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Lucas HamonDec 12, 2017 4:17:30 PM6 min read

The Secret Behind Inbound Marketing Agency Pricing

The Secret Behind Inbound Marketing Agency Pricing
7:11

Understand what you're paying for

To help you get a grip on the costs associated with your possible investment in inbound marketing, I'm going to reveal our biggest secrets about inbound marketing agency pricing.

I feel like one of those magicians revealing the secrets to the most profound magic tricks. It's possible that I may not make it through the week if inbounders see my true identity, but I'm going to risk it anyway, because you want to know, and I want to help!

Today, I'm going to break out the two most widely accepted inbound marketing agency pricing models, so you can see what you're paying for, and I'm also going to show you how we come up with your plans.

This will help you understand what you're getting into when you first spark a conversation with an agency as well as how to compare pricing structures between firms.

Are you new to inbound? If so, check out this Guide to Getting Started, so you can see why and how, exactly, it helps businesses grow.

There are two widely accepted models for pricing inbound marketing:

  1. Cost Plus
  2. Value-based

The Cost Plus Model

As you can imagine, the cost-plus model is exactly as described... We base it off of our overall costs with a mark-up. Mark-ups can range anywhere from 35% to 100% or even more depending on the agency.

Why such a big discrepancy? Well, I can't speak for every agency out there, but I can tell you that we land somewhere in the middle, and we justify it based on the oversight each project has along with our constantly evolving delivery model. We also cross-collaborate between projects every month to keep teams fresh, full of ideas, and constantly reflecting. We also promote cross-collaboration with our freelancers working through DMoD, and have a continuous dialogue going where we help each other.

There's also the general overhead and cost of doing business.

The big thing is about vision... Having vision is important to your success. Churning out cookie-cutter marketing isn't going to do you any good, and thanks to a saturated internet, it's becoming increasingly important to be innovative.

Understanding costs:

It's important to note that no two agencies or programs are going to have the exact same costs. For one, we could value certain skills differently, or compartmentalize them differently. This could mean that one agency is paying $25/hour for the same role that another agency is paying $75/hour for.

It's also important to note that our delivery processes also vary. For example, at Orange Pegs, we won't assign a single person to plan AND execute an entire program. We have different folks for strategy, writing, web development, and graphics design. We also have folks who sole responsibilities are to edit copy and others who focus primarily on social media.

For us, this means paying less per skill-set than we'd be paying if we used "unicorns" (folks who are skilled in ALL aspects of inbound) to plan and execute everything. Conversely, it means spending more time and money on communicating and overall process improvement

So, just because two agencies may charge $3,500/month for programs with similar delivery figures (blog posts per month, content offers per whatever, and monthly time spent in social media, etc), that doesn't mean they're offering the same things... They're close, but you should take into consideration that there will be differences.

You may also find that one agency will charge $15,000+/month for the same exact delivery as somebody charging $5,000/month, but that doesn't mean the one charging you more is charging a bigger mark-up. The reasons could be good OR bad. Maybe it's because they've figured out a formula that streamlines their team and they pass along the savings. Or, maybe they use cheap, less experienced talent and don't care about success because it's a numbers game.

How to identify value:

The best way to differentiate value between the two is to talk about STRATEGY. How is this investment a strategic one? (not sure how to spot a tactical marketing shop vs a strategic one?)

Spoiler, MOST agencies are focused on inbound as a tactical service offering, not a strategic one. They'll use the term "strategy" throughout their presentation, however, they're not using the term properly most of the time.

Strategy implies BIG PICTURE. So, a strategic investment is one that considers both up and downstream implications. This means there is always a plan for what's next. It also means there's a shared sense of focus around GROWTH. It's not just about tactical wins. It's about the BIG wins.

When investing in inbound marketing for the first time, it's unlikely that you have the framework to support it if it's successful.

So, as far as value is concerned, you may be GREAT results from a tactical outfit, but "great" would only be measured in the context of INBOUND, not the growth of your business. That means getting caught up in vanity metrics, not Your North Star. VALUE is about growth, not pretty-looking reports.

The Value Model:

This one is pretty simple. The value model is purely based on outcomes. Mind you, this does NOT mean it's performance-based, but rather, based on the projected outcomes along with how much they are worth to YOU.

So, if a single customer has a lifetime value of $100,000, they're going to charge a percentage based on how many customers they think they can bring you, broken down into months.

The formula goes like this:

If 1 customer = $100,000 in LTV, then they're going to charge based on how many leads they are responsible for generating toward that goal that YOUR COMPANY is responsible for closing. If they can generate enough leads in a single month to give your sales teams a reasonable chance of closing just 1 of those million-dollar customers each month, they'll charge, say, 5 - 10% of that per month... or $5,000 - $10,000/month.

In doing that, they're not going to necessarily commit to delivering any specific number of blog posts, time in SEO, etc. The perk for them is to operate based on what is most important at that particular moment in time.

How they are the same:

Neither model is actually guaranteeing customer acquisition. They shouldn't, anyway, because closing the deal is out of the marketer's sphere of influence. This is important to note because there is still going to be the onus of actual sales on your salespeople.

How we come up with your plan:

Inbound marketing is an important tool used in all of our Growth programs. It's the accelerant between the 5 different stages of the pirate metric funnel, no matter what the problem is that we're solving for.

Our pricing is derived from the number of experiments we plan on running in each sprint cycle. We use the Cost-plus formula, so you know we're pricing our business fairly. Click HERE to learn more about our inbound marketing agency services:

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Lucas Hamon

Over 10 years of B2B sales experience in staffing, software, consulting, & tax advisory. Today, as CEO, Lucas obsesses over inbound, helping businesses grow! Husband. Father. Beachgoer. Wearer of plunging v-necks.

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