How Much Do Digital Agencies Cost? : The Price-Value Trade-Off
Let me be frank: you don't always get what you pay for with digital agencies. There are very real price-value trade-offs, meaning that you can pay a lot of money for something and get comparatively little value. Rather, this is more the case:
- What you get doesn't matter if it can't be measured.
- You should always measure the metrics, KPIs, performance towards goals and OKRs, and overall results of a marketing campaign, website redesign...whatever it is an agency does for you.
- What you get matters less if it doesn't have a strategy behind it.
- You need a proper plan or strategy as to how each deliverable will get you closer to your measurable goals. If the plan is weak or there is none in the first place, the outcome may be just as weak.
- What you get depends on the experience, expertise, and intelligence of an agency's individual team members.
- Sometimes you are assigned a more junior team member...and you get junior results.
- What you get is always more complex than what is stated.
- For example, a deliverable of "SEO" in proposals from two different agencies can mean incredibly different things. SEO is always more complex than a bullet point, and just because one agency includes it in their proposal does not mean their SEO work is actually giving you any measurable, valuable results.
- What you get is not always in your best interests.
- While certain offerings may be valuable for some organizations, it may not be valuable for yours. Many agencies will try to sell you what's in their best interests rather than your own best interests.
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Various Pricing Models
In this model, the agency or freelancer simply tracks the amount of time it takes to complete a task. This gives both you and the agency ultimate freedom and creativity, and best takes into account the time put into a given task or project. However, it can lead to budget overruns if not managed carefully.
If budget is a concern, it's best practice to set estimates at the task level and track and update along the way. If a pattern of overages on the task level occurs, you can then pinpoint an issue in the estimation process, namely that estimates are not sufficiently padded to account for the reality of the situation.
Project / Fixed Bid
Of course, you can do project work under an estimate, and work hourly as you go along, updating and communicating on progress as you go along. In an agile project management framework, your goal is to launch a product under the estimated number of hours, while trimming scope and features in order to do so.
A fixed bid entails a flat rate for a project. You usually pay upfront for a good portion of the project, then collect milestone payments along the way.
Monthly retainers are common in the digital marketing industry. It is a way of establishing a relationship with an agency so that they can plan for the capacity and resources needed to staff and manage your account on an ongoing basis. This allows them to give you priority service and manage their business in a healthy way. Retainers are often flexible, giving both the client and the agency flexibility to do great things together, in partnership, allowing the scope and deliverables to expand or contract as needed.
You may see pricing for outcome-based solutions, such as "3 blog posts per month, 5 social media posts per month" in concrete pieces. While this can sometimes get you the results you're looking for, it can be comparable to vanity metrics such as "get us more Facebook likes." What does that mean or do for your business? What do those blog posts do if they are not part of a comprehensive SEO strategy? Is it beneficial for the agency to be writing those blog posts, or is it better for you to use your in-house expertise to write the content, with the agency serving as the coach and SEO strategist, to help you create the right kind of content with the right keyword strategy?
You may see pricing like this, especially for conversion rate optimization (CRO) or paid ad management, sometimes with a lower flat fee. The deal is that you as the client pays more as the agency performs and brings in specific results, like conversions on the website, or leads from paid ads.
While this sounds attractive, you as a client are going to pay a premium for the agency essentially taking on all the risk. Furthermore, if not done right, this kind of relationship can quickly become toxic, especially when results take many months to come in the door due to the reality of a client's digital marketing ecosystem.
Cost of Specific Digital Marketing Services
Different digital marketing services can be priced in various ways. With each one, you ought to consider price-value trade-offs. Before you undertake any marketing initiative, ensure your marketing budget supports a quality, high-value end result so that the deliverables meet or exceed your goals.
Pricing for Web Design
Web design involves such a wide range of possibilities. From the less-complex side, you have website solutions like Squarespace, then solutions like WordPress which can get more complex, then Drupal or other enterprise-grade CMS solutions on the more complex end.
Ultimately you should desire a web design that accomplishes measurable KPIs and goals for your organization. Pretty aesthetics and beautiful graphic design are nice, but, unless you have a brand that is mostly based on aesthetics, such as a creative design agency or an art school, you really ought to focus on things like user experience, conversion rates, SEO, and measurable outcomes and KPIs coming from the website, not to mention the technical excellence required to handle more advanced web projects, ensuring you have a well-crafted, future-proof solution that keeps you out of technical debt.
Pricing for Web Development
Web development can be seen as a commodity. And, on its own, it can be. You can indeed find low-cost developer resources, including those overseas. However, web development really is not a commodity when:
- integrated with a smart web and digital marketing team
- aligned on an overarching strategy
- using best-in-class project management
- the individual developers have a high level of expertise and communication capabilities
- the project is more complex
In these cases, web development can truly make or break your project and is quite far from a commodity.
In the United States, a reasonable/market rate for web development services is ~$140/hour. You can find lower rates in companies that just specialize in development, but then you lose the value of an adjoining design and/or digital marketing team, as well as agency-level services and expertise.
