Struggling to put a price on your agency's marketing services? Wondering whether to charge based on value or on time spent?
In this article, we'll explore how to price your marketing services effectively.
How to Determine the Price Structure for Your Marketing Agency
Pricing your services is one of the biggest marketing agency challenges. Pricing is never done because it continually evolves with the market, your business needs, and your team dynamic.
When Beth Trejo, founder and CEO of Chatterkick—a digital marketing partnership focused on helping businesses expand the impact of social media—began her company 11 years ago, she was stuck on pricing. Scrambling, she wondered if she should price her services low or high and started googling her competitor's prices. She had to ask herself what the best use case was for the problem she was trying to solve.
That problem, then and today, is that businesses do not have the time or expertise to do social media on their own. Her pricing has to allow for consistent work for her team and consistent client outcomes.
Beth advises that aligning your agency's pricing with value, communicating changes to clients, and evolving your pricing as your agency grows are key to determining the most suitable pricing structure for any agency.
Key Metrics That Help You Choose Your Pricing Structure
There are multiple ways you can price your marketing: an hourly rate for time and materials, a fixed bid that bundles scopes together, a retainer model where you're on call, and value-based pricing.
You can use a combination of these pricing models, but ensure you have a value proposition ready. You need to make your clients understand that if you aren't paid to respond to negative comments on ads you're running on their behalf, the money they are paying is wasted.
Beth and her team complete a competitive landscape analysis for every new client. The results are used internally to see how each client is positioned competitively in the market, what they need to market against, who is in their organization, how they function as a company, what they prioritize, and what their core values are. This wealth of client research material allows Beth and her team to see how that business works and the opportunities they have to help them improve or grow—It enables Beth's team to establish more value for their services.
#1: Align Your Pricing With Your Value Proposition
One of the keys to pricing your services is understanding the value you provide. Your pricing needs to align with your capabilities and expertise. When you first start your agency, price your services based on research of your competitors' rates and an honest assessment of what you can reliably deliver. This approach allows you to set fair baseline pricing while staying within your expertise.
When Beth started Chatterkick, she knew social media and the tools and tactics to use, but she didn't have a strong foundation in brand-building. Acknowledging that fact, she offered lower prices. The lower prices helped her enter new markets or businesses because her services were substantially less expensive than her competitors. She used this as a strategy to grow her business.
Over time, as your agency's capabilities expand, you should raise your prices accordingly. Note that your pricing should match the value you now provide, not the rates charged by competitors. A pricing mismatch can lead to poor service delivery and unhappy clients. Listen to what your customers and prospects are saying and hear what's being said between the lines so you understand their questions.
Understand that you may need to reposition and shift a little in how you talk about your services—get curious.
For example, Beth's company hired an outside expert to interview her clients. Their answers were vastly different from what her company could gather. She also measures Net Promoter Scores regularly to get feedback and ideas from her customers. Additionally, she recommends observing your sales cycles. Continuously evaluating and aligning your pricing ensures it reflects your current value proposition.
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Start with the Problem You Solve
Begin with the client's problem and your solution. If you don't understand the problem you solve, you can't prove your unique value, and value is where the dollars are. When you solve an urgent need, your pricing becomes clearer.
By pegging value to business outcomes, you justify your rates. Frequently re-evaluating the value you provide and adjusting your pricing according to that value is key to your agency's success.
#2: Compare Your Prices Against Your Competitors
An important pricing strategy is positioning against your competitors. There are three different types of competitors you are up against:
- Direct competitors: Agencies that are similar to yours.
- Indirect competitors: Agencies that differ slightly from yours but offer similar services.
- Replacement competitors: In-house teams.
Understanding the competitive landscape and different buyer types will help you determine where your total price point needs to land.
This is especially relevant when competing with in-house teams, a common scenario for agencies. With social media, it's easy to assume one person can do 25 things. This is the mindset Chatterkick has to compete against.
You can compare your costs by calculating the salary of an equivalent in-house resource. Beth compared her team of four against the cost of one full-time in-house social media employee. This comparison made her value proposition tangible to potential clients and was a great selling point.
