The pricing strategy will vary by type of ad agency and client engagement. Its generally common practice for an ad agency to have a preferred approach, but many vary it on a case-by-case basis depending on clients requirements and expectations.
The way most traditional ad agencies charge is based on a range of factors including; overheads (office rent, management salaries etc), use of freelancers, estimated billable time for each role, the level of profit they want to apply.
Here are some of the more common methods used by traditional ad agencies;
Option 1. Blended rate with time estimates.
A blended rate covers all the specialists in the agency from social media, strategists, design, media buying, account managers, regardless of role or seniority and will be one flat rate (e.g $1000 per day). Some clients prefer this approach but may ask for specific individual rates to compare ‘apples with apples’ in a pitch situation.
Option 2. Specialist rate with time estimates.
The rates for individuals will vary depending on their skill set, experience, level of seniority and contribution to the project. You will be pay more for experienced people as they demand higher salaries.
Most ad agencies will justify this method with clients by presenting that the higher rate more experienced marketer will be able to ‘nail the solution’ faster than a junior or less experienced staff member will.
Option 3. Retainer based projects
Retainer fees are less common nowadays however are still popular when a client is undertaking a project that is measured in months and the client and agency agree upon some key performance indicators in advance. Examples include SEO & social media management. The challenge with this method for some clients is that the agency will typically want to monitor any agreed KPIs on a monthly and/or quarterly basis along with the time taken to undertake those tasks and adjust the fee accordingly.
Option 4. Fixed fee model
Usually driven by the client due to a fixed budget having been established prior, the agency will calculate how much time can be spent at each stage of the project to provide a solution that will meet the objectives outlined by the client.
Before accepting a fixed price project the ad agency will usually go through a thorough estimating process to determine how much budget should be allocated for the project. On many occasions the agency will almost certainly ask for more budget or will even walk away from the project if they don’t feel the objectives are achievable or desired margins are available.
Option 5. Value-based model:
Some ad agencies will try to charge for the value of the work they are doing rather than the time taken to do it. Most would like to use this model however the market still demands more tangible methods of charging.
How does the marketing department charge;
One of the things we’re incredibly proud of at The Marketing Department is how we have structured what we charge in order to remain transparent. In an industry where pricing can often be confusing, transparency just feels like the right thing to do. Transparency in how and what we charge builds trust, and trust is the foundation of great teamwork
We find when being upfront and transparent about what we charge, something strange happens, it makes our clients lives easier!. In openly disclosing what we charge, it also shows we’ll be transparent and straightforward with everything else we do.
Contact us today and ask to see our price list!