What is the best way to price inbound retainers?
This is the question most agency owners will ask themselves multiple times throughout their careers.
There are tons of pros and cons to different pricing models. Let me begin this post by saying that I would love to hear your thoughts in the comments section below.
Cost vs. Value Based Pricing
Cost-based vs. value-based pricing are two of the oldest and most tested pricing models in the inbound community.
Cost-based pricing is simple. Figure out what the costs your agency will incur and mark up form there. It is safe, predictable with low variables.
With safe an predictable, you potentially forfeit the right to charge more. That is where value based comes in.
Value based pricing is a tougher model to follow. There are many factors in inbound marketing and a lot of unknowns to contend with.
The theory behind value based pricing is that you are charging based on how much additional value you will add to your customer. Therefore if you plan to 10x a companies revenue, well then you can certainly charge more than a cost based model. The inherent problem is, how do you prove that those are the actual results the client can expect?
Value based pricing can be a tough sell in a service based business. Prospects want know know actual costs upfront and it is hard to not give a large range with value based pricing.
Package Based Pricing
Another popular model is using packages. A customer can select from 3 preset packages, typically labeled something like “Fast, Faster, and Fastest.”
At one level you may receive 1 blog post per week, the other 2, the next 3 so on and so forth. Not a very customized approach but it sure makes creating systems and processes easier. It also sets a clear expectation for the client from the beginning.
My personal opinion is that agencies seem to be moving away from this model. There seems to be a greater premium placed on personalized strategy and flexibility in today’s market.
Point Based Pricing
This method seems to be picking up quite a bit of steam lately. One of the major catalysts behind this movement is Paul Roetzer from PR 20/20.
Paul gave a great presentation at INBOUND 2015 all about how and why he developed this model at his agency. You can see his power point he shared at Partner Day 2015 here.
The theory is almost a hybrid model. You take the concept of packages and make them flexible. Tailor those package to the clients needs by allowing them to become involved in determining what they will receive. Give them guidance based on your suggestions but make them part of the process.
In order to see examples of how Paul has set up point based pricing you can check out his agency’s pricing page here.
Jeff White at Kula Partners is another great example of an agency doing point based pricing. Check out their pricing page here.
The Best Method
So what is the best way to price retainers? The best answer is probably that it depends on the type of owner you are. How much risk are you willing to take and what makes sense based on your team structure?
The more research I do the more I begin to like the point based model.
I think this is an area we will se change in the near future. As inbound grows and more agencies continue to innovate it won’t be long until many more model arise.
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