How much does it cost to work with a digital marketing agency?

6 min to read

The cost of a digital marketing agency is reflected in the value that the firm provides for their clients. The perceived value that a digital marketing agency will be providing when attempting to solve your issue will always be reflected in the price. One the first things entrepreneurs and organisations think about when deciding if they need a digital marketing agency or not is: “How much will it cost us?” It is important to make sure that the agency you decide on is within the budget allocated. But if you are to price focused, you may not be provided with the quality and service you desire. The most expensive agency is one that charges a cheap rate but wastes your time with subpar results. That is why it always key to consider the full opportunity cost of your decision.

Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another.

Investing the time to choose the right digital marketing agency will yield better financial results for your company down the road as the main goal is to improve conversion rates and gain more sales.

So, how much does it cost to work with a digital marketing agency?

This article was designed to help you understand the greater landscape of the agency world, and construct a framework for evaluating digital marketing agency fees.

Average Hourly Rate of a Digital Marketing Agency

Using the data from the digital pricing survey , the average hourly cost of a digital marketing agency is $148.13. In the US the average hourly rate is $167.28, and, in the UK, it is $111.36.

Looking at the marketing industry from an international perspective, the US and UK are on the higher end of the hourly rate spectrum. Agencies based in pricey, metropolitan cities like New York and London are going to have some of the highest hourly rates in all the world.

Agencies who can reduce overhead costs by working in lower cost-of-living locations, like Portugal, can offer a more competitive hourly rate. And, since all work is done online and using the same platforms, regardless of where the agency is based, physical location does not need to be a huge deciding factor in selecting an agency.

Typical Pricing Structures of a Digital Marketing Agency

Hours per Month

This is one of the most common models for agency pricing, as it allows for a flexible scope of work and potential for increasing workload as needed. Typically, agencies will estimate the number of hours per month needed to provide the appropriate services based on the size of the client’s brand or project. Monthly hourly models typically fall into the one of two categories:

Blended rate with time estimate: This structure pays for all specialists throughout the agency for example paid media, data analytics, SEO and software development. Rather than billing for each person who works on your project individually at varying prices, the blended rate model provides an average for a pool of resources needed to complete the project.
Specialist rates with time estimates: This model is in the complete opposite to the blended rate as it charges you for each individual specialist that works on your project. The rