Marketing agency billing must be understood by the startup or small business management team
Our Denver digital marketing agency billing at Matrix Marketing Group has been disruptive right from the start. But we have yet to settle in on one pricing model, however. It is driven by our clients. But the most popular model in our annual programs by far.
Let’s find out why.
You just landed your dream job as director of marketing and you have been tasked with a big project to drive more leads for your sales team.
You might have some marketing staff but what the marketing team has been doing is not working. Your web traffic has been flat and you’re not getting many leads from the website.
You could do some growth hacking and figure it out yourself. Or you could begin a search for a digital marketing agency that can help you get your business objective much quicker and cheaper.
If you go to the outsourcing marketing route, you should so go slow and make the right selection.
Hiring a digital marketing agency is a big deal. You must make sure they can help you with your problem.
As a professional ski instructor, luck me, right? You bet. So, when I see another instructor that could help their student achieve their goal in a different way, I’ll tell them in the locker room.
Because if you miss the correct skiing fundamentals, in the beginning, your progress will be hindered. Have you ever try to break a bad habit?
Do you golf? Any bad habits?
Because like in skiing, if your digital marketing agency takes you down a road for 12 months they better get it right. If the front end of the marketing program is not done correctly, you will experience waste through the whole process. Try to avoid that.
The marketing agency billing structure should allow for addressing your problem.
Sure everyone wants a quick home run, but most marketing takes time. You have to develop products customers want and then the right messaging to drive a business or sales response.
You need a marketing firm that understands your revenue model, your customers – customer, map out the buyer’s journey, and activate lead generation campaigns. Easy right? Okay, I’ll bite. Tell me at @gschildge
Think about 10 personas and 18 different buyers’ journeys. So know you have to map the sales cycle, gate the sales process, add metrics, test with live content, look over the data and analyze it, and adapt until you are ready to scale.
Marketing Case Study – Security
ARA saw amazing results:
- Website Traffic: 191 percent month-over-month increase in website visitors
- Leads: 232 percent month-over-month increase in top-of-the-funnel leads generated
You need about 1,000 responses for anything to be statistically significant. When was the last time you ran a multi-channel, multi-variant test? What were the results?
Although many of our clients want us to build them hourly, these are small projects, the more common model is a monthly fee that lasts for 12 months or more.
I can recall when I was on the other side of the desk hiring traditional marketing agencies in traditional PR firms. what they would charge me was a flat rate over at $195 per hour and they billed me in quarter-hour increments.
So the flat rate that I paid was the same hourly rate that I paid for all the personnel from junior to senior. Now I’m sure they went through some cost analysis to come up with this blended rate of $195 an hour but I’ll tell you when I asked for reports they always seem to scramble.
Do You Know Your Score?
Your marketing ROI is critical. For you and your company
Measurement matters now more than ever. Use this marketing scorecard toolkit to bring structure and meaning to your numbers.
I worked with some other PR agencies as well as used a tiered rate model billing system. So if I was talking to the senior person of the organization I may pay $350 an hour or if I’m paying for somebody to write a press release and maybe paying them about $135 an hour.
The marketing firm tracks their hours and what they were doing. If not the model breakdown quickly.
Marketing people work in an environment where there are a lot of interruptions. Therefore, tracking time sometimes is not the most important to them at that moment. I call this the unintended lie. It may or may not be intentional. So why risk it? You don’t have too.
Weigh Your Options with Marketing Firm Cost
Many marketing agencies bill clients using an outdated method that rewards ineffectual behavior. Traditional billable hours are flawed; both the agency and the client suffer because of this substandard billing.
Moving towards a progressive, flat fee billing method results in positive changes for the agency and its clients.
Traditional Marketing Agency Billing
Traditional marketing agencies bill using an hourly rate. The rate might be a blended rate at $250 per hour or a tiered hourly rate.
The rate varies based on which of the marketing agency’s employees is servicing the client’s account, resulting in a tiered-rate system.
This tiered-rate system is priced based on the agency’s cost. The agency calculates the costs associated with a particular job and then adds what they consider being a suitable markup.
Problems with Traditional Marketing Agency Cost Structures
Traditional billable hours are flawed because of several issues. The first problem is that it overlooks inefficiency and can even promote unproductive work behavior, whether intentional or unintentional.
