HOW DO SOCIAL MEDIA AGENCIES CHARGE CLIENTS?

HOW DO SOCIAL MEDIA AGENCIES CHARGE CLIENTS?



Anyone interested in seeking the services of a social media agency is curious about how things work when it comes to the services they offer, the methods of handling client requests, and most importantly billing. How do social media agencies work out their pricing and service packages? We talked to social media agencies and learned all about what goes into calculating and coming up with a pricing structure. Without further ado, let’s look at the details.
In a recent article, we discussed the services that social media agencies offer. Here’s a quick list for your reference:
  • Social media publishing
  • Social media audit
  • Competitor analysis
  • Social media marketing strategy
  • Creating a social media policy
  • Creating social profiles
  • Providing social customer support
  • Running social media campaigns
  • SEO
There are many ways in which agencies do their pricing. It usually revolves around the the type of services and the level of client engagement they offer. I will be discussing some of the popular pricing models in this article.

TIME OR SKILL-BASED PRICING MODEL

This type of model is built on the kind of expertise and skills you require to run your business’ social profiles. This means that the social media agency will be assigning individuals to handle your business on social media. The cost for each individual can vary depending on their experience, the type of tasks they will be handling, their contribution to your business’ sales, etc. This kind of option works best for those businesses who are looking to fill gaps in their in-house social media team.
The challenge with this type of pricing is that the clients usually see the number of billable days of a person rather than the value derived from the x number of days of effort. For example, a senior social media strategist might have spent three days on building a powerful strategy for the client which will reap a million dollars in profit. However, the client is billed for the three days and not the million dollar value that the (s)he has generated. Hence it is important that this pricing model includes something that we can refer to as the “value” fee when charging the clients.

ALL-IN-ONE PRICING MODEL

This pricing model is where the client is charged for the services of a complete team of individuals with different levels and types of expertise. This kind of pricing does not discriminate between individuals in the team or their expertise. It’s what we address as the complete package.
This model works best for businesses who do not have an in-house social media team or manager but are willing to spend on social media marketing. The client usually outsources all their social media marketing activities to be handled by an agency.

VALUE-BASED PRICING MODEL

This model borders on the first pricing model we discussed. It is built on the assumption that the client will reap a high ROI in return for the money that the agency is charging for its services. This means that the agency will bill clients based on the value that is expected to be derived from the social media strategy that they build. Time is not considered as one of the factors when structuring this pricing model. This type of pricing raises the question of how cost can be assigned to value based on assumption.
While most agencies would like to use this pricing model, clients look for measurable data and ROI when investing in an agency.

RESULT-BASED PRICING MODEL

This type of model is for agencies who staff the best social media managers and marketers and who are confident that they can deliver positive results for every client.
This requires agencies to be sure of their social media marketing strategies with a track record of proven ROI for their clients. This is a difficult path to take because social media is constantly evolving and the way people use them is keeping up pace. Even the most meticulously planned strategy can fail. There is no one sure way of achieving success for the clients because it depends on a lot of internal and external factors as indicated.

PROJECT-BASED PRICING MODEL 1

This type of model is based on the budget that the business or client fixes. With this fixed budget, the agency needs to work out the time that can be spent on each service that is required to meet the client’s social media marketing objectives. The challenge with this model is that clients can be demanding and strict about the allocated budget. With the agency’s charge out rates, it might be difficult to deliver the services required (though most agencies usually work them out with the client).
This model works best for agencies that offer consultation service where they do not actively involve in running social media campaigns. They stop at guiding or training the client’s in-house social media team. Small businesses who do not have a huge marketing budget or businesses who need a head start with social media marketing can opt for such a pricing model.

PROJECT-BASED PRICING MODEL 2

The other kind of project-based pricing model is where the agency discusses and reviews the requirements of the client. It makes a list of services, the amount of time and expertise required to achieve the client’s social media goals and gives a project estimate cost. The client is usually billed a part of the project cost upfront. The challenge with this model is that the project might evolve as the client and agency begin working together. This means that the cost will ideally have to be increased but this cannot happen due to the initial agreement signed by both the parties.

REVENUE-SHARING PRICING MODEL

This is one of the latest changes in the cost model. In this model the revenue generated from the services provided by the agency is shared between the agency and the client. The agency usually asks for 15%-20% of the margin with the clients lowering it way down. Or it is the client that mandates the percentage of margin that the agency will get from the social media marketing it provides for the client.
The challenge with this model is that unless the agency wins a huge chunk of sales for the client through social media, there is little that they can get as a fee. Clients prefer this model because they believe that it gets the agency to put in all the efforts to win ‘that’ percentage of profit margin.

HOW DO RETAINERS FIT IN

The buzz is that retainers are slowly dying out. But truth be told, they are not going away anytime soon, at least not for small and medium social media agencies. This works brilliantly in favor of the agency because there is a steady inflow of money coming in periodically. Though businesses are initially hesitant to sign up for a retainer, there are three important benefits for clients or businesses to consider.
  • No surprise or additional costs
  • Long-term collaboration
  • Readily available expertise
Retainers will blend in well in most of the pricing models. The agency usually sets up a retainer fee for repetitive tasks such as regular search engine optimization, running monthly ad campaigns on social channels, generating x amount of engagement every week, etc. However, before any of this is decided, the agency should figure out whether or not it falls under the subscription business model. If the agency does not offer services that clients cannot keep coming back for, then there is no point in investing time in proposing a retainer fee.

CONCLUSION

No matter which type of pricing model a social media agency adopts, clients have begun to ask for transparency. Hence agencies are becoming more disciplined when estimating costs for social media projects. They have begun to move towards models that can quantify the services they offer.

OVER TO YOU

Are you a social media agency? If so, tell us how you price your services. Which models have you tried and which ones have worked for you? Share them as comments; we’d love to know. And, if you are a business that has outsourced social media to an agency, tell us which pricing model you prefer and why.
HOW DO SOCIAL MEDIA AGENCIES CHARGE CLIENTS? HOW DO SOCIAL MEDIA AGENCIES CHARGE CLIENTS? Reviewed by Mohammed ELarby Mohammed on 11:50:00 AM Rating: 5
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