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Masooma Memon on April 8, 2021 (last modified on April 6, 2021) • 16 minute read
Working out your marketing agency retainer fee might be confusing initially.
And, frankly, it might even take a few retainers in trial and error as you work out exactly how to charge them.
However, having a strong starting point or factors to reference as you work out your pricing is always helpful. And, that’s exactly what we’ll offer today – help in terms of the factors that other agencies consider as they price retainers.
Ready to learn? We’ve got a lot of ground to cover, so let’s get started with a primer of what you’ll learn:
A marketing agency retainer is a recurring monthly or quarterly agreement between a client and a marketing agency for specified services or consultation.
Think of it like this: you offer marketing services for various channels such as social media and blog, for example. A client comes in and wants to work with you for a quarter on their social media.
Based on the agreement, your agency dedicates a set amount of resources (manpower and time) to managing the client’s social media.
Since the project isn’t one-off and you work regularly for a defined period with the client, the client is known as a retainer. What’s more, the pre-booked service is referred to as a marketing agency retainer.
For a marketing agency retainer to work, you and your client need to decide the project scope including what sort of work is required (and how much time it’d take), deliverables, expected results and the project time frame.
Having this clearly decided helps in two ways:
Ultimately, with these specifics laid out in advance, you and your client can work out a retainer fee.
It’s essential to mention here that you can always price the way you prefer – on an hourly basis, value-based, and so on. Most of the agencies that contributed to this post, about 38%, prefer retainer-based pricing.
Less than 20% offer a fixed fee. Fewer still, charge mixed and hourly rates. Hardly 5% charge on a performance-based pricing model.
Marketing retainers are a win-win. Let’s look at them from both the perspectives:
Benefits for the agency:
Benefits for the client:
This depends on the services you offer and services your client is looking for.
If you’re a complete digital marketing agency, your typical services might include media planning, traditional advertising, website conversion optimization, search engine optimization, content marketing, and more.
Similarly, if you’re a content marketing agency, you might be offering services like content planning, competitor research, content audit, content writing, and more.
About 75% of our respondents share they offer content marketing services with a close majority providing SEO services. Social media marketing, email marketing, and web development are other services that most other agencies offer.
Some 20% also offer influencer marketing as a service. Here’s a complete look at the services typically offered in a marketing retainer:
Now your client might avail all these services or some of these. Chances are, your client might start working with you on one service, but goes on to work on more.
Now, on to the meaty bit on marketing agency retainer fee.
We’ll discuss all the factors that go into pricing an advertising retainer so that by the end of the section, you’ll have an idea of how much to quote a client.
But first, how much do other agencies share for retainers? Most of the agencies (38%) have monthly retainers of $1,001 – $2,500. Some 22% also have retainers of $2,501 – $5,000 and less than 10% have retainers of $10,001 – $15,000 in a month.
Let’s go on to explain how you can price your retainers:
1. Understand the costs involved
2. Consider the amount of time that goes into the work
3. Factor in extra hours of work
4. Calculate the profit margin
5. Consider the client’s ROI
6. Factor in the manpower too
7. Don’t forget the job’s complexity
8. Build in a buffer in the pricing
9. Bonus tips for planning your agency retainer fee
First things first, “anticipate the amount of work and costs” Jonathan Aufray of Growth Hackers Agency says. Lay down all the work that’ll go into the project as well as how much you’ll need to spend on it to get things done such as the cost of running ads let’s say.
Start with “discussing with the client on the deliverables, timeline and scope of work. By knowing that, you will be able to evaluate and forecast your costs,” Aufray notes.
“Once you know the corresponding costs, you need to quote a price where your business is profitable while adapting to your client’s budget and goals.
Pro tip: If a client is interested in working with you, but can’t afford the prices, ask them to adjust the project scope so that it fits within their budget.
“And, don’t forget to consider any tools or costs that go into delivering those services – it is important to make sure you have an estimated amount to cover those as well,” RielDeal Marketing’s Stephanie Riel adds.
