How Should Agencies Price Marketing Optimization Services

optimization-pricing

Let’s get real.

Agency pricing is hard.

How should an agency price conversion optimization services?

If you’re running a company that does anything that even remotely touches optimization then you probably know what I’m talking about. As our service offerings began to evolve we decided to get serious about solving the pricing conundrum. Our goal was to provide simple and transparent pricing for two reasons:

  1. For our clients: We needed a pricing structure that was easy for our clients to understand, and that they could use when budgeting.
  2. So we could scale: Once we got a handle on our pricing it became more apparent to us how we could scale the business, which is good for our clients. 🙂

On to solve the puzzle…..

FIRST, HOW DO YOU DEFINE MARKETING OPTIMIZATION SERVICES?
We categorize what we do as anything that would help a business improve their marketing ROI. Which, in turn helps them grow. Conversion optimization could touch any of the following.

  • Website conversion optimization
  • Landing Page Testing
  • E-commerce Analytics
  • PPC / Paid Search
  • Social Media Ad Management
  • A/B Testing
  • ..and a whole bunch of other things.

WHY IS PRICING IT SO DIFFICULT?

Pricing is Hard

 

  1. Conversion Optimization touches nearly every part of the stack. From your media buying strategy, to your ad copy, to your analytics & conversion tracking, and ultimately all the way into your Customer Data. This requires all types of people at wide ranging skill sets and price points.
  2. Who does what? Drawing the line for where your agency stops and where your internal team starts is hard. This is why we prefer to engage on such a deep level. Most of our clients don’t feel like we’re a third party. But that makes pricing tough.
  3. Optimization happens in real time and there is never an end. You can’t manage optimization with legacy waterfall processes, huge project documentation and long production cycles. It’s also 24 hrs/day 7 days a week. This makes the fixed bid model almost impossible to execute.
  4. Optimization doesn’t happen overnight. There is no magic bullet. For every test you run you’re going to run a few that fail. This makes it really difficult to design engagements that are the right length. With most clients we’ll find a quick win within a month, but this gets your incentives out of whack. We don’t want to be shooting so hard for low hanging fruit or quick wins that we ignore the big picture or focus on large scale changes that may take longer or require more data to reasonably evaluate.

 

SO HOW SHOULD WE PRICE THESE SERVICES?
As we pondered all of this, we realized that transparency was the only way. We landed on a retainer based plan or subscription model with add-ons. We also decided to document some of our thought process behind it here in this blog post.

Full disclosure: We may change our minds. In fact, it’s highly likely. Just as in any business we’ll plan to listen to our customers and adapt accordingly. For now this is where we’re at, and how we go there.

THE RESEARCH

The Research

 

Our Existing Clients:

We began our analysis of the topic at the core. We’ve been in business for a while, and have a base of existing client engagements to look at. Each is different but they all fit into one of the buckets that you’ll find on our pricing page. Some of our clients are on an ongoing optimization plan, where as we have clients for whom we only manage media, or specifically build analytics/optimization related technology.

After auditing our existing client base we began to look around.

Content on the Topic:

We found a number of different forum posts, blog articles and Quora threads on the topic. Below are a collection of the most relevant. If you’re looking to hire a conversion rate optimization agency, or work at an agency yourself and are pondering pricing, we’re confident you’ll find them interesting.

  • How do conversion rate optimization marketing companies price their services?
  • How to charge for conversion optimization?
  • How much should you pay for conversion rate optimization?
  • How to price conversion optimization?

 

OTHER AGENCY PRICING

In our research we analyzed a number of different pricing models, and looked at several other agency pricing pages that were publicly posted on the web. Additionally, as a team we spoke to advisors, employees of other agencies, and reviewed agreements from our own previous agency relationships.

What are the traditional models?

Hourly Rate Model

This is what some would call the old school agency or consulting model.

Positives:

  • Simple and easy to understand. Agency tracks hours. Client pays for hours.
  • Easy for client to scale. Need more help. Buy more hours.

Negatives:

  • Incentives are misaligned. The agency has no incentive to get things done, in fact the opposite. They’re incentivized to bill hours. Not good for the client.
  • Focus on hours. Not on value. If I’m the client, I don’t care how many hours I pay for. I care about lift in conversion rates, leads, LTV, ROI.

