One of the most common questions I get when speaking with a prospective client is “how do you charge for your services”
My stock answer regardless of what we are talking about is 3 million dollars. That usually gets a chuckle, then the prospect wants a real answer. The philosophy of my agency has been that we should adapt to the client’s needs, not the other way around. Our financial arrangements are structured to work with the client’s budget. In the past we have charged by the hour, by the project, a monthly retainer, or a percentage of the media budget we placed.
These days most of our clients are on a monthly fee basis. As the expertise and labor we provide for clients evolves, so must the compensation structure. When I started my first agency, nearly all of our revenue was in the form of media commissions on television and radio placement. We also charged for our creative services on a project basis, but the core revenue was commission.
Media placement was most of our business in the early days, and with our backgrounds in television and radio that made sense. As the world of marketing and advertising has changed, we’ve evolved to remain relevant and lead our clients through the change. Much of our work today is email, search marketing, online advertising, IP address targeting, content development, and reputation management. Clients rely on our years of experience and expertise, and it’s hard to say “20 years of experience is worth $175 an hour (or pick your number).”
So what is a reasonable monthly fee? We evaluate the volume of work and amount of time we believe it will take to provide great service. We’ve got enough experience that our estimates are usually fairly accurate. We also know that the workload will vary by month, so we look at the fee over six months and one year. If we estimate $3500 a month plus media costs and materials, some months we perform $5000 of work and other months $2000 of work. From a budget standpoint both client and agency benefit from advance planning.
Our fees and long term client relationships are dependent on providing value through our knowledge and guidance. We believe in a transparent model of information, where the client sees what we are doing and how we do it. Any business willing to invest the time and money can handle its own marketing. There’s a reason agencies exist and clients are willing to pay a fee for our services. Its labor intensive to stay on top of all the changes in marketing today, and agencies bring the knowledge of the collective experience of all their clients to the table.
So we put a dollar figure on our skills and if the value we provide is in line with or exceeds the client’s expectations, we do business for a long time. If not, we get canned.