Agency Pricing Realities

Walk around the halls of any ad agency and you will hear a wide array of colorful language more suited for a locker room than a place of business, but the dirtiest word you are likely to encounter is the dreaded “procurement”.  This word universally sends shivers down the spine of anyone that’s had the pleasure of negotiating scopes of work and more precisely, the agency fee associated with said document.

I do not claim to offer a surefire cure for the pain of scoping negotiations, however the best remedy to steer clear of “procurement hell” lies in the art of the scope.  And while I can wax on poetically about the importance of defining and outlining objectives, tactics, goals, deliverables, timelines, blah, blah, blah, let’s cut to the case – agency fee model is the biggest hurdle we encounter.  The question we must answer is what is the best pricing model for agencies and clients alike – a retainer approach or an hourly bill model.

Now I’ll be the first to admit that an endorsement for a retainer approach sounds a bit biased coming from the agency side. But when compared to a billing by the hour model, that tends to be the option of choice from your friendly neighborhood procurement person, the retainer approach offers benefits that stretch well beyond cost alone.

Why you ask?  Let’s say you have a household project that does not fit into your expertise as a proud, do-it-yourself homeowner. And let’s also assume you don’t have the time and/or equipment to accomplish this project. What gives you more comfort in dealing with a general contractor – a flat cost based on competitive marketplace considerations or the unknowns of paying an hourly rate with variables such as undefined timelines, non-guaranteed staffing (workers) and the inevitability of cost overruns.

Flashback to the agency world – the reality is staffing is lean even the best of times. Agencies do not hire ahead of the curve and we are not built to have employees sitting on the sidelines waiting for their next assignment.  A retainer approach secures resources by locking in a team and reducing variables such as waiting on team members assigned to multiple projects (i.e. extended timelines and billable hours) as well as the removal of any incentive on the agency side for efficiency of timing. The best agency/client relationships are based on continuity – we are service organizations at the heart and if it’s my money, I want the best talent with the least amount of risk for turnover. The promise from the agency side is that a retained team will provide dedicated resources and that promise must be kept for this approach to work.

So while procurement may never be an enjoyable process, the pain can be minimized when we are able to provide competitively priced dedicated teams that are set up for success. And isn’t that what both agency and client ultimately want to achieve?

Retainer vs. Hourly Billing: How Do You Devise a Pricing Model That Works for Both Agency and Client?

Part 2 of a series
This is part two of a two-part series about pricing models. Part one discussed how to determine consulting rates.

There was a time when most search marketing agencies used the traditional advertising agency model and charged a percentage of their client’s advertising spend. Over time, many realized this form of payment actually dissuades your client from administering their budget effectively or efficiently and incentivizes quantity rather than quality of work or results.

Today, the prevailing pricing methods for search agencies are monthly retainers or hourly bills. Which one is right for your agency? How do you determine the best pricing model for both your agency and your client?

To answer this, ask yourself some questions about your client and the work you’ll perform on their behalf. Does your client have a set budget for your work? If so, they’ll insist on staying within that budget and will also likely want to spread that cost over months. If so, a retainer will work best.

Retainers, when staffed correctly, allow agencies to commit resources to the client, enabling them to work on client projects and tasks at any moment in time. They enable brand managers to have a focused, knowledgeable team that in essence becomes an extension of themselves. Retainers, thus, permit energy and focus to be on critical thinking, rather than on hours billed or time and resource constraints.

The retainer price will be based on several factors, including services performed, anticipated number of dedicated hours per resource, and overall budget. It’s essential that the agency price the retainer effectively. Thorough and transparent collaboration between the agency and brand will result in a properly staffed, timed, and billed retainer agreement that will benefit both agency and client.

The hourly rate pricing model has certain advantages as well. It’s simple to calculate and understand and provides both agency and client an opportunity to test each other out. Neither side may be willing to commit to a long-term relationship without first knowing that their work styles are compatible.

The hourly rate pricing model works best when clients require semi-regular task-oriented work. It’s not optimal for clients who require full-time agency support. Likewise, if the client doesn’t have the wherewithal to support working with the agency on a full-time basis, which requires a significant time commitment, both parties will be served best by an hourly rate price model.

