price variations, your location will influence your price.

Types of Digital Marketing Services

Businesses spend as low as $500 to well over $10000 monthly for digital marketing services.

Digital marketing strategies are highly dependent on the brand seeking them, its customers, and offerings. So, this vast difference in price ranges depends on the digital marketing package they’ve specifically ordered.

As a digital marketing service provider, you can offer numerous digital marketing packages, each with a different price range. This wide range gives you the advantage of netting a broader customer group as there will be a Goldilocks just right plan for everyone.

Some of the most common digital marketing packages include:

Search Engine Optimization (SEO)

Search engine optimization involves various techniques to optimize your client’s website to rank highly in search engines. Some ways to achieve a higher ranking are through promotion, on-page SEO, off-page SEO, and technical SEO.

SEO changes constantly. As a result, it requires continuous maintenance to retain top rankings. Your agency can generate long-term income from SEO tasks.

Typically, SEO costs $3000-$8000 for monthly retainers, while one-time projects could cost up to $30000. You could also decide to charge hourly consultation rates between $90 to $200.

Content Marketing

Content marketing strategies promote relevant content for online traffic growth, lead generation, and brand awareness.

It may include writing and publishing your client’s blog post, but there’s a lot more to effective content marketing. You can also write ebooks and whitepapers, design infographics, and create audio or visual content.

Businesses that pay for content marketing services usually pay between $500 – $3000 a month. It’s quite a spread. So, the price you ultimately set for your agency depends on the technicality of the content and the monthly volume your client expects.

Pay-Per-Click or PPC Management

PPC management is a standard feature on Google ads that boosts online visibility. It is a form of advertising where you pay Google for ads on your client’s site to appear at the top of search listings.

PPCs can generate new leads for your client as soon as the ads go live. Your client then pays per click (CPC) or when their ad is clicked. PPCs have various target options, making them suitable for successful digital marketing campaigns.

They are a trendy package used even by top brands.

Many agencies charge customers 15-20 percent of their total ad spend as their fee for ads management. You can increase or decrease the percentage you charge based on how narrow their target audience is for their budgeted ad spend.

Social Media Management

Social media management is the process of online advertising through various social media channels. It involves posting content on multiple platforms and monitoring the marketing analytics. The channels include Facebook, LinkedIn, Twitter, Snapchat, Instagram, and Pinterest.

Many agencies charge monthly fees varying from $500 to $10500 or simply charge $30 to $300 per day should a customer prefer.

Email Marketing

Email marketing is a form of online marketing where companies can personalize their communication with their audiences. Most businesses use it to promote content, discounts, events, etc., and direct customers toward their websites.

An email marketing package is either charged per email or monthly.

Monthly payments typically range from $350 to $5000. Few services charge as low as $300 for their basic plan, while the cost per email is between $0.1 to $0.5.

Email marketing campaigns are affordable and effective. So, even small businesses with limited budgets can usually afford them.

Link Building

Link building is a strategy to link other websites to your site. You can buy links or hire someone to build them for you.

Link building can be costly. But it creates credibility for your site on Google.

Link building monthly prices are usually between $3000 and $10000, depending on the number and quality of links. Hourly price is between $50 – $250.

Video Marketing

Video marketing is a popular and effective form of digital marketing for modern businesses. You can use in-house videos, smartphone videos, or outsource video marketing production — depending on the objectives.

Smaller video projects can be priced between $1000-$150000, while large ones can be priced up to $40000.

Web Design

Web design is the process of creating and designing websites to make them more appealing to potential customers.

Quick-loading and easy-to-navigate websites increase traffic and generate new leads, costing between $2600 and $30000, depending on the customer’s needs.

Client Profitability

We have realized that in calculating agency prices, you need to set realistic ones. Realistic prices that make sense for both you and your clients enables a beneficial working relationship.

Some of the core factors to think about include:

Retainer-based or Project-based Pricing

While there are various pricing models, they fall under these two broad categories. Your business can operate on one or both, depending on your flexibility.

Retainer-based pricing

This pricing model is often adopted after establishing a relationship with a client. The customer agrees to pay an upfront amount for the services you intend to offer within the agreed period. You must calculate your total billable hours and present them as a single amount.

Retainer-based pricing can be complicated. So you should be cautious to avoid overcharging or undervaluing your services.