Percentage of Media Spend Model

This was the media model back in the TV/Radio hay day. Client spends $1mm on media, agency gets $150k. Broken. This model crept it’s way into PPC and Display as well.

Positives:

  • Again, easy to understand
  • Clients are used to it.

Negatives:

  • Bad incentives. Agency is incentivized on how much of client’s money get spent rather than value driven.

A NEWER APPROACH:

Monthly Plan Subscription Model

Think of this like a SaaS model. You purchase a subscription to a plan or package, that includes a bank of your agency’s effort. How that effort is quantified varies. These models are becoming more and more popular in the agency world.

Performance Model

Some agencies will work on performance. (either partially or completely). A few things about performance deals:

Positives:

  • Incentives are directly in line.
  • Client only pays for results
  • Agency participates in the upside of positive performance.

Negatives:

  • If results don’t happen immediately, it’s hard for the agency to justify adding resources
  • Agency may not directly control variables that trigger performance payments

For these performance deals to work. The following conditions are optimal:

  • The agency should be involved in designing tracking & reporting systems
  • There should be some type of long term commitment, so that the client can’t simply walk away and stop paying once performance gains are realized
  • Agency & Client teams must have a good system in place for real time communication & collaboration. Hint…Slack

So where did we end up?

OUR PRICING APPROACH
After taking into consideration all of the information available, along with the knowledge and experience of our management team and advisory board, we landed on a bit of a hybrid approach. Our pricing starts with Monthly Subscription / Retainer packages. We offer these packages at multiple levels to support clients who’d like different levels of engagements.

Before we enter into one of these packages with a client we start with an ‘audit.’ For this we charge a flat fee of $1,000. This audit gives us a chance to evaluate your existing metrics, spend some time working with you directly, take inventory of your data & analytics infrastructure and to begin planning. After the audit its time to get your business into an optimization engagement.

OPTIMIZATION PLANS

Since the core of our agency services center around marketing optimization, we structured our monthly retainer packages similar to something you might see when looking at SaaS model.

We have three levels / plans, and a new client can pick which one fits their needs. We’ve attached what we call ‘optimization hours’ to each plan and backed that into a blended hourly rate.

What is an ‘Optimization Hour?’: An optimization hour is a fully dedicated hour that one of our experts spends focusing on your optimization projects. This could be a client meeting, designing a landing page, competitive research, analyzing data, writing copy, building conversion flows, etc. Anything that is going to move the needle.

These plans begin with 90 day commitment at the smallest level and tier down to month to month options as the highest level.

ADD-ONS

With optimization comes a need for additional services. When surveying our existing client engagements, we realized that nearly every one of them has expanded beyond an initial analytics set up & optimization plan. For most of our clients, we’re managing media buys, and building custom software/landing pages, etc.

MEDIA BUYING

For our media buying clients we take a little different approach than your typical media agency. Rather than charging a percentage of spend, we charge a flat monthly fee that is based on where your total spend falls with a cap. As your company grows and you’re spending more on media our fees scale, and the effective percentage you pay tiers down.

CUSTOM SOFTWARE DEVELOPMENT

For development related projects, these engagements typically fall into 2 buckets.

  • Project(s) – These are scenarios where we’ve determined with the client on of the following:
    1. A specific set of reports that need built
    2. A custom landing page experience
    3. A new website/product or application
    4. When we can define the deliverable we’ll scope out the work with a client and execute on the project.
  • Ongoing Development – More often than not, our clients need ongoing development support and the needs are fluid. One day they may need a landing page tweaked. The next day a report built or a modification to an existing conversion path. These needs don’t necessarily fall into the scope of a ‘project’ but getting them done quickly and efficiently can be crucial to the success of an optimization plan.

For this reason we design Custom Development Retainers. In these scenarios we build a block of development hours that we think will meet the needs of a client’s optimization team and we charge a monthly fee. This puts the client in a very agile position and gives them the ability to scale their tech needs on the fly.

 

Shoot us a tweet and tell us what’s up or set up and audit and start optimizing.

Ryan Riggin

RYAN RIGGIN

Ryan is a marketing guy who likes to get his hands dirty with technology and data. Outside of that you can find him out riding a bike somewhere.