Digital Marketing Agency Pricing Models

The challenge of pricing your digital marketing services is that you need to be competitively priced. Yet, the average costs for certain services can vary significantly, making it nearly impossible to decide what would be an acceptable rate.

Whether you’re just starting out or you're an established agency looking to revise your pricing, here’s an overview of the most common pricing models. We also include examples of what some of the leading agencies in NYC and other major cities charge.

Digital Marketing Agency Pricing: Pricing Models, Average Costs and More:

Most Common Pricing Models

Before you decide on your rate, first figure out how you want to charge your clients. Here are six of the pricing models most commonly used in the industry:

1. Fixed fee/project-based pricing

This is the most common pricing model. More than 60% of agencies use this option, according to the Digital Agency Industry Report 2023, released by Promethean Research.

It’s pretty straightforward. Clients get charged per project like running a website audit. They like it because they’ll know exactly what it will cost beforehand, eliminating any surprises.

However, it can be difficult for agencies to estimate correctly how many hours and resources they’ll need to devote to the project. If they get it wrong, they’ll ultimately have to absorb the loss.

It’s best used if you mainly work with price-sensitive clients like small businesses. To use it, you’ll estimate how much a project will cost and then add a margin to that amount.

2. Packaged/tiered pricing

If you like the idea of selling additional services (something which you can’t really do when using the fixed-fee pricing method), consider exploring the idea of offering marketing packages. From SEO to social media marketing to general digital marketing, there are various types of packages that you can offer.

You’ll combine a number of related marketing services and offer it as a packaged deal at different pricing points. For example, an entry-level content marketing plan can include three content pieces, while the next tier will offer six pieces.

The challenge is to create it in such a manner that everything is clear. Clients should be able to tell exactly what’s included, excluded, and available as an add-on.

You’ll also need to have a wide skill set so that you can offer a variety of services. For example, if you want to create a social media marketing package, you’ll need to know the ins of all the major platforms. Alternatively, you should be super skilled in one platform so that you can offer all the services needed to market on that channel.

It’s predictable which can work in favor of both clients and marketing agencies. Service providers enjoy a more steady influx of payments, while clients can budget better. 

What’s more, clients also feel that they get more value than paying for each service individually.

3. Monthly/retainer pricing

This is similar to selling marketing packages. Your client will pay a monthly fee to retain your services which will be limited to, for example, 40 hours per month.

What makes this approach attractive is that a percentage of your monthly income will be guaranteed. However, getting businesses to sign up is challenging.

4. Hourly rate

Like the fixed-fee pricing method, charging an hourly rate is simple. You identify an hourly rate, for example $100 per hour, and you charge your clients for the number of hours you spent on their campaign.

Hourly rates can differ widely. Basically, anything between $75 and $250 per hour goes.

One drawback is that it can be difficult to grow your business if you solely use this pricing model. After all, there are only so many hours that you can work per month. Plus, if you want to implement a four-day workweek, an idea that’s slowly gaining momentum in the industry, you’ll possibly have even fewer billable hours.

5. Performance-based pricing

With performance-based pricing, you’ll charge a fee based on the targets that you’ve met. You’ll use a specific performance metric, agreed upon beforehand, like page views, leads generated, or sales. This means that if you don’t deliver results, you don’t get paid.

6. Menu pricing

Another less popular option is to price services individually. You’ll, for example, charge per blog post, social media profile optimization, or logo.

As individual services are generally cheaper than a full-scale project, it can be easier to attract new clients. It also offers clients the most flexibility. They can pick only the services they really need.

That said, it might not be the most cost-effective for clients. For example, they might decide to pay only for the actual social media posts and skip strategizing. This could mean that their content misses the mark.

The Average Cost of Services

Deciding what to charge will be influenced by your monthly expenses as well as what competitors charge. You should price your services competitively from the start. If you’re only starting out and thinking about discounting your services to attract clients, keep in mind that it will be challenging to increase your prices if it turns into a long-term partnership.

That said, the thing about digital marketing pricing is that there’s not really such a thing as a standard rate. The pricing across most services tends to fluctuate a lot.

Let’s take video marketing, for example. According to Semrush, short videos can cost anything between $4,000 and $35,000.

To help you price your services, here are some numbers to keep in mind for the main strategies:

SEO

Ahrefs, one of the tools digital marketing agencies can use for SEO, surveyed over 400 professionals about SEO costs. Here’s what this SEO survey uncovered:

• The average hourly rate is between $75 and $100. 
• Project-based fees typically start at $2,500 and it’s not uncommon for it to cost as much as $5,000.
• Retainers start at about $500 per month and can cost up to $1,500 per month on average.  
• A monthly retainer is the most common pricing model. Nearly 80% charge a monthly retainer.

