Every agency needs to figure out how to price its services. Pricing your services is a simple concept but it can be tricky if you don't know what you're doing.
As a general rule of thumb, the price of the product must cover the cost of rendering service and overhead expenses.
In any agency, there is no one-size-fits-all pricing model because different services have different costs associated with them.
By creating your agency, you've already taken the first step in becoming successful. The next thing to do is strategize on how to price your services correctly so that you can start selling them and getting clients who will invest in what you have to offer.
Agency pricing varies from agency to agency, but generally, there are 13 ways to price your services. You can utilize agency management tools for your convenience.
The main factors you need to take into consideration when starting an agency are the cost of rendering the service and how much you want to make as a profit.
Now that we've covered some information on pricing your services, here are the strategies you can use for an agency pricing guide.
1. Figure Out Your Market
As an agency, you need to figure out your target market. It is not enough to just choose one target market and stick with it. You need to keep iterating on your target market as you grow because their needs will change over time.
You should also determine whether there is a competitive advantage in any of the following.
- Price Point: What are people paying now? Are they willing to pay more? If so, how much more?
- Technology: What type of technology do you use to provide your service and what is the cost associated with those tools?
- Service: How will you deliver the results (in-house or outsourced)? If it's outsourced, who are your providers and why should they invest in working with you rather than a competitor?
Once you have a clear understanding of your target market and pricing, it's time to start strategizing.
2. Define your Ideal Clients
To price your services correctly, you have to be able to define what an ideal client looks like for your business. Do some research and write down who your ideal client is.
Clients are the source of revenue for your business. Without them, you are nothing so it's important to get this right from the start.
You need to know who is willing to pay more money and what exactly they want out of your services.
Some clients may be looking for a quick fix while others might have multiple goals in mind, which makes it difficult for you to establish an ideal client.
Use the information that you have gathered about your target market and create a list of qualities that this type of agency would want in its services.
Remember, these are people who are willing to pay more so there's got to be something valuable they're getting out of the service provided.
For example, if you're an agency that does social media marketing for small businesses in the United States, then you might want to focus on clients with at least 100 employees and $100 million revenue per year so they can afford your services.
3. Create a Price Structure
Once you have an idea of what your ideal client looks like, it's time to create a price structure. When creating this outline for yourself, ask yourself these questions:
- What are the core services I provide?
- What is included in each service level and how do they differ from one another?
- How much does each service cost?
- Can I offer a discount for different levels of service?
- What is the cost associated with each level of service and how much do I need to make from each contract to be able to sustain my business?
Remember, your price structure needs to align with what you think an ideal client would want so it will vary depending on who they are.
4. Showcase Your Service
Once you have a solid price structure, it's time to start showcasing your service. There are many ways that you can do this and some agencies choose to use different approaches depending on their target market:
- Direct outreach: This is the best way for marketers who focus on smaller businesses because they don't need large budgets to afford your services.
- Email outreach: This is the best way for marketers who focus on mid-sized businesses because they have larger budgets and are more likely to invest in your services.
- LinkedIn or email groups: Reach out directly to clients! You can ask questions, and some of them might even become clients for your services.
- Quora: Find questions related to your agency’s services and see the most common pain points and answers.
- Reddit: Reddit has multiple subreddits for pretty much every type of client. Hang out in those communities and answer their queries as best you can! You never know when it might lead to something bigger.
5. Industry Specific Factors
Each industry has different prices for its services. For example, an agency that helps restaurants with online reviews might charge $100 per month whereas a digital marketing agency in the US would charge anywhere from $500 to $2000 based on experience and expertise.
Industry-specific factors such as location and what type of clients you're targeting will affect your pricing.
If you're marketing to restaurants in Manhattan, then it would make sense for your prices to be higher than if you were targeting small businesses around the US that are looking for a quick fix.
6. Sketch Your Standardized Price
Based on your research about the target market, create a standardized price. This is where you list out what each service includes and how much it would cost a client to use them.
This will help you create an easy-to-understand visual representation of exactly what they're getting for their money so that there isn't any confusion down the line.
7. Make Sure You Be Consistent
The last thing you want to do is price your services differently for every client so you must have a consistent price structure across all of them.
