Social media marketing is technically free. Any business can create an account for free where it can share unlimited posts, which is also free of charge.
Yet, knowing where to post, what to share, when and how often to do so calls for an in-depth understanding. That knowledge and experience come at a price, for which businesses are happy to pay.
In fact, our Digital Marketing Benchmark Report 2024 found that digital marketers believe that social media marketing generates their highest return on investment (ROI). The challenge, though, is finding a pricing model and rate that will make the labor-intensive job worthwhile to social media marketing agencies too.
Here’s an overview of how other social media marketing agencies go about pricing their services. From pricing models to popular services to average rates, explore how you can remain profitable in 2024.
6 Pricing Model Options for Social Media Marketing Agencies
Billing clients for social media marketing work requires that you know how much to bill and how to bill them.
Digital agencies generally have more freedom when it comes to choosing a rate (but only to a degree if they want to remain competitive). However, when it comes to the Ts and Cs, it’s best to stick to one of the following popular pricing models that clients have grown familiar with.
1. Retainer pricing
Sprout Social, one of the leaders in the social media tools category, surveyed over 220 agencies about their service offerings, client pricing, and packaging. They crunched the numbers and found that the retainer model is by far the most common contract type.
Nearly 80% of agencies surveyed use this pricing model. What’s more, in the case where agencies offer only one type of contract (which only about a third do), it will be retainers.
The reason why retainer pricing is so popular among social media marketing agencies is that you know where next month’s paycheck is coming from. Aside from the peace of mind, it also makes it easier to plan — both your budget and workload.
Similar to offering social media marketing packages, clients will be charged a fixed monthly fee to keep your services which are typically capped at a set number of hours. The commitment is usually for between 6 and 12 months, with nearly 4 out of 10 agencies happy to settle on this contract length.
Getting clients to sign a contract for a year is also quite common and even smaller social media marketing agencies have had some luck. The same report found that 36% of social media marketing agencies manage to land yearlong contracts.
That said, the reason why agencies still manage to make the old retainer model attractive is because they’re making it more flexible. When going this route, it’s essential that you can find a middle ground and create a contract that works for your agency as well as your clients.
For example, you’ll have to agree upon leftover monthly hours. If the client only ends up using 90% of the hours one month, will you allow them to carry it over to the next month?
What if one month calls for more work? Will you be happy to put in a few extra hours free of charge that month?
It’s this kind of flexibility that agencies need to apply to ensure the retainer model remains attractive in uncertain economic times.
You’ll also need to keep in mind that first-time clients are unlikely to sign a retainer. You can use one of the following pricing models for new clients and pitch the idea of switching to a retainer once you’ve proven your capabilities and they understand their own needs better.
2. Hourly rate
Charging an hourly rate is less commonly used by social media marketing agencies. Only about a third offer hourly contracts, according to Sprout Social’s The Agency Pricing and Packaging report.
Freelancers, on the other hand, typically use the hourly rate for social media marketing services.
As such, keep in mind that if your agency plans on charging an hourly rate, you’ll likely have to compete with freelancers. A potential issue is that freelancers can often “afford” to charge less than the average rate as they don’t have all the overhead expenses of running an agency.
While the model is self-explanatory and calculating the price and bookkeeping are straightforward, it does require a level of trust between the agency and client. If an agency “takes longer” to complete a task, it will be able to bill for more hours of work. Because of the nature of this pricing model, you have to ensure that you build a trustworthy brand. Otherwise, it’s easier for clients to wonder if the team is dragging their feet on purpose to make more money.
Charging an hourly rate also makes it difficult to grow your agency. Ultimately, there are only so many billable hours. Plus, not all the work involved is always billable. Each project involves admin tasks (like replying to an email) that are difficult to fit into the equation.
If you solely rely on this pricing model, you risk feeling as if you’re always racing against the clock. While this is stressful, the work isn’t tied to performance agreements. Of course, you’ll always give your best, but after the work is completed, you’re done.
All things considered, hourly rates are best suited for longer projects that involve a lot of research or extra requests.
3. Performance-based pricing
In short, with the performance-based pricing model, an agency will charge a fee based on the results they generated. It involves more risk than other models, but the rewards will allow you to grow your agency faster.
Unlike SEO efforts that are harder to track, there are dozens of social media analytics tools that you can use to prove the effectiveness of your campaigns. Most platforms also offer their own insights and analytics that can serve as a baseline. Thanks to the availability of tools, charging a performance-based fee can make sense for more experienced agencies confident about their expertise.
To ensure that this model works, it’s essential that all parties agree about which metrics this performance bonus will be based on. There should also be clarity on the fee itself, the timeline, and which tracking tools will be used.
4. Project-based pricing
For a straightforward, one-time project, it often makes more sense to charge for this project as a whole and that’s that. For example, if a business needs to create a series of Facebook ads to promote Black Friday, you can use this model.
This pricing model is attractive to clients (especially smaller businesses with set budgets) because all costs will be agreed upon beforehand. Plus, if they were unhappy with the working experience or results, they’re under no obligation to work with you again.
