How Agencies Can Define Their ‘Structure’ for Pricing Inbound Marketing and Marketing Automation Services for Clients
Stop doing consulting for free or writing blog content and e-books on your own dime. Know your value and how much it costs your business.
As an Optify Agency Channel Manager, agency partners ask me daily for advice on pricing and packaging their marketing services for client proposals. Having previously worked as a proposal writer and innovation consultant at a marketing agency, I’ve learned that pricing creative and digital services is very complex and there are multiple variables to consider for each job.
While writing a proposal at my previous agency, I sought counsel from my father, a Systems Risk Analysis Engineer in his 35th year at Boeing:
“You must lay out all the variables, resources and jobs to be done. Then for each job always determine the most it will cost you (fixed costs + key sensitive variables) and the least. To make this simpler you must look at the worst-case scenario and the best-case scenario and those sensitive variables. Somewhere in the middle of that range is the sweet spot.”
Since an agency makes money by trading hours for dollars- your people are your margin. Have you clearly defined your charge-out rates? (If not read below).
Charge Out Rates: If you haven’t already done this, than it’s high time you took a look at the basic principals built around a common set of formulas for charge out rates of your employees and freelancers:
- Number of Working Hours / Year
- Number of Chargeable Hours
- Salary Rate
- Overhead Rate
- Net Profit Margin
(Chris Lang, Flash Accounts LTD.)
This blog is not focused on charge-out rates, but they are fundamental in building a streamlined approach for inbound and automated marketing. If you are uncertain of your charge-out rates, I suggest demoing job-costing software like Paprika. Paprika was developed for marketing and creative agencies.
3-Steps to Develop a Pricing Structure
Step 1: Lay out the sensitive variables: This will give you the ability to make an assessment of what the real value is and the most sensitive variables driving that value. This is how successful businesses that deal with complex risk investments operate.
Step 2: Visualize the jobs to be done: Let’s imagine you are really doing this. Whether you are an agency or B2B marketer you must determine your budget and pricing. Leaving something out can severely hinder your ability to make a profit or even break-even on a client’s project or marketing task.
Creatives are visual people, so don’t be afraid to apply your creativity and strategic out-of-the-box thinking to your own business. Schedule a budget-planning session with your team and cover an entire wall with paper. Visually draw out and map your business. Put your whiteboard painted walls and post-it notes to use for you!
I first suggest visualizing the SERVICES & JOBS TO BE DONE. Focus on those sensitive variables like billable rates and resources.
Start by stating the resources (employees, freelancers) with relevant billable hours and estimated time for completion. You will want to include expenses like materials / traveling costs and overhead.
Step 3: Develop a ‘packaged’ approach: My advice to agencies is to develop a 3-tiered approach for providing ongoing support to your small, medium and large clients (bronze, silver and gold). This will keep you from re-inventing the wheel every time you sign a new client. These packages need to be based on the jobs you will perform for inbound marketing, content marketing, email marketing, lead nurturing and webinar support. This can be done through ‘units’ for a # of monthly campaigns, bundled into a monthly retainer or on a case-by-case basis, or even cost per lead generated.
Once you have a visual and spreadsheet of everything that needs to be done you can then determine the range for worst-case and best-case scenarios.