3 Ways Digital Marketing Agencies Can Use Pricing as a Competitive Advantage
If you’re a digital marketing agency, you’re one in a million when it comes to firms that offer services like search engine optimization (SEO), search engine marketing (SEM), social media, content or email marketing. Companies ranging in size from one-man shops to global agencies with hundreds of employees offer these digital marketing services for brands of all sizes – from small nonprofits and startups to Fortune 500 brands.
So, how do you stand out among the crowd? One way is to leverage the cost of your services by positioning your agency as close as possible to the intersection of supply and demand.
Here are a few things you should consider / factor in to your costs to create the most appealing price for your potential clients.
Blended hourly rate
Account teams usually consist of varying levels of experience. They may have one or two junior-level employees (let’s call them Account Executives), one or two mid- to senior-level employees (Senior Account Executives), an Account Manager and an Account Director. A Vice President, Strategist, subject-matter expert (e.g., SEO Director) or Executive Vice President may also weigh in on the account from time to time, especially for larger projects. This isn’t true for all account teams, and it’ll vary based on the size of the client. But for our purposes, let’s just assume this structure is standard.
Many clients want the expertise of senior-level account servicers – those AMs, ADs and VPs – for the cost of junior-level servicers. And to be fair, who doesn’t want designer quality at consignment prices? The best way to promise clients that they will have senior-level reps working on their account without driving the price up is to offer a blended hourly rate.
Hourly rate is a common, clear and transparent method of charging for consulting hours delivered. It’s easy to show costs against activities completed, and most clients understand this pricing method.
When you position your pricing based on a blended hourly rate, instead of simply billing the sum of all of your team members’ individual hourly rates multiplied by each of their hours spent against the account, you give the client the most value (senior-level expertise) at the lowest cost per expertise level. Stay tuned for a more in-depth post on how to calculate your team’s blended hourly rate.
Another way to position your services as providing the most value for the smallest cost is to price based on projects. For most agencies, this pricing model isn’t ideal because it doesn’t guarantee a consistent monthly cash flow that a retainer would. However, for projects such as website redesign where retainer-based pricing doesn’t really make sense (it’s kind of a one-and-done deal), you can bake in extras such as content optimization for SEO at ‘no extra charge.’
For example, if you typically charge $10,000 for a standard, complete website overhaul and redesign, and you also want to give the client a fully optimized website with the redesign, you can add the SEO on top without actually attaching a price tag to that line item.
Let’s say your SEO Manager’s hourly rate is $200 and it’s going to take her a projected 20 hours to optimize the site’s content. That’s an additional $4,000 in SEO fees. Now, you can either charge $14,000 total for the website redesign plus SEO at ‘no extra charge’, or you can discount the package a bit for combining the two services and charge, say, $12,000. The actual price can vary based on the minimum you need to charge to meet your financial goals; the important detail here is ensuring your client sees the added value you’re providing at a lower cost.
Be willing to negotiate
I hinted at this point in the previous section, but one of the best pricing tactics you can use to beat your competitors is your willingness to negotiate.
Never show your minimum, “I-can’t-possibly-go-any-lower-than-this price up front,” because nine times out of ten, clients will try to come back with something lower. But that’s okay – in fact, you want your clients to try to negotiate with you. This is your first chance to show off your account servicing skills and demonstrate just how flexible you are to meet your client’s needs. It can also be an opportunity to upsell via counter offer with a bundled package – we will reduce your overall fee if you allow us to do SEO, web design and also produce some infographics for you.
It’s okay to come down a bit in your price, especially if you overshoot the first round. But remember: don’t simply take on new clients just for the cash flow, especially if it’s not profitable for your business. The client should be a good fit for your team and should meet your minimum requirements to hit your larger financial goals. Clients who try to nickel and dime you down to the lowest price might not be the type you want to work with anyway, and they could end up being more of a headache than anything else.
Do you have any other tips for using pricing as a competitive advantage? Please leave them in the comments!
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