Hiring a digital agency can be a fantastic business move. Agencies can help you grow your brand and expand your business. External teams allow you to look at your business from an outside, and often new, perspective. Not only do you get a fresh take on your business, for smaller businesses, it allows you to utilise a varied team of professionals, from development to design.
No digital agency is the same, but one thing they do have in common is pricing models. Pricing models are put in place for consistency and assurance, and all have their pros and cons. When looking at different agencies, their pricing models may sway your final decision, depending on the needs of your business. Lucky for you, we’re here to help you find out which model, or which agency, is right for your business.
Different Types of Pricing Models
When it comes to agencies, pricing models take into account factors like time spent on production, the scope of the work, client budget, agency expertise and costing, the value, and the type of product, risk management, and market rates to determine the final price.
1. Hourly Rate
One common pricing model is the hourly rate model. Exactly as it sounds, agencies charge a set rate per hour of work. This is best for projects where the scope is undefined, or likely to change throughout the duration of the work. When choosing this model, it’s important to consider that if the project does take longer than expected, increased costs are likely to occur.
2. Project-Based Pricing
Project-based pricing is when a fixed cost is set for the entire project, regardless of the hours or resources used. This is best for projects that have a well-defined scope and deliverables, but it requires careful scope definition to avoid ‘scope creep’ - veering outside of the project's pre-determined boundaries - without additional compensation.
3. Retainer Model
Clients with long-term requirements and regular consistent work will often prefer a retainer model where they pay a recurring fee, usually monthly, for ongoing services. This is best for companies with consistent, ongoing needs, though it is essential to define the scope of work clearly so that both the business and the agency understand what is included and expected.
4. Performance-Based Pricing
Performance-based pricing is a model where payment is based on the achievement of specific results, such as leads generated, sales, or other KPIs. For clients with a large focus on measurable outcomes and ROI, this model can be quite beneficial. It is important to consider and agree clearly on what the performance metrics are and can be higher risk and therefore not as appealing, for the agency.
5. Value-Based Pricing
Value-based pricing is based on the perceived value of the services to the client rather than the cost of the services provided. For services that offer high strategic value or the potential for significant ROI, this model is highly beneficial. This model can be far more profitable for agencies, but it requires a deep understanding of each client’s business and the actual value that will be provided by the agency.
6. Commission-Based
Much like commissions in other industries, this model describes the process wherein the agency earns a commission on sales or leads generated. For sales-driven campaigns, particularly in the e-commerce space or where direct sales are being made, this model can be a good fit. This model is beneficial for aligning the agency and client incentives, however, it may not cover all aspects of marketing.
7. Integrated Access Model
Some agencies - like our own - will combine pricing models to ensure scope, value, and performance are all taken into account. Our three-tiered model is result-based, with flexible, targeted efforts tailored to your business’s current needs. We offer a fixed cost for initial setup, after which you can choose from three levels of management based on specific services, with the number of hours spent informed by your goals. The best part? You can ramp it up or dial it down at any point in time. Essentially, you tell us exactly what you want and when you need it.
Our team is made up of in-house specialists in Performance Marketing, Analysis, Social Media, Design, Community Management, Copywriting, Ads, Project Management, Development, and the list goes on. Our team then integrates into yours for as seamless an experience as possible. The Access Model takes all of the above models into account to form a pricing model targeted specifically at ensuring businesses are getting exactly what they need from their marketing agency, for the best value possible.
And if you’re not sure what you need? We’ve got you covered. Our On-Demand services can be utilised on your schedule without any sort of long-term commitment.
So how do you choose the best model for your business?
When choosing the right model for you, the main things to consider are your business objectives, the scope of the project, your target audience and how accessible or easily engaged they are, the product type, and the conditions of the market. Asking around or speaking directly to the agency or agencies you are considering can be a good way to do this, and internal discussions are always useful for considering larger business moves.
Once you have decided on a model and begun working with an agency, it’s always a good idea to keep an eye on how it is working for your business. Keeping track of KPIs, campaign results, hours, and the overall level of service you are receiving is a great way to do this, but keep in mind that often with creative agencies, no two days are the same, so there will always be a little fluctuation, just watch out for things becoming inconsistent.
Want to learn more about pricing models? Interested in our Access model? Get in touch today!
