If you’ve ever sat down to brainstorm on pricing strategies for your digital marketing services over a pint of beer, you may want to let the beer itself be the inspirational source to drive pricing protocol.
Why beer? Beer is very diverse. There are a variety of styles ranging from stouts to saisons, pale ales to porters, and IPAs to pilsners. You have big brand beers like Budweiser and Miller, and craft breweries like MacLeod Ale Brewing Company. When it comes to craft beer, no two IPAs or Scottish lagers are the same. However, all big brand beers are nothing but generic piss water across the board (you get what you pay for).
In order to determine pricing, you must first decide what services you will offer and how much manpower, time, and internal costs will rack up. Then you need to decide what types of clients you offer various services to.
Your Perception of Clients, Services and Why it Matters
If you want to be the piss water beer of big brand pricing, then you will do what every other boring agency does: offer three service types as a one-size-fits all solution to marketing budgets while giving clients the illusion they are saving money. This methodology testifies to the fact that you view all clients the same and, like Coors, you are giving them a watered down product that lacks originality.
If you want to be the craft beer of marketing then you will view each client as a unique beer with a variety of notes that make him an original player in this industry. This means no two marketing strategies will be alike and you will need to do what true expert digital marketing agencies do: offer value-based pricing. This is a pricing strategy where client cost is based primarily on an estimated value of services performed versus the cost of the services. In other words, if your client can state a clear revenue goal (let’s say he currently sells 20 vacation packages a month and wants to double this monthly number to 40) you would determine what his current spend is, how it translates into broken down sales numbers, and create a strategy based on factual data designed to double the current monthly average. While your competitor charges $1000 a month for a cookie-cutter SEO plan, you can charge virtually any price so long as it is fair to the client, covers your internal costs with a profit, and most importantly the strategy is set to meet or exceed client expectations.
If the client already pays 100,000 for services that don’t even get him close to his revenue goals (selling 40 vacations each month at 100,000 a pop), he is wasting money and will likely invest 21,600,000 a year to make an ROI of 144,000,000. In this scenario you are charging 15% of the client’s profit earning (18K each month).
In reality, few digital marketing agencies can execute this strategy. You truly must have the abilities to execute at a high level and have all the resources needed to offer such finely-tuned deliverables. You need to view your clients like flights of specialty craft beers and deliver a sophisticated service that compliments high expectations.
Small, Medium and Large Businesses and the Beer They Mirror
The beauty of value-based pricing is that you don’t have to exclude the smaller clients if you wish to service all business models. However, it may not be worth your time to take on these clients due to the fact their profit goals and the appropriate pricing doesn’t justify your team’s time that would be spent on the engagement. In other words if “the buzz” is your profit earning, and a small mom and pop business is a low APV beer, you would need to have three of them within the same time frame it takes to drink one in order to see a return. Therefore, it would be worth it for you to take on that mid-size or enterprise client with significantly larger earning potential scaled at the same timeframe for delivering results.
The larger agencies often take on these “light beer clients” and give cookie-cutter services scaled down to accomodate the minimum time their internal invests in keeping the client on ice. If they have larger clients you typically see segmented departments manage these guys–a model that continues to offer watered down services but from “barista marketers” with slightly more experience.
Know your beer and you will know which clients are right for you. If you decide to only work with mid-size and large clients, just make sure you aren’t diluting services. Big taste buds need huge flavor in complex craft beers. Also, make sure you aren’t missing out on great opportunities in small packages, and see that your earning potential justifies the move and your services are on track to meet the client’s revenue goals. Also keep in mind that businesses are searching for the best marketing agencies and they have their criteria. Do their goals indicate they are ideal candidates for your methodology?
Finally, if you decide not to work with the mom & pop businesses, don’t pour them down the drain. Spend a few minutes to point them in the direction of an agency that is designs to help these types of clients. They will appreciate it, and they may refer bigger clients to you our of simple appreciation. Budweiser sells for a reason: enough people have low standards and love the cheap price of cheap beer. So long as you can point them to an honest, small SEO company that specializes in local tactics, the lead you turn away will likely get the help they need, and they will remember your name.
Value Based Pricing Will Get Bigger in 2018
This year craft beer sales saw huge numbers in bottle sales priced at 3,000-8,000 a piece. Beer lovers with sophisticated palettes are willing to pay 7500 for a barrel aged sour saison because their brain is wired to experience pleasure surges from this level of quality. Then there are sophisticated beer palettes that don’t justify such high pricing for a single bottle when their satisfaction is met at the same cost for six high-quality craft beers. It all comes down to value; what kind of experience the client hopes to have at a price point that makes sense–a cost that gives them what they hope to achieve that proves to be the perfect investment for their business growth palette.