I published an article recently that addressed the issue of why hiring an agency is so expensive and, even though it doesn’t seem to have been promoted via email or social like most articles, it did result in a lot of questions about marketing agency cost. Some include:
- What are the minimum/maximum ranges I should expect to pay?
- Do you all charge per project or is there a fixed monthly cost?
- How long should I be stuck in a contract?
- Why is your pricing such a secret? Why can’t you just list them on your site as Mailchimp does?
- How much do you increase your pricing when you think a client will be difficult?
First of all, an experienced agency would avoid bringing on a difficult client and would be quick to let one go instead of over-charging and subjecting their team to a PITA. So, that shouldn’t be an issue very often at all.
Second, the secrecy of our pricing isn’t an intentional act of subversion. A lot of factors go into pricing and, much like when dealing with an auto mechanic or a brain surgeon, the costs are going to be as unique as the problems we’re tasked to solve. However, I would like to address as many questions as I can to provide some clarity while still being accurate to a somewhat diverse readership.
Types of Agency Arrangement: Retainer vs. Fixed-Scope
Generally speaking, there are two types of contract arrangements you can expect when looking at marketing agency cost: fixed-scope (usually based on the cost of time & materials) and retainer-based (a set budget per month that can be used in a variety of ways as needs arise). There are other arrangements as well like cost-per-lead or “pay for performance” but, for the sake of simplicity, let’s go with the primary two.
Fixed-scope arrangements are best for more deliverable-based work like a seasonal ad campaign, website, or brand development. These are projects that have a clear endpoint and, once that end is reached, we can go our separate ways. These types of relationships are considered short-term.
Long-term relationships tend to go with the retainer model, and it’s often what clients ask for once any fixed-scope projects we’re initially hired for are out of the way. This cost is usually based on the expected amount of time needed each month and can vary widely based on the size of the client. For instance, a small town may only need digital marketing support, so you’re probably looking at the $2,500 – $4,000 range per month, often less expensive than hiring one junior marketer.
A larger destination like a county or city may pay $12,000 – $40,000 (usually on the lower end) per month since there will be far more work like more intensive, ongoing research, greater content needs, and more diverse segmentation. Please note that this is more closely tied to our costs at Imagine and based on the services we offer. Your mileage may vary with other agencies.
About Value-Based Pricing
Finally, there’s value-based. This approach looks at expected ROI and gauges the cost based on what would still provide a good return to the client. We take this approach when working with smaller destinations to make sure that we can still provide value – even if the budget is low.
For example, let’s say you want to increase hotel occupation by 30% over the month of October. We’d take a look at what that increase looks like in terms of revenue, and manage staff and projects on our end to keep our work at a cost that provides both results and a nice margin of hotel tax revenue to the client.
Once again, this cost can be all over the place but typically, hourly rates are determined by the agency size, roles within the agency (junior vs. senior, specialization), and geographic location of the agency. For a freelancer, you’ll probably pay $75 – $150/hour, although some specialists may charge higher.
Small generalist agencies and design firms will usually run you around $100 – $200 per hour and almost all of them use an hourly rate. Fixed-scope projects will be less expensive but may take longer and have less complexity – remember, you’re probably only working with 1-2 people. Make sure to set expectations accordingly.
Medium agencies will usually charge around $225 – $400 per hour. With that increase, you’ll receive more staff on your account and more specializations like research and platform expertise. It’s at this point where you’ll see greater sophistication in the marketing strategy and more predictive analysis.
Larger agencies will obviously charge more than the medium ones and the marketing agency cost will often be scaled in accordance with the expertise and staff assigned to your account.
Minimum Engagement Costs
Most medium-to-large agencies, and increasing numbers of small agencies and freelancers, will set a minimum cost for engagements. This means that an agency will expect a certain amount of budget within their relationship to do the work that needs to be done. Sometimes, this comes across as snobby but it’s certainly not the case.
Think of a construction company that builds larger structures (office buildings, apartment complexes, etc.). That company has a sizable staff and infrastructure that’s necessary to get those larger projects done. They’re not designed to build single-family homes, and the costs they’d need to cover while building that single-family home would be disproportionately high.
Agencies work the same way. By setting a minimum level of engagement, the agency can then limit the number of clients and projects it takes on per year, keeping revenue in check. They’re also able to provide better service to those clients they do take on so that their clients don’t feel like they’re one in a thousand others served by that agency.
While many agencies will waive things like local travel and phone calls, there are some that can’t be absorbed in a traditional retainer or project budget. Long-distance travel and outsourced services like custom development and videography will be additional line items in your initial proposal. The smaller the agency, the more outsourced services you can expect.
That said, you should never receive unexpected expenses on your invoices. Your account manager (or point of contact in the agency) should always bring the possibility of these costs to your attention while they’re still only a possibility. You should have the right to say “no” long before the cost gets billed to you. This happens through proper communication – something I cover in a previous article.
Contracts and Length of Service
It’s not uncommon to ask that an agency lock you into a set amount of time in their contracts – usually six months, one year, two years, etc. Not only does this provide some financial stability on their end, but it also gives them a solid runway to get your campaign to start delivering consistent results.
At Imagine, we don’t set long-term contracts. If we’re not performing, our clients should have the option to move on and try someone else. By removing that condition, it helps us stay sharp and make every billable hour count, but it’s not for every agency. So don’t look at being locked in as a negative; it may just be a necessity for how that agency does their magic.
I hope that gives you a better idea of marketing agency costs and what you can expect when hiring an agency. As I mentioned, there are a lot of variables to consider and no one-size-fits-all pricing is going to work consistently for you or the agency. Just know that many – if not most – agencies take your success into account when determining their pricing. Not doing so would be to the detriment of their long-term success as well.