The challenge for agencies, though, is to have a firm understanding of what will be needed in terms of skill and hours. If you underestimate the number of hours, your profit margin will be lower. You can’t revise your quote.
To work out your fee, you’ll typically estimate the number of hours you’ll need and any linked costs and then add your profit margin.
Sprout Social’s report found that most agencies add a margin of between 11% and 20%. Less than a third charge between 20% and 30%, while only 15% add between 30% and 50%.
5. Menu pricing
You can also price various services individually. This model works great if you prefer completing specific tasks that are simple in scope.
Small businesses love it for the flexibility. By being flexible in your own approach and allowing certain clients to mix and match the services that they really need, all opportunities are maximized.
Like project-based pricing, it has the potential to backfire if you don’t have a strong grip on costs. Ensure that you weigh up the time a specific service requires along with the number of employees (and level of skills) needed.
6. Packaged/tiered pricing
This pricing strategy groups a range of services together and sells it at a monthly, fixed price. The three-tiered approach is most commonly used.
You’ll have an entry-level plan targeted at new clients and small businesses. A mid-level plan (often labeled the most popular), and a higher tiered plan aimed at clients with deeper pockets.
The services that are most often included in social media packages, according to Sprout Social, are:
- Social media strategy
- Content development
- Social media management
- Paid social
- Social media analytics
- Social media engagement
- Community management
You can always offer less-popular services like social audits, employee advocacy, or social listening as additional services available at an hourly rate or individual price.
There should be some continuity between the different tiers. Agencies typically include all the services included in the previous tier and simply add a few extra services and/or increase the posting frequency and number of platforms and/or profiles. For example, WebFX, known for their social media marketing services tailored for small businesses, scale their packages like this:
- The Bronze plan includes 10 monthly social posts, one social media network, and one personal monthly consultation for $3,000 per month.
- The Silver plan includes 20 monthly social posts, two social media networks, and two personal monthly consultations for $4,200 per month.
- The Gold plan includes 30 monthly social posts, three social media networks, and four personal monthly consultations for $4,800 per month.
Strategy and competitive analysis are included in all three of these plans.
Correct wording is crucial. Not only must everything be clear, but it should also be presented in an attractive way. This starts with the name of the package. All the packages - even the cheaper ones - must sound inviting.
When marketed correctly, packages can offer you the same benefit of a more predictable income stream like retainers, but with even more transparency. Clients will know exactly which services are included.
The Average Cost of Services
The second key part of formulating pricing is deciding on your rate. The going rate in your industry (specifically location) along with your recurring monthly expenses are two main factors to consider. These will impact what you should and can afford to charge.
If you’re thinking about charging a monthly price for social media services, Sprout Social’s report found that most agencies charge between $1,500 and $5,000 per month. Only 12% charge more than $5,000.
Planable, another leading social media management software solution for small teams, also sets the average in this range. However, according to their math, social media management services can start anywhere from as little as $500 per month.
The average minimum campaign size is slightly higher. We surveyed the rates of the top social media marketing agencies in over 40 US cities and found that it was about $7,000.
That said, this number differs significantly. The lowest average campaign size was just over $2,300 while the highest average was nearly 10 times that.
This shows you the impact that location can have. When we analyzed 30 of the top social media marketing agencies in Indianapolis, we found that the average minimum campaign size is only $2,332. On the other hand, the average minimum campaign size for the top 40 social media marketing agencies in San Jose is a whopping $21,892.
The average hourly rate generally doesn’t fluctuate as drastically. Using the same approach, we calculated the average hourly rate for social media marketing to be anything between $72 and $117.
In this case, New Jersey is the most affordable state. The top 40 SMM agencies in New Jersey charge on average only $72 per hour.
Knowing these average industry rates will ensure that your pricing is competitive from the start. Price yourself too high and you’ll have a harder time landing long-term clients. On the other hand, if you price yourself too low, you leave yourself with no real room for growth.
What Are the Most Profitable and Popular Services?
Like with other popular digital marketing strategies, social media marketing encompasses an array of services. The key services that your typical social media marketing package will include are:
- Social strategy
- Paid social ads
- Content creation
- Community management
- Performance tracking
For example, Sprout Social lists social media strategy as one of the most profitable social media services. Because of its technical nature, agencies can afford to charge more for strategy services. To give you an idea, Planable’s data reveals that agencies based in New York City charge as much as $190 per hour when senior members are involved.
It’s critical that you decide beforehand which types of services you’ll offer. Planning, implementing, and optimizing a long-term campaign requires a lot more work (and individual services) than managing a single social media account.
Key Takeaways
For most social media agencies, landing a client on retainer is the ultimate goal. You get paid in advance. Plus, you can rest assured knowing that for the next few months you’ll be able to cover your monthly costs.
That said, there are various other pricing models to explore. Not all businesses have long-term projects or essentially want to entrust social media efforts to a third party.
For these clients, consider offering a customizable package, charging hourly pricing, or per specific service. In fact, offering multiple contract types is the trend nowadays.