If they're paying $100 per month and another company might pay $2000, then the clients who are already spending money with you might feel cheated or swindled if they see that other companies are getting a better deal.
That's why it's important to have an easy-to-understand price structure so there isn't any confusion about what your services cost the client in the long run!
8. Keep Track of Your Pricing
One strategy that you can use is to keep track of your pricing on a spreadsheet. That way, you're able to note any changes in the market and make sure that your clients are getting an equally valuable service for what they're paying.
When it comes time for renewal, you'll have all the information at your fingertips. No matter how much you think your services are worth, don't ever be dishonest about the cost of them.
As we've discussed, honesty is the best policy and it will ensure that you're able to sustain your business for a long time.
9. Know Your Competitors' Pricing
Along the same lines as keeping track of your pricing, it's also a good idea to keep track of your competitors' prices.
That way you'll be able to figure out exactly what the market is selling those services for and adjust if necessary.
By knowing what the market is selling those services for, you'll have a better idea of how to price your offerings.
That's why it's so important to do your research and understand what your target market is charging for their services!
10. Don't Forget About Taxes
Most countries require you to withhold taxes from all of the clients that you work with. Even if you're operating out of a tax-free jurisdiction, it's still important to know how much you need to withhold from your clients.
That way, when the time comes for renewal, you don't end up charging them too much money or not enough money to cover taxes. This will lead to confusion and might even cause problems with the relationship between the agency and the client.
11. Testing Strategy
The saying goes, if it ain't broke, don't fix it. That doesn't necessarily mean that you shouldn't ever change your pricing strategy. Instead, what you can do is test your pricing strategy to see how it performs against others!
You can set up multiple campaigns across various platforms like Facebook, Twitter, PPC, and Facebook ads and see which one works.
Once you determine what your winning campaign is, then it's time to double down and make sure that you can scale it for maximum results!
12. Be Flexible When Necessary
Just like we talked about in the previous section, sometimes if a pricing strategy isn't working it's best to just move on to another one.
Instead of stubbornly sticking to a pricing strategy that isn't performing, it's better to be flexible and move on to something else that might work better.
Over time, you'll figure out what works best for your business model and then you can double down on that strategy to make sure that it pays off both short-term and long-term.
13. Always Be Selling!
Some people think that once the project starts, it's time to relax and coast until it ends. However, the truth is that the selling continues during the entire process.
If you're not selling your services during projects, then when do you?
That's why it's so important to always be selling - especially when it comes to services like lead generation, SEO, and other digital marketing strategies.
As long as you continue to sell, you should never run out of business no matter how good your services are!
Types of pricing
- Project-based pricing
One of the best ways to price your projects is based on the specific requirements that the client has.
By setting up a project-based pricing strategy, you're able to charge what you feel is necessary for each service.
This means that if one project requires significantly less work than another one - then you can accurately price it!
A great way to experiment with this strategy is to break up all of the services you offer into different categories.
For example, one category could be about developing an effective social media strategy while another might be about sending out press releases for your clients.
Then when they come in and request a service, they'll charge them accordingly depending on what type of service they're looking for.
Some people might prefer this strategy over others because it gives them complete control over how their services are priced.
- Hourly pricing
Another great way to charge your clients is by charging them an hourly rate for the specific services that you provide for them.
This works well if your client prefers seeing how much time it takes you to finish a project so that they can compare it against other agencies.
The only downside of this is that some clients might start taking advantage of your hourly rate by coming up with more tasks for you to do.
It's important to know when you should charge an hourly rate and when you should not. So be sure to weigh your options carefully before committing!
- Fixed pricing
Another way to price your services is by offering a fixed rate for something specific. This means that you're able to determine exactly how much you'll be charging them upfront and they know what they can expect to pay.
This also helps you because it keeps the client from asking for anything more.
As long as your client is happy with the price, this strategy can work perfectly for you!
- Blend of fixed and hourly pricing
This might be one of the most common strategies because it's a great way to have control over how much you charge while also being fair to your clients.
You'll determine the fixed price for the service you're about to offer them.
After that, if it takes more time than expected then you can charge them at an hourly rate. This allows you to make some extra cash while still being fair to your client.