However, according to Semrush’s numbers, it’s not uncommon for the average costs to exceed $100 per hour. In fact, charging $250 per hour can still be regarded as competitive.

What’s more, if you end up working with a large business, you can possibly generate over $200,000 per month.

Social media management and marketing

According to Sprout Social, rated as one of the top social media management tools for agencies, a comprehensive social media management plan can cost just over $12,000 per month. Though, when they interviewed over 220 agencies about the cost of their social media services, the bulk (33%) said they charge between $1,500 and $3,000 per month.

The services that will often be included in this price are:

• Platform management
• Strategy
• Content creation
• Analytics
• Community management

In terms of hourly rates, social media managers can earn up to $150 per hour.

If you’re thinking about offering content creation, the going rate is anywhere between $150 and $500 per post.

Email marketing

Email marketing is another one of the main digital marketing services you might want to offer. Compared to SEO and social media, though, it’s not that expensive.

According to Email Vendor Selection, clients can expect to pay about $2,500 per month. For example LYFE Marketing, rated as one of the top digital marketing agencies in the United States, charges about $1,850 per month for 10 emails and 10 text blasts.

As for the average hourly rate for email marketing, most agencies charge between $100 and $200 per hour. For example, if an executive works on a campaign it will be closer to $200. Alternatively, you can charge a blended rate — the same hourly rate irrespective of which team member is assigned to a campaign.

Pay-per-click (PPC) advertising

PPC campaigns and email marketing fall more or less into the same price range. According to Semrush, the average monthly cost for a PPC campaign can be anything from as little as $250 to $1,500. However, 310 Creative, one of the top B2B SEO agencies, claims that it’s not uncommon for businesses to spend thousands per month on PPC campaigns. Anything between $5,000 and $10,000 is still pretty average spending.

PPC works a bit differently to the other strategies, though. Because of its unique nature, it  presents another possible pricing model to agencies, giving them the opportunity to charge a percentage of the ad spend. This percentage usually ranges between 10% and 30%, based on 310 Creative’s numbers.

WebFX, one of the top agencies for small businesses, charges between 12% and 15% of the ad spend. They also charge an initial optimization fee that ranges between $1,200 and $5,800, depending on the package.

This is an example of another potential source of income — setup fees. It’s not uncommon for agencies to charge once-off fees, not just for PPC but other strategies too.

The Profit Potential

According to Promethean Research’s Digital Agency Industry Report 2023, the number of digital agencies in the United States and Canada has increased by 54% between 2018 and 2023. Not only have they grown in number but also in size.

In 2018, 21% had between 11 and 50 full-time employees. Fast-forward five years and 27% fall into that cohort.

So, while there might be more competition, the stats want to suggest that there’s still ample work available. One of the reasons for this is that businesses are investing sizable percentages of their budgets towards various digital transformation initiatives.

Gone are the days that budgets are mainly spent on websites and digital marketing. Companies are spending on areas like customer experience (CX) and automation. Promethean Research anticipates that by 2026 the digital transformation spend will exceed $3 trillion.

Agencies might be getting bigger and businesses might be willing to spend more, but margins have become smaller. Revenue spent on cost of goods and operating expenses is up by 5% respectively. This leaves them with pre-tax net income of 17%. This number used to be as high as 35%.

There are two main reasons for this change. For starters, inflation has been a major issue. Forbes reports that prices nearly across the board remain at least 20% higher than two years ago. The inflation picture of marketing agencies in the UK looks pretty similar, if not worse.

Then, there’s the salary pressure. To help deal with this pressure, agencies can explore offshoring (moving certain business processes to countries where labor is more affordable) and nearshoring (similar to offshoring, but the process is moved to a nearby country). It’s especially popular among large and enterprise agencies.

Aside from exploring offshoring and nearshoring, staying on top of new capabilities will also help push the needle in the right direction. The Digital Agency Industry Report 2023 found that brands have lately focused more on building their own in-house teams. However, at the moment, new tech like AI are creating new capabilities faster than businesses can build their in-house teams.

Key Takeaways

Clear pricing models are crucial. That said, you should still include a level of flexibility.

Leave room for customization.

You can also apply more than one pricing model. For example, you can charge a fixed fee for the bulk of your projects. Then, for additional services, you can use an hourly rate.

If you want to stay relevant though, you’ll need to look beyond simply providing the standard services. Look to include services that revolve around AI and customer experience that businesses’ in-house marketing teams aren’t as experienced in yet or simply don’t have enough data for.