Whether you’re a startup or an established agency, it’s crucial to formulate a well-planned pricing strategy. It’s not just about the amount you charge. It’s about how you position your company in the market. Consider pricing strategy as an essential aspect of your business. It can lead to more profits for your company, attract potential clients and ultimately generate more sales.
Read on to know how to formulate a pricing strategy for your digital marketing agency. In this article, we’re going to discuss tips and tricks that can help you come up with a great pricing strategy.
Why is pricing strategy an essential part of marketing?
A pricing strategy is a plan for how a company will value its products and services. In other words, it’s the path you choose to move your products through the buying cycle. It’s significant because it lets people know what a business is all about, what it stands for, and what it’s willing to do for its customers.
Getting your pricing strategy right can be the difference between success and failure. If you charge too much, your need to show the value of the services, or potential customers won’t even consider your business. If you charge too little, you’ll leave money on the table. Pricing strategy isn’t just about the payment for your product or service. It’s about the bundle of products and the value you offer.
One of the most important things is that we are dealing with a highly competitive industry. The digital marketing agency is always in competition with other companies in this niche. To survive in an extremely competitive environment, your company has to develop an appropriate pricing strategy that works for the business. It should be flexible, make the most profit and be the most suitable.
Your pricing strategy: different methods for charging
Cost of services is one of the most important topics for any business. You can have the greatest product. But if you set the wrong price, you won’t be able to sell it. When it comes to a digital marketing agency, you’ll have to decide on the type of pricing you want to offer your clients. There are multiple options, but I’ve chosen the most common ones to help you decide.
#1. Use the hourly pricing principle
To calculate how much service value should be, we usually begin with the cost of the product itself. If we’re talking about a product, the cost of its production is the main indicator. In the case of a digital marketing agency, the cost of an hour of an employee’s work is the starting point.
First, assess how many hours your employee spends on the task or service. Multiply it by the hourly rate (excluding time for vacations, sick leaves, and organizational tasks). Then add the agency expenses on:
- marketing;
- office rent;
- education;
- overheads;
- soft;
- taxes;
- etc.
And multiply it by extra charge based on:
- сompetition;
- niche specifics;
- your expertise and reputation.
This method is common for businesses in the service industry, especially in the digital marketing field, so use it without a doubt.
#2. Know your competitors
If you’re running a digital marketing agency, it’s vital to comprehend your competitors and the way they charge their services. It’s not about lowering prices or being the cheapest in the market. It’s about the value you bring to the table.
When looking at the pricing strategy of your competitors, analyze the following:
- What is the market like?
- What is the price range your competitors offer?
- Is there a steady rise in prices for a certain service?
- How much do companies charge for the same services?
- Do you offer more value to your clients?
- How much does it cost you to do your services?
If you’re not aware of it, you can easily end up making the same mistakes that your competitors have already made.
#3. Assess the reality of selling a service
As a marketer, you know that your services are worth a lot. But how to persuade your clients to pay for them? In many cases, it boils down to your pricing strategy. You may be thinking: “Of course, my services are profitable. Who wouldn’t want to pay me for what I offer?”
In reality, it’s not always as easy as it seems. The answer is obvious: identify the target audience and examine its needs. When a client contacts you, the main thing you must do is to figure out what they are expecting to get out of your services. Assess if your service is profitable for a client and if it’s real to sell it.
#4. Set price based on its value for clients
Your service may be exclusive. In this case, it will bring you great revenue. Use its value when setting the price of your digital marketing services. The clients of your company will be ready to pay for a profitable proposition if you prove its profitability.
It’s desirable to create, analyze, and compare several cases with various budgets, different numbers of websites / social media pages, geo focus, and stuff. Then you’ll get an average cost of a digital marketing campaign.
How to implement your pricing strategy?
After having discussed the various models that digital marketing agencies use and the reasons that lead to their adoption, it’s time to put the theory into practice.
Pricing is one of the most difficult areas to get right in digital marketing, and it’s all too easy to either undercut your competitors or overcharge and lose potential clients. But there are ways to get the pricing right, and it all comes down to one point: knowing your client’s needs and showing that if he pays you, he’ll get expected results and value.
Pricing isn’t a science. There are no specific rules that you can follow to get it right. Instead, explore your market and be aware of the competition. Pricing isn’t about setting a specific rate and hoping it works out. It’s about understanding the market and then working out what your perfect price should be.
Summaries
Choosing the right pricing strategy is a critical part of the success of any digital marketing agency. It should be able to differentiate the company positively while still being profitable and maintaining a high level of client service.
In this article, I’ve explained how you can set the right price for services and how to communicate the value you’re providing to your clients. Hope this post has been helpful and provided some valuable insights.
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