Are Your Charging Right For Your Digital Marketing Services?

• Reading Time: 4 Minutes
• Published: March 12, 2021
• Last Updated: February 11, 2025

Setting the right pricing for the services you offer is a vital task. The price of the services provided by a digital marketing agency differs from one agency to another, the reason behind this is – the experience of the agency, scope of work, type of industries the agency caters to, and size of the agency. There are a lot of factors that determine the pricing of your services. However, you have to be extra cautious while setting the final price. Slightly more than ideal price, and you might lose the client while lesser than ideal price, you are losing out on potential income and earning a thin profit margin. Accounting for digital marketing company can be that complex.  However, a simple formula for setting the price of a service is –

Cost + Markup = Price

Let us understand both these elements of pricing properly. Few components of the costs that digital marketing agencies incur are rent, electricity charge, tools & software expense, human resource cost, and other expenses. The cost you incur can be reduced to some extent, after which it will start hampering your workflow. Check with your accountant and understand the various aspects of your day-to-day cost in running your agency. In case you don’t have an in-house accountant, you can take advice from your outsourced accounting services provider.

Now let us talk about the last two elements, i.e., markup (profit margin) and price. The price you set for your services plays a vital role in your profile margin, so it is vital to make sure you set the right price with optimal profit margins. Your price must be such that it covers the cost of the services rendered and the overhead expenses. While the profit margin can be as simple as setting a certain percentage on the cost, this method is not the most effective. The price should be based on what services you provide, the market value of those services, your expertise in the matter, the advantage you are providing that your competitors cannot provide, and, most importantly, what clients and prospects are willing to pay.

There are various methods that one can opt for in deciding the price of your services. Let us discuss each one of them in detail.

1. Hourly-based

Many startup agencies use this method as it helps them charge for the hours they put in for their work. The hourly-based method is beneficial when you have clients who generally ask for lots of edits or revisions. In this method, you need to calculate the cost incurred on an hourly basis for working on any project.

2. Project-based

The second method is to charge clients on the basis of the project. This way, you charge for your expertise. This method is best fitted for works that are going to be executed only once. You must estimate the number of hours that might be required to execute the project work, and it will act as a guide in setting the project-based price.

3. Retainer model

The retainer model best works when you have already established a relationship with your clients and the client require a large volume of work each month. The client pays an agreed prepaid sum for work to be performed on an ongoing basis. The retainer model again can be of 4 types: hour-based retainer, deliverables-based retainer, performance-based retainer, and hybrid retainer. In an hour-based retainer, the fee is based on the number of hours you need to put. The deliverables-based retainer is more of value-based pricing where clients expect a specified number of deliverables per month. The performance-based retainer is also another value-based pricing in which you be paid based on the achievement of goals agreed upon. It is a slightly dicey way of pricing because if you are unable to complete the goals, you might end up with a termination letter from your client. In the hybrid retainer method, you can use a combination of the three retainer methods to determine the fee schedule.

4. Recurring model

The recurring model is best for long-term projects, and these are a great way to have a steady income while you can provide discount rates to attract clients.

5. Performance-based

The performance-based retainer is value-based pricing in which you are paid based on the achievement of some set targets. You must make sure to take the backing of the right metrics and achieve those goals. Otherwise, you might find yourself in a situation where you are not paid for your work.

6. Customized pricing

Like any other service industry, you can always opt to choose customised pricing for your services—this method helps to provide better-customised service as per the budget of the client.

7. Value-based

Value-based pricing is one of the best ways to price your services once you have established a brand for yourself. This way, you earn the value you provide, but the sad truth is that not many use this model as it makes it difficult to compete with competitors who are offering their services at an affordable rate. Contradictory to this statement, there are clients who understand the value you will contribute to their organisation and will readily agree with this model.

Selecting a price that is ideal for your business can be a daunting task, but it is an important task in the process of running your digital marketing agency. Do detailed research about the market, competitors and talk to experts who can guide you with the pricing model. Our virtual accountants can also assist you in this process by helping you understand your expense and the profit margin that is needed to sustain and grow your business.

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