Project-based pricing

Project-based pricing is a standard model for most digital agencies. This is because project fees are simpler to determine compared to retainer fees.

With a well-defined scope of work, you’ll have fewer variables to consider.

Management or Monthly Fees

After settling on either a project-based or retainer-based model, you can discuss the payment terms with your client. It can be after several services or monthly.

Pricing Models: Use Digital Marketing Pricing Packages

If you provide various digital marketing services, you can outline the details and create a price for each package to make it more appealing to clients.

Some of the most popular digital marketing pricing packages include:

Social Media Package

Social media advertising is one of the fastest and most cost-effective ways to reach a large audience. The main objective of social marketing is to create exciting content that existing clients and friends can share, attracting new customers.

You can post your content on social media sites such as Twitter, Facebook, Pinterest, and Instagram.

Branding Packages

Branding is developing identifiable characteristics of your business. It involves creating a name, tagline, design, logo or symbol, and brand voice.

Branding bridges the gap between your services and the ideal customer, eliminating doubt and mistrust. It also increases your business’s recognition among customers, giving you a competitive edge, and creating loyalty and higher customer retention rates.

Branding is a vital marketing activity, so you should include its cost in your price tag.

Most digital marketing services offer branding packages for their clients to promote consistency. These packages often include creating the client’s logo, visual identity, and style guide.

The package consists of digital assets like websites, business card designs, email templates, letterheads, social media graphics, event branding, and more, depending on what was agreed with the client.

Branding packages are pretty pricey and can cost up to $75000.

Inbound Marketing

Inbound marketing is constructing valuable content that meets your target audience’s needs and influences long-term customer relationships. It’s content that’s geared toward forming a connection, answering questions, and solving problems your customers already have.

In contrast, outbound marketing is meant to disrupt and interrupt — PPC ads are a form of outbound marketing.

The various types of inbound marketing content include:

  • Blog writing
  • Video marketing
  • Research
  • Infographics
  • Webinars
  • News articles
  • Social media advertising
  • Slideshare
  • eBooks
  • White papers

Inbound marketing can be costly. Pricing it as a standalone package can prevent your overall running costs from skyrocketing.

Media Buying

Media buying is the acquisition of advertising space on offline and digital platforms such as websites, social media, and YouTube.

You need resources and a well-defined marketing strategy to undertake successful integrated online marketing campaigns.

Full-Service Package

Fully-integrated marketing packages involve website design, content creation, email marketing, social media marketing, public relations, and other digital marketing services. Full packages cost between $30000 to over $200000.

Customize Sales Experience to the Pricing

There is stiff competition in the digital marketing sector. To retain your clients, you need to offer them valuable services for their money.

Which Pricing Model Should You Use?

Here are the advantages and disadvantages of various models to help you make an informed choice.

Project-Based (Milestone) Pricing Model

You can opt for this model if you’re confident in your skills and resources. However, you’ll have to accurately estimate the project’s length and involvement for you to charge accordingly.

Pros

  • Agencies work without client supervision.
  • Customers can check small tasks before committing to large and long-term projects.
  • Agencies can request a part of the price upfront.
  • Rates and deliverables are negotiated up front, safeguarding the agency from additional requests beyond the original contract.
  • It’s convenient for agencies and clients since it’s easier to calculate than a retainer model.

Cons

  • It can be challenging to determine the duration of a project before completion. This can be difficult for new agencies to charge appropriately, risking the loss of clients.
  • Agencies cannot charge additional work automatically. They need to negotiate for it.
  • Agencies have to divide massive projects into phases and negotiate payments per phase to maintain a steady cash flow.

Hourly-Rate Pricing

Hourly pricing is the easiest and most convenient if you’re a beginner. This model values your time since clients pay you for the hours you’ve invested. And you earn as much as you can work.

Pros

  • It is easy for customers to understand and stay within the budget.
  • New agencies can create their first invoice faster since it’s the easiest of the models.
  • Clients prefer this model because they know how much they’ll spend per hour.
  • You can predict your cash flow if you’re sure of the number of hours you’ll work per week.
  • You can earn more from long-term projects.

Cons

  • You’ll get the same for complex and simple tasks without considering skill or experience.
  • There are no incentives for working faster.
  • You must track and document your working hours to receive payment.