It does not motivate marketing agency employees to minimize distractions, maintain accurate time tracking, or adhere to cost-effective work habits. Clients should not have to worry about the efficiency of their marketing agency’s employees.
The second reason traditional billable hours are flawed is that conventional billing is unpredictable. Clients are provided an estimate, this estimate can vary based on how much labor they actually associate with the task.
Clients may be dissatisfied when their bill winds up being significantly more than estimated.
A final complication is that traditional billing is lacking in transparency. Clients know they are billed by the hour, but they do not understand what work is actually performed for their account. Non-transparent billing can lead to trust issues between the client and the marketing agency.
A New Marketing Agency Fee Structure
There is a new model that is predictable and transparent. The billing method is a consistent monthly rate (or subscription) and it eliminates several of the issues associated with conventional billing.
Matrix Marketing Group uses this approach and we base it on the value that we provide to the client rather than on associated costs. To do so, we charge a flat rate that includes many marketing tasks that we feel can offer significant lasting value for our clients.
Benefits from effective marketing techniques are realized over time rather than all at once.
There are tiered billing models suitable for different sized businesses and are aligned with the company’s growth goals. The entry-level package is ideal for small businesses with a limited marketing budget.
The mid-level package is attractive for small to mid-sized businesses who desire to grow their business. The final package is appealing to businesses striving for ambitious growth in revenue.
With that said, the digital marketing agency still has to adhere to a tight project schedule. And make sure you add metrics to your project.
Why Marketing Package Billing Methods Makes Sense?
The fixed price billing method is transparent. Clients know what their rate includes and what services they can expect. They do not have to concern themselves with scope creep or paying for additional hours for the marketing agency to complete a task.
The hybrid marketing agency billing models are all-inclusive.
Also, clients don’t have to worry about a fluctuating billable rate if it requires a more specialized staff member. Regardless of who winds up working on their account, they get the expected product for the same rate.
Billing based on value gives clients predictability. Traditional billable hours are flawed in part due to their variability. Predictability is a vital characteristic for small or new businesses with a limited marketing budget.
The rate for the company’s marketing package is the rate that they pay for the agency’s services. There are no last-minute surprises that may cause the client to rethink working with the agency.
With fixed monthly costs, efficiency and strong work habits are encouraged. The firm bills the same, regardless of how many hours a project requires. This eliminates any incentive to work at a less than timely rate.
Employees with superb work behavior are not punished under our model. They bill the same amount as an employee who takes twice as long to accomplish a task.
If you are an agency reading this, get this problem correct quickly. We use many training elements, but the staff loves guided micro-learning module. Trust me it works, make the certification process a snap to get.
Traditional billable hours are flawed; this is an outdated model that can drive clients away.
Matrix Marketing Group’s progressive billing system makes our marketing services more affordable, drawing in a larger number of clients.
Clients understand the billing method and are more satisfied with our digital marketing services. After all, do you care how the donut is made? Or do you just want a donut?
We focus on what value our marketing services add by using flat-fee pricing that applauds an efficient work environment.
The digital marketing landscape is changing quickly. A training program is essential to keep your staff up-to-date with micro-training, webinars, conference and more.
Wrap-up on Marketing Agency Cost and Service Programs
The cost of a marketing agency may not be cheap but can pay-off huge. Hiring a full-time marketing staff is even more expensive.
Marketing agency billing must align with what needs to get done to meet the client’s expectations.
If you engage with a digital marketing agency, you should bet some quick wins, I mean within a month, but the real leads start to flow in around month six and around nine to twelve marketing become free.
As we say in the ski business, go with the PRO!
Getting serious about considering outsourcing some of your marketing?
Check out our white paper to help you build your business case.
Have something to say about your thoughts on how marketing firms price their products?
Digital marketing agencies typically make money by charging their clients an hourly fee for their services. But, blended and project-based fee structures are available, as well. Look for a new pricing model that eliminates hourly billing.
How much does a digital marketing agency charge?
Digital marketing pricing is all over the map, but ones that have been in business over 15 years might charge a monthly fee from $3,500 to $20,000 per month for small-to-midsized businesses (SMBs)
What do Facebook advertising agencies charge?
Facebook, as most social media advertising, is a percentage of ad spend. These fees are between 10 – 20% of the monthly ad budget, and this is for larger ad budgets. Flat Fee – if you have a focused campaign during a limited period, then a flat fee makes sense. Hourly rates are charged based on how long you spend doing the management and track your time.