A good estimate of the work that goes into a project is an estimate of the time that’s needed to get the ball rolling.
The team at Newman Web Solutions takes this approach. Lori Newman shares their pricing process: “For us the most important aspect we consider when determining our monthly retainers and depending on the nature of the services we provide, we usually base it on the amount of time provided or spent on each particular client’s project each month.”
Kevin Kohlert from Borealis Digital Marketing agrees. “The most important aspect for calculating the monthly retainer is the amount of time and effort a project will take in order to achieve desired results.
For example, if a client wants to get to the first page of Google’s Organic Search Results in a highly competitive industry, it’s going to take hours of research, planning, and execution, in order to achieve this goal.”
“We find that clients prefer retainers because they are predictable,” Newman observes. “They know in advance what they must budget for each month. Everything is handled upfront, which benefits both the client and the agency.”
So, how to go about doing the math? Kohlert has the formula: “You’ll want to either calculate the number of hours you’ll need to spend each month and bill based on this projection (i.e. 20 hours per month), or operate in a performance-based structure (i.e. get a commission on gross sales or business growth.
What’s more, if a client wants more of your services, you can always upgrade their packages. Newman’s team does the same: “we can upgrade their retainer to the next tier or bill them additionally as need if they exceed their plans allowed time.”
In fact, 22% of agency owners think it’s best to review the retainer fees in three months. The majority, however, says you can revisit the pricing when necessary.
Also bear in mind that as you discuss the project and work out your agency retainer fee, be sure to “clearly define the expectations for what tasks and metrics to the client,” Sparkr Marketing’s Wendy Margolin reminds. “Communication is key to starting and maintaining a successful client and consultant relationship.”
Editor’s note: Keep tabs on how much time you’re investing in your clients’ projects using this free Harvest: Clients Time Report dashboard. It shows all essential metrics such as the hours tracked, billable amount and time, and more – all on one screen.
It’s also essential that as you detail the time a client’s project will take, you squeeze in some buffer time as well – saving yourself from the headache later on.
ProsperoWeb, LLC’s Brian Stewart highlights this. “Always remember to factor in extra hours when calculating a retainer fee in the event that something goes wrong. If no problems arose and those items were not required, the customer would not be charged for them.”
Another essential step is to pay attention to your profit margin. In fact, Martina Cooper from BHMR goes on to call this factor “definitely the #1 we consider when calculating our retainer.”
And here’s how it works for their agency: “Since our digital marketing efforts are likely to add a couple of cost %s per client acquired we need to make sure that it would be even worth our time to start and provide digital marketing services to particular clients.
Having worked with some clients in E-commerce and Surgery, we always try our best to come up with a mutually-beneficial agreement that will lead to the best return for both parties involved for a long period of time.”
This is another way of working on your marketing agency retainer fee. It works for a very simple reason that Jesse Heredia from Ravecode Solutions points out: “Clients only care about the outcome.”
So it makes sense that you “make their lives easier.” How, you ask? “With value-based pricing,” Heredia answers.
Sharing their agency’s process, Heredia writes, “we look at the goals, measure the demand versus the competition and come up with a potential ROI depending on their customer lifetime value. Based on this number, we can determine a monthly retainer fee that makes sense for them as well as increasing our bottom line.”
LIFTOFF Digital’s Nate Rodriguez echoes the same. “I believe one of the most important factors is considering ROI (return on investment) for the client. In other words, will the client see a potential return on their investment with your company? That is a super important consideration.”
And, here’s an example: “Say a company sells $30 widgets and you’d like to charge a 2k retainer, that is a lot of widgets you’d have to sell to justify your retainer,” Rodriguez explains. “However, if that same company sold $500 widgets you’d only need to get 4 sales and they’d be at break even, the rest would be cherry on top.”