If clients choose an hourly rate price model, they need to understand upfront that the agency will not allocate resources to projects until an agreement is in place. This agreement should come with an understanding as to when the work will be performed and when it will be completed. Agencies are not expected to “drop everything” as they typically would with larger retainer clients.

Another consideration is that agency hourly rates tend to be priced higher for short-term projects. Retainers give agencies more flexibility to offer blended or reduced hourly rates in return for the longer term commitment.

Most typically, a combination of retainer and hourly rate will meet the needs of clients and agencies. Any work deemed above and beyond the retainer agreement will be billed hourly. Dedicated resources still will be allocated, but those resources will bill any hours above the agreed-upon retainer allocation at an hourly rate.

Which model do you prefer? Share your experiences in the comments below.

Determining Pricing: How Much Are Your Consulting Services Worth in the Open Market?

Part 1 of a series

Are you diving into the world of consulting? Determining your hourly rate is tricky, especially for those new to the world of consulting.

Here is a list of questions to help you begin to establish a rate that meets your financial objectives while keeping your client’s budget in mind.

What is your specialization, and how rare is your skill set?
Two very important factors that influence how much you can charge for your services are your specialization and the scarcity of the services you provide. If you are one of a select few who have your skill set (and you can prove it via customer testimonials, certifications, and specialized training), you can charge more for your services.  Keep this in mind as you develop your practice. Generalists are a dime a dozen. If you want to maximize your income potential, specialize in one area of digital marketing services, and do it better than anyone else.

What is the average hourly rate for your services in your local geographic area?
Base your rate on what your local market will bear. Don’t overprice or underprice the market, unless you have a very specific specialization or you are just starting your business and have a need to prove yourself to prospective clients.

What is the age of your business?
As stated earlier, young businesses might want to set their prices at the lower range of the local market. Older businesses, with testimonials from well-known brands, might consider charging above the mid-range of the local market.

What are your financial objectives?
If you’ve determined your annual financial objectives, you can do some simple math to determine your hourly rate. If your objective is to earn $100,000 per year and you plan on taking two weeks off for vacation, you can start by equating an hourly rate as:

$100,000 / 50 weeks per year = $2,000 per week

Assuming you work 40 hours per week, your hourly rate is $50 per hour.

Keep in mind some of the factors above to determine if this figure should be adjusted upward or downward. Remember to consider and account for billable hours per week – not all 40 will be billable, or you may need to work additional hours to manage administrative and business issues to achieve 40 billable hours in a week. Also, factor in your expenses. Many consultants, regardless of industry, double or even triple the base hourly rate to get a net figure to charge customers. If this rate does not equate with what the local market will bear, or with your experience level and your level of specialization, you may need to adjust accordingly.

As you determine your rate, it is important to remember not to devalue your business or yourself. Be prepared to justify your rate. Ways to justify include providing references, white papers, and examples of your success stories. Your clients should be your biggest advocates. Don’t be afraid to ask them for references when you are trying to acquire new business.

The only time you should consider reducing your rate is if you believe the prospective client is trying you out before committing to a much larger budget and will provide you with a steady income in the future. If clients push back with regard to your rates, offer them additional services at the same rate, rather than devaluing your service. Another option would be to offer a reduced rate only if the balance of the bill is paid in advance. Be flexible, yet steadfast.

Pricing is a lot like marketing itself. The best results usually come from a deep understanding of your market and testing different things in order to come up with the perfect mix. Good luck, and enjoy the ride.


How did you determine the rate for your consulting services? Share your experiences in the comments below.

Best Twitter Features to Promote your Online Business

SEMPO_Blog_Twitter1Why Twitter?

Businesses of all sizes have been slow in realizing the potential of social media marketing. And those who do, fail to understand the reason and benefits of marketing on Twitter. The thing about Twitter is that it is not the average social media site where people sign-up to hang out with friends. Twitter is also about information.

You may not realize this, but many people turn to Twitter for information, so there can be no better place on social media for getting your brand message across. In fact, many potential customers may already be searching Twitter to find you. Do you have something for them?

There are as many as 2 billion searches on Twitter every day, and around 645,750,000 active users. Fortune 500 companies and small businesses have accounts on Twitter to interact with their target audience. Along with this marketing potential, Twitter has introduced many features over the years that can be used by online marketers to boost their brand image.

