Understanding Agency Pricing Models: A Guide for Startup Marketers

Today, we’re tackling a subject that often confounds startup marketers: agency pricing models.

If you’ve ever wondered why your marketing agency charges what it does, or how you can negotiate a fair deal, this article is for you. Firebrand Founder and CEO Morgan McLintic uncovers the methods agencies use to price their services. From buying labor in bulk to value-based strategies, understanding these models can help you make informed decisions and form effective partnerships.

Morgan’s experience includes running and acquiring agencies, so he knows the industry inside out. As he puts it, “The better you understand how agencies work and make their profits, the more you can be a partner, not just a client.” Let’s break down the three most common pricing models used by agencies today and what factors affect the cost of hiring a PR agency or digital marketing agency.

The Three Main Agency Pricing Models

1. Time-Based Pricing

Time-based pricing is the most straightforward model and is popular among agencies. Here’s how it works:

• Description: You pay for the time agency staff spends on your project, with hourly rates varying by seniority or skill level. This agency billing method allows agencies to account for agency service fees effectively.
• Pros:
  • Simple to understand.
  • Scalable for agencies of all sizes.
  • Allows clients to access a wide range of expertise without paying for a full-time hire.
• Cons:
  • Costs can fluctuate monthly, making budget management tricky.
  • Accuracy in timekeeping is essential but often challenging.
  • Time is an input, not an outcome—clients may not get what they expect.

Morgan’s take: “Time is an input, not an outcome. You’re paying for potential, not necessarily for results.”

Best For: Projects with undefined outcomes, evolving scopes, or when specific expertise is needed on a short-term basis. 

2. Deliverables-Based Pricing

Deliverables-based pricing is a favorite for clients who prefer to pay for tangible results rather than time. 

• Description: You pay for specific outputs, such as a website, blog posts, or marketing campaign, regardless of the time spent. 
• Pros:
  • Clear scope and expectations.
  • Easy to understand—clients know exactly what they’re paying for.
  • Agencies can manage their time efficiently, leading to more predictability.
• Cons:
  • Requires a detailed definition of deliverables, including revisions, to avoid misunderstandings.
  • Clients may underestimate the time needed to produce quality work.
  • Changes to the deliverable can lead to additional costs.

Morgan’s take: “It’s all about the output. You know what you get, not just the time spent.”

Best For: Projects with clearly defined goals and tangible outcomes, like design and content creation. 

3. Value-Based Pricing

Value-based pricing aligns agency compensation with the value they deliver to clients, often making it the most complex but potentially rewarding model. 

• Description: Agencies charge based on the perceived value of their work to the client, not the time or specific deliverables. 
• Pros:
  • Strong alignment between agency and client goals.
  • Encourages efficiency and expertise.
  • Eliminates debates over time and revisions.
• Cons:
  • Establishing value can be difficult and subjective.
  • Not scalable across different clients or services.
  • Some services lack clear value metrics, making pricing challenging.

Best For: High-stakes projects where the value is clear, such as lead generation campaigns, fundraising announcements, or high-profile media training. 

Additional Revenue Streams for Agencies

Aside from the main pricing models, agencies have other revenue streams that impact the cost of PR agencies and digital marketing services:

• Intellectual Property (IP): Some agencies develop proprietary tools or methodologies that they license or sell to clients, adding to the overall agency cost structure.
• Third-Party Markups: Agencies might mark up costs for third-party services, particularly in media buying. Understanding how to compare marketing agency pricing models can help navigate these costs.
• Operational Costs: Agencies factor in time for onboarding, reporting, and internal meetings, whether included in service fees or separately.

Morgan’s Insight: “You’re not just buying hours or deliverables—you’re buying access to expertise, tools, and strategies that can change the game for your business.”

Tips for Working with Agencies

To make the most of your agency partnership, keep these tips in mind and consider the best practices for agency pricing negotiations:

1. Understand the Model: Know which agency pricing model your agency uses and its implications for your budget and expectations.
2. Clarify Deliverables: Ensure clear definitions of deliverables, including revisions, to avoid misunderstandings. 
3. Align on Value: If using a value-based model, work with your agency to define the metrics of success and value creation.
4. Manage Expectations: Communicate openly with your agency about timelines, scope changes, and potential impacts on costs.
5. Be a Partner, Not Just a Client: Foster a collaborative relationship where both parties feel valued and aligned towards mutual success.

What Makes a Marketing Agency Pricing Model Effective

The number one thing that determines where an agency’s pricing model is right for you? Whether matches the goals and needs of your campaign and results in an effective partnership.  By being informed about how the agency works and defines success, you ensure you’re choosing the right partner. 

Final Takeaways:

• Choose the Right Model: Match the pricing model to your project’s nature and goals.
• Define Success Clearly: Work closely with your agency to ensure alignment on outcomes and value.
• Communicate Openly: Foster transparency and collaboration to build a lasting partnership.

By grasping the nuances of time-based, deliverables-based, and value-based pricing models, startup marketers can negotiate better deals and set realistic expectations. As Morgan McLintic says, “The more you know, the better you can steer the ship.” 

Understanding agency pricing models can be complex, it’s all worth it for the right partner. Firebrand executes under a deliverables-based or value-based pricing model depending on what your startup needs. Learn more about our unique Multiplier Marketing approach that multiples impact.