You can also find cost-efficient outsourced rates overseas in the $15 to $30+/hour range, but there are often cultural, communication, project management, team, and strategy barriers that can be more costly than the savings, including the cost of technical debt accrual if the underlying programming and architecture is not top-of-the line. It is a better, less-risky idea to work with an agency who does the outsourcing for you, rather than trying to do it yourself.
Of course, you can find freelancers to do web development, but this can be extremely risky if you are not a highly technical, experienced developer yourself. The supervision and quality assurance the companies and agencies can offer is incredibly important. We often encounter projects that "my friend's brother" or "some guy from Craigslist" was working on, and they almost always in a state of utter disaster, and if not they at least have a large amount of technical debt, done in a one-off platform, in a one-off manner that was suitable to that particular freelancer -- not the organization they were working for.
A Word of Caution on Multiple Vendors
The more vendors you have, the more costly and inefficient projects tend to be. For example, passing assets from a branding agency to a creative agency who then passes its assets to the web development agency...those projects tend to be sh!t shows in our experience, to put it lightly.
It is often better to have a branding agency handle the identity and branding assets – don't let them overextend their deliverables into design and development, which is when disaster strikes. Let each agency specialize in what it does best, which may include "the entire process from UX and content strategy to web design to web development" –- breaking up those steps is often dangerous and disadvantageous if you have a capable agency who can do all of them. The branding and identity work, however, is a separate beast. For best results, consult your web design and development agency about the ideal deliverables it would receive from the branding agency.
Pricing for SEO Services
Search engine optimization (SEO) has both a wonderful and terrible reputation, depending on your experience and who you talk to. SEO is a very important business strategy, but you have to invest in it accordingly. There are too many cheap "SEO packages" that do nothing more than keep you where you're at rather than propelling you forward. The greatest value of SEO is actually empowering and educating your in-house marketers and content creation team, although of course this can also be done by an agency. Local SEO is a bit of a different ballgame, but most SEO agencies can also handle local SEO.
SEO is truly a "get what you pay for" deliverable, but cheap SEO with budget pricing structures verges on snake oil. Too many agencies bundle SEO up into packages with little transparency as to what they're actually doing for that money. Personally, I would recommend hourly pricing for SEO along with complete transparency, measurable outcomes, and a focus on empowering internal team members rather than an agency or freelancer handling the entirety of your SEO efforts, especially when domain knowledge expertise is required.
Pricing for Social Media
Social media can be a very strategic and important part of your marketing strategy, There is the concept of "social media management", which is simply managing the social media accounts for an organization. If you are simply looking for someone to manage your social media, without a real marketing strategy or high-quality content behind it, you'd be best hiring a freelancer for $20-$50 per hour.
However, with social media marketing, you are using your social media to promote your products and/or services, sometimes with the help of influencers and micro-influencers. This is a more strategic, intentional approach that is best left to an agency or an in-house hire.
Pricing and Hourly Rate
For agency social media services, you may find package deals for X posts per month, but if you want to do serious social media marketing, you're best off either defining the deliverables extremely clearly or going with hourly pricing, ideally partnering with your in-house digital marketers to own a good share of the work. Hourly rates for social media agencies in the United States can range from $140/hour to $200+/hour, depending on location.
Pricing for Paid Advertising and PPC Services
Paid advertising and PPC present several different pricing models. You can pay based on performance, sometimes with a smaller flat fee, or incorporate the total amount of ad spend into the equation, so that a person's time managing that spend is accounted for as the spend grows or shrinks. Google Ads is the dominant PPC platform, but there may be different pricing models for other platforms.
Pricing for Marketing Strategy
Here's where the value can skyrocket, as can the price, but not necessarily. The trick is in knowing how price and value are balanced. A solid marketing strategy can be developed by a smart agency with experienced team members – you don't need to hire a big, fancy agency that specializes in marketing strategy to get some really solid advice. Ideally, this strategy will be co-created and supplemental to your in-house strategy.
You can of course hire a huge consulting firm to come down from the rafters with a 100-page document, and pay through the nose for it...but that's often not the best use of funds, save for the largest of companies with complex business situations.
Often this is best done through hourly work rather than a package since strategy should be dynamic, changing, and flexible. Agency hourly rates for this type of work can range from $150 to $300+/hour in the United States.
Pricing for Fractional Marketing Services
A modern, full-scale marketing team has many different roles, not just on the marketing end but on the technical end as well. This mix of roles, from CMO-level to CRM specialists and PPC experts to developers, CTOs, and technical architects/engineers can be purchased on a fractional basis. Meaning you don't have to hire the entire team, but rather a certain number of hours for only the roles you need – 10 hours per month of developer time, 2 hours per month of high-level strategy / CMO time, 15 hours per month of graphic design, 6 hours of SEO expertise.... You can see how in-house marketers could benefit greatly from just the right amount of expertise.
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Pricing for Other Digital Marketing Services
Many other services like eCommerce, content creation, content marketing, set up of marketing campaigns and landing pages, email marketing, and so on can be purchased as hourly services through an agency.
If you get too constrictive with project-based or outcomes-based pricing, sometimes you are delivered content or results that are just ok rather than meeting the level of excellence you could get if you were able to be more involved and provide creative input into the entire process.