Value-Based Pricing

If you’re an expert or have a ton of experience in your trade, a value-based pricing model is the most suitable to reward your worth. Clients will appreciate your premium services and be willing to pay high prices.

Pros

  • You can earn more if you provide more value and drive growth for your clients.
  • There is the freedom to set your prices.
  • Clients are happy to receive valuable services.

Cons

  • It is a challenge to produce consistent value always.
  • You may value your work inappropriately.
  • It is risky since a reduction in value lowers your profits.
  • Despite all your efforts, you may fall short of some goals.

Retainer Pricing

A retainer model indicates your commitment to work for a specific client for a fixed duration of time at a predetermined rate. It assures you of steady income as long as you and your client honor your agreement.

Pros

  • You have a steady flow of income.
  • Your dues are paid upfront or in milestones.
  • Clients have an easy time budgeting and accounting since they know their monthly expenses.
  • You can create an ongoing strategy for your client.
  • You have flexible time to work on projects and deliver them as agreed.

Cons

  • Estimating how long a project will take before you begin working on it can be challenging.
  • It is challenging to standardize your project.
  • The final cost may surpass the client’s budget.

Customized Pricing

If you have various skills and resources, this is the pricing package you can adopt to have a variety of clients and different income streams. In addition, this model cushions you against losses since you have other clients to rely on if one client delays or defaults on payment.

Pros

  • You can analyze clients’ specific needs and tailor services for them.
  • Your services are cost-efficient.
  • You can accommodate all types of clients.
  • You can add value to your agency by providing various options.
  • Clients only pay for the services they need.

Cons

  • Clients may negotiate several services, lowering your profit margin.

Factors that Influence Digital Marketing Cost

Running a digital marketing agency is a practical step towards financial independence. In addition, offering quality services at appropriate rates can help you compete with established digital marketing agencies.

Digital marketing pricing requires in-depth research and consideration of other factors, regardless of your chosen pricing model.

Such factors include:

Agency Experience

Digital marketing is a competitive industry where clients get what they pay for. Therefore, your rates as a beginner cannot be equivalent to those of established digital marketing agencies.

But don’t worry. Your hard work will pay off and you’ll be able to charge higher rates before you know it. But you need to showcase your past successful projects to stand out and obtain those higher fees.

The more experienced you are in the trade, the higher the rates you can charge and larger contracts you’ll attract.

As an experienced agency, you have all the digital marketing tools, and your digital marketing team has the necessary expertise to work better and quicker.

On the other hand, you should start at reasonable rates, build your reputation, and increase them as you grow.

Industry Competitiveness

Many industries scramble for digital space. But some are more competitive than others. The more competitive your industry is, the greater the effort and budget you’ll need to stand out.

For instance, the legal and medical sectors are highly competitive on popular advertising platforms such as Google Ads.

So, when venturing into a competitive industry, you’ll need more advanced advertising strategies and financial investment than when entering a less competitive trade.

Operating Costs

The operating costs of digital marketing companies vary according to their sizes. Larger companies have lower operating costs thanks to their economies of scale. This implies that they can charge affordable rates and still manage to make profits.

On the other hand, beginning digital marketing consultants may need to charge slightly higher to meet their operating costs.

To keep your budget low, maximize every dollar and let your charges reflect the quality and scope of your work.

Digital Marketing Strategy

There is no standardized strategy that determines marketing pricing.

Your digital marketing prices will fluctuate according to your client’s objectives.

Consider that one marketing strategy may work for a given agency or a specific client, but may not work for you or all your customers.

You should test each digital marketing plan with your client and find out what works best for their industry and business goals.

FAQs

What is agency markup?

Agency markup is the percentage of profit an agency makes after selling its services.

What is a typical agency fee?

A standard agency fee is an actual charge an agency places on its clients.

How much should a digital marketer charge?

Although most digital marketing hourly rates are between $50 and $400, they can be lower or higher depending on individual marketers.

When working hourly, it is essential to have an accurate timer to record your work time correctly.

How do I charge for my agency’s services?

Your charges will depend on your services, operating costs, and other factors that may determine your pricing. You’ll need to understand your clients’ businesses and find a suitable pricing model.

Check out our ScaleMap Diagnostic. It’ll tell you more about your agency and if now is the right time to scale!