Marketing in 140 characters?

This is the character limit of a tweet; 140 characters has, in essence, become a term of its own and it was a challenge for marketers to get their point across in the shortest amount of words. In all fairness, they managed to do just that, using relevant keywords, Hashtags, links, and tweeting at the best time as revealed by research. However, now you have more enhanced features that will not only help you cross this character limit but also enable you to incorporate various media elements as well.

Best Twitter Marketing Features:


Twitter Cards

Twitter cards allow you to attach media expressions to Tweets that direct readers to your content. All you need to do is add a few lines of HTML to your website. As a result, every time someone Tweets a link to your content, a card will be added to it that can be viewed by user’s followers. So even if you post a link to your Flickr photo in a Tweet, a card will be created. You can choose between a Summary Card, Photo Card, Gallery Card, App Card, Player Card, and Product Card. Be it price, benefits, or description, everything you need to post about your content can be done using a Twitter card. You can also promote your products using the gallery view and 2 “customizable fields” where further information about the product can be added. Recently, the social network made one more step toward enhanced promoted tweet campaigns by introducing conversion tracking and tailored audiences options.










In the example above,  you can see how East India Tea Company successfully promotes a new post on its blog with the help of Twitter cards. Though the message occupies more space, it also gets more engagement, as it is reflected on number of retweets and favorites.

Custom Timelines

A custom timeline is much like a Twitter list, but here you can choose which Tweets to include in the list. These timelines can be embedded into websites as well. There is a title on top, followed by a 160-character description. New tweets that are added appear at the top of the list. Note that you can only use custom timelines with the TweetDeck app. Once you download the app, you can use timelines to promote your business in several ways. For example, you can have a list of the oldest to the newest products, so that potential customers will be aware of your latest offerings. Secondly, if you use hashtags with your products, you can make a timeline of the best tweets from your customers. The same goes for customer reviews, testimonials, and answers to FAQs.  The information will not only be streamlined, but the presentation will be user-friendly as well.

Tweet Archive

Many users are already aware of this feature where one can download all tweets since day 1 and turn them into an archive. You can use this feature to observe your earlier tweets as well as to see if any improvements need to be made or if some successful formula was used before that you may have forgotten about.

See below how the archive of your tweets will look like if you request it via the Setting tab of your Twitter account.









Trending Topics

As mentioned at the outset, Twitter is all about sharing information, and nothing exemplifies this more than the Trending Topics feature. This feature has been constantly updated, and now there are hundreds of cities around the world on the list to help you discover at a glance what’s trending across the globe. You can also receive more specific trends after you select the country or city you are interested in.  If you are also using the Twitter features discussed so far, then you have access to comprehensive market research about almost any target audience in the world.

Enhanced Photos

You do not have to be a social media marketing expert to realize the compelling and engaging benefits that photo sharing offers. To further augment visual content shared on the website, Twitter teamed up with Aviary to provide iPhone and Android users with special filters and effects. These range from black & white to vintage, which means there are multiple options to choose from. Hence, you can always find filters and effects that help you tweak your pictures in line with your brand image.

As you can see, the feature looks pretty much like the one on Instagram, so the process of enhancing the photos is going to easy and enjoyable.









Negative Keyword Targeting

Keywords, when used properly, can do wonders for your business’s online visibility. When misused, they can repulse both your customers and search engines. So your aim should be to appear in relevant search results instead of spamming users with hashtags that they were not looking for. This is where the Negative Keyword Targeting for Promoted Tweets comes into play. This feature ensures that the search terms you use do not appear in tweets and conversations not related directly to the product itself. For instance, if your product name is Pure Passion, you can ensure that the product doesn’t turn up in search results for either ‘pure’ or ‘passion’ keywords.

Note that there is a bulk importing tool on Twitter as well, where you can highlight words that you want to match with your keywords. This tool provides you with three different matching options when entering keywords, which are exact match, phrase match, and basic keyword match.

These are some of the best features on Twitter that empower marketers to create a unique selling point on social media. Use a combination of these tools, and engage with the huge audience of Twitter users.