- Fixed pricing with add-on prices
This is another great strategy for making sure that you have a good balance between your clients and yourself.
You'll decide on the fixed pricing for the services that you're offering them.
Then if they want any extra stuff that will cost them an extra set price. It's as simple as that!
The best part about this strategy is that it gives you full control over the price that you have while also being fair to your client.
Other Factors That Might Alter Your Pricing
Many other factors affect how much money people are willing to pay when working with an agency.
For example, the industry that the agency is in will alter how much they're willing to pay. If you're working with people in an industry like technology, then they might be willing to spend more because of how quickly things are changing.
It depends on how much money they have and what their long-term goals are for the projects that they're working on!
For example, you might be able to charge more for your services if:
- You have an extensive background in the industry and can offer exclusive insights. And you're a known authority and people trust what you say.
- Your clients know that they will get better results by working with an agency rather than trying to do it themselves.
- They understand that the money they're paying would be more than enough to cover for your services and time spent on their business.
- You have a team of experts that can help you provide high-quality results. You'll need to show them what each member of your agency does so it's clear how much value they add compared to someone who is doing just one task.
- Your clients understand how much work it takes to run a business and what is involved in running an agency.
- They know that you need to make money from the services provided so they're willing to pay higher prices compared to someone who just needs something fixed quickly.
- You have a long track record of success for your client's specific industry. There's a reason you've been able to maintain such high success rates so your clients know that it can be trusted.
- Your price structure is transparent and easy for potential clients to understand. Instead of having tiered pricing, which might confuse people into thinking the more expensive package gives them better results, have one flat fee that includes everything needed from start to finish.
- You're a well-known authority in your industry and you can offer value beyond just the service itself.
- People want to work with someone who is going to improve not only their business but also their brand as an expert or influencer in that field, which means it's worth paying more for better results.
Creative Ways to Increase Your Price
Some agencies might decide that they want to charge more for their services. If this is the case, you can try some of these creative ways to increase your prices:
1. Offer a bonus service or add-on for clients who are willing to pay higher rates. You could also offer them additional perks such as data storage, unlimited revisions to their final product, or your expertise for extra projects.
2. Get referrals by working with other agencies whose clients are willing to pay higher rates.
This will help you increase your exposure and credibility as an agency that can work well with companies that want the best results possible without charging ridiculous amounts of money.
3. Offer discounts for the first few months. Many new companies offer a special discount for their services when they're just starting.
It is to attract more attention and clients, but after that period is up you can increase your prices accordingly.
4. Offer exclusive deals or free products/services if someone signs on with an annual contract instead of monthly payments.
It'll be more lucrative in the long run and it's a way to show that you're willing to do anything necessary for their business.
5. Offer services for free when clients sign on with an annual contract instead of monthly payments, which can be much more expensive over time if they aren't careful.
This will help them see your value and keep you as part of their marketing team for a long time, which is always ideal.
Benefits of having an agency pricing guide
You can set your pricing structure to be more expensive than it would be if you were just working on your own.
You can entice potential clients with an attractive package deal that will give them everything they need.
You know how much time and money is involved in running an agency, which means you'll factor that into the final cost of services.
There are many different ways to increase your prices, including by offering bonuses for higher-value deals.
You can show that you're an authority in your industry because you have the expertise and skills needed to grow a successful business while still staying on budget.
You'll show clients that trust means something when they work with you because they'll know you're doing everything possible to help them achieve their goals.
You can attract more clients because having an agency pricing guide will set your company apart from your competition and attract the attention of people who are looking for the best results.
Now that you know the 13 strategies you should use when determining how much to charge for your services, it's time to start putting them into practice.
Your agency pricing guide will help you reach new heights and increase your company's visibility among the competition, which means it's time to get started today!
By selecting the right agency pricing model, you can ensure that your company will be successful and profitable for years to come. You can spread your roots deeper into the ground and build up a strong relationship with your clients.
Agency pricing is a complex topic but it doesn't have to be as long as you follow these 13 strategies. From there, it's all about modifying those strategies and constantly innovating until your price structure is perfect for your agency.
Some models might not work initially but with time and practice, you'll find one that is perfect for your specific business needs so take the initiative to try out some of these strategies today!