Another crucial aspect to think about is the number of your agency employees that’ll be involved in the retainer’s work. In other words, ask yourself: “how much manpower a project is going to require,” Sean Allen from Twelve Three Media outlines.
“Will the project take 5 employees? 6? 8? 12? Once you know the number of employees, you need to figure out what the average hourly rate is for that group of people,” elaborates Allen.
On a side note, most agencies have a team of less than five people working on a retainer project.
GR0’s Kevin Miller puts it slightly differently. “The best way to determine the price of a monthly retainer fee is to factor in your overhead costs and determine salaries for yourself and your staff.
Allen summarizes, “the investment of time and employees tells you how much you should charge. Based on this math, agencies should be able to charge retainers that meet the 40% minimum margin they need to stay profitable.”
That said, Miller advises you to keep in mind that “not every client is the same. Some clients require much more work and effort to see results. A multinational corporation will have a different retainer fee than a small business that is just getting started.”
Editor’s note: Get a birds-eye view of what your team’s completed, what’s due, what’s incomplete, and more with this Asana (Team overview) dashboard. It’ll help ensure the retainer project is well in progress.
“When building your monthly retainer fee, you’ll need to consider complexity,” Slingshot’s David Galownia brings in another important point.
“A legacy system that takes a lot of effort should be priced higher than a project with newer technology and low complexity. The higher the complexity, the more effort you and your team will have to exert to maintain the product.”
“With retainers, you want to make sure you’re giving them a good deal, while also avoiding undercutting yourself,” Galownia continues. “Guaranteed monthly revenue is great, but you may lose money in the long run if you don’t price yourself at a competitive rate.”
In addition to the time buffer we talked about, Tiffany Lewis from More Meaningful Marketing underscores another important buffer to include in your agency retainer fee.
“When calculating a monthly retainer fee for a client, even if it’s not for consulting, make sure to build in a buffer that allows you to be available to the client in the event of questions, training, or level-setting.”
Lewis also notes, “Different clients have different skillsets and knowledge prior to coming to you for services. You want to be able to give them a good experience and also make sure that you’re charging fairly for the value and services you’re providing.”
With all the essentials out of the way, here are two bonus tips to bear in mind as you work out the cost of your advertising retainer:
“The most important aspect to consider when calculating monthly retainer fees for a client is the how much work you can handle in a month.
You should always keep in mind that while a lot of your clients might need your services on an ongoing basis, not all of them will be able to pay you on the same level. It is okay for you to have such clients as long as you don’t take on too much work and get stuck with tasks that take up too much of your time.
In order to prevent this from happening, you will have to calculate your retainer fee in a way that will allow you to work on multiple projects but at the same time keep your focus on the clients that pay you well and are willing to give you more business in the future.
The easiest way to do this is by starting with a higher retainer fee and then lowering it over time with your clients.” – Dan Sears, Cirely.
“The most important aspect to consider when calculating a monthly retainer is how you determine your quality of service.
Of course, you want to determine what type of tasks you will complete for your client, how long it will take, and compare that to the quality of service you will provide.
If you are very knowledgeable or have a lot of experience in the work you will be doing, it’s reasonable to charge a higher retainer fee.
Since you will be providing a high quality of work which will likely be easier on the client than if they chose to work with someone with less experience.
Retainer fees are very personal, you should never undercharge what you think your time is worth.” – Brooke Markevicius, Allobee.
It’s always a good idea to use a marketing retainer under the following circumstances/objectives:
If you didn’t nod in agreement to the points above, you probably don’t need to use a marketing retainer.
To put it simply, there’s no need for an advertising retainer if:
With all these factors that you’ve learned today, we’re sure you’re already feeling ready to price your advertising retainer since now you know exactly what factors to consider.
Simply work out the project details, the time that’ll go in the work, the people that’ll be involved, and the operational costs. You’ll start getting a rough idea of your marketing agency retainer fee.
Fine-tune it with other factors such as the value you’re offering, the client’s ROI, and more that we discussed.
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