Topic (00:40): How digital marketing agencies get paid.
It’s always important to ask a digital agency you’re working with, “What is your fee structure? How do you typically charge or bill your clients?”
There are three primary ways that you will hear about digital marketing agencies getting paid:
1. Hourly (1:45)
We see agencies bill hourly under different circumstances.
- If they are working on a very specific type of project and it’s a little bit harder to calculate some of the components of the project, they might choose to charge hourly because the work might vary from month to month.
- Another instance where you might see an agency charge on an hourly basis is if they’re a smaller agency, a solopreneur, or freelancer. A lot of times, if you are working directly with an individual and, again, the workload might be a little less predictable on a month-to-month basis, then they might turn in timesheets to you or invoice you with their hourly rate.
What’s a good hourly rate that you might pay someone who runs a digital agency? This really can vary. We’ve worked with individuals who freelance and charge $12 to $15 per hour. We’ve also come across individuals who worked as solopreneurs and might charge over $100 per hour. It really is a huge span. Sometimes, it’s based on the experience level of who you’re working with and sometimes it’s just based on their relevant expenses.
2. Flat Rate or Retainer (4:20)
Here at Go Getter Marketing Group, this is usually how we charge our clients. If you are hiring an agency that is going to charge some type of flat rate, it’s typically an ongoing relationship. As the client, you are paying based on the value of the project.
With flat rates or retainer fees, everyone needs to be very clear about the responsibilities of each party. What’s the responsibility of you, the person that’s going to do the hiring? What’s the responsibility of the person who is overseeing the project, your contact at that agency? If you find that you’re going far above and beyond that, then you might consider changing the structure of the project. This will vary from agency to agency.
3. Performance-based or Commission (6:36)
We see less agencies doing this, but there are definitely some out there that offer this option. If you’re working with an agency that agrees to do any type of performance-based marketing and that’s their pay structure, then the responsibilities on both sides, just like flat rate or retainer, need to be clearly discussed in advance. You need to be very clear about what performance goals at the beginning of the project and outline a fee structure for any commissions paid based on revenue or performance.
A simple example could be you hire an agency. They agree to do performance-based marketing and say, “We’re going to run your Facebook Ads campaign and if we generate X amounts of leads for you (or X amounts of dollars in sales), we get X percentage.” It could be on a percentage basis, or one cent on the dollar for every sale, or ten cents on the dollar—it can look a lot different agency-to-agency or by project. It’s between you and the agency to be very clear about what the expectations are and the performance bonus in place.
Pro Tip: Hybrid (8:28)
Every now and then, we see agencies employ a hybrid payment structure. With our clients, we might do a hybrid approach depending on the project that we’re working on. An example hybrid may be: “We charge a flat rate at XYZ amount, and this is our performance bonus, based on hitting certain goals that you have in place for us.”
Remember to always ask these questions when you’re looking at working with a digital marketing agency:
What’s your fee structure?
How often should we be paying you?
Having a transparent and communicative relationship with your marketing agency will put you in an ideal position as you launch your campaigns.
If you have any further questions on this topic, be sure to contact us. You can also find more topics on our blog, including a specific blog post that covers digital marketing payment scales in more detail. Also, tag us on social media with any questions or topics you want to hear about for future “10 Minute Marketing” episodes!