Your goal is to make your pricing relatable based on budgets your potential clients already understand. You have to understand what people are willing to pay for your services and what other providers are charging for the same services.
#3: Develop Your Good, Better, Best Tiered Service Packages
Package your services into tiers like good, better, and best.
Your baseline “good” package should provide solid value without embarrassing you. You want to be careful not to cheapen your services so much that you won't be able to execute them for your clients.
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The middle “better” package is where most buyers will land, so make it the best value. Start in increments of $1,000 or a 10–20% increase of your baseline price. Add high-value items to this tier, like additional reporting or competitor data and research.
Finally, the premium “best” package should include special services buyers will covet. You can go exponentially—an anchor price—to show your potential customers what they are missing in the other two tiers. Or, you can show them accelerated capabilities, something you can sell and repeat that shows increases in volumes, platforms, or additional people and resources, for example.
Disney, for example, offers a fast pass to their theme parks and resorts. Speed is very enticing to some people, who are willing to pay more to prioritize their needs. Priority pricing doesn't have to involve more resources from your company, either. It could be as easy as saying that for an additional $1.99, a potential customer gets priority support. Still, all you're doing is moving them to the top of the queue to get faster support.
You can raise your prices based on your agency's bandwidth and availability. When Beth started Chatterkick, it was just her and a small team, so her prices would fluctuate. Whatever client she would take on had to be worth her time and resources. She knew that if people wanted her services, she could push up her prices until she heard “no” a lot—meaning until she found her price cap. If you hear “no” a lot from an ideal customer, you might need to adjust the pricing or value you're providing within that pricing line item.
This tiered approach makes buying easier for your clients and allows you to showcase the range of your capabilities. This gives people the opportunity to see what they are missing in the higher price points and make their choice based on what they think is best.
#4: Uncover Hidden Value You Already Provide
As your agency evolves, there are often high-value services already being delivered that can be monetized. Beth suggests managers shadow team members to identify areas of unseen value. For example, her team discovered the extensive behind-the-scenes social media data collection and reporting they performed could be packaged as a premium service.
Uncovering this “shadow work” allows you to charge appropriately for benefits clients will appreciate.
#5: Adjust Your Pricing as Your Agency Evolves
An effective pricing strategy must evolve as your agency grows. You shouldn't change your prices too drastically or frequently, as it creates confusion for your clients. Chatterkick addresses this by holding quarterly pricing reviews. They examine their service mix and evaluate if their pricing structure still reflects the value they aim to deliver.
When discussing changes in your pricing, it's important to involve your team members from different departments like finance, operations, and services. This ensures your pricing aligns with your agency's resources and market conditions. While revenue projections in professional services can be tricky, regular evaluations can help you incrementally adjust pricing to stay current.
Communicate Your Pricing Changes Thoughtfully
When you need to adjust pricing for existing clients, communicate thoughtfully. You don't want to do a lot of flat rate price increases. That feels icky from a client's perspective. Instead, focus on evolving the scope and services you provide. This approach frames it as adding value versus just raising rates.
Beth recommends giving two options to your clients when possible—one included in their current contract and one requiring additional fees. This shows your clients that you are still providing solutions within their existing investment without it just costing them more. Over time, you can graduate clients with packages and pricing that better fit their needs and your capabilities.
As Chatterkick evolved, Beth and her team built a different engine to fuel their customers. And because of that, they adjusted their prices. About two years ago, the company shifted to a pod model—a four-person team now surrounds each of their clients. They added value by giving each client four experts they could go to for social media direction, thereby eliminating their old business model and old price point. Beth and her team had to graduate some of their legacy clients while others were able to seamlessly align with the new model and pricing structure.
Beth Trejo is the founder and CEO of Chatterkick, a digital marketing partnership with a global reach focused on helping mid-market businesses expand the impact of social media. She has been featured in USA Today, Yahoo, and Business Insiders for being on Comparably's list of the Top 50 CEOs for Women two years in a row. You can find her on Instagram and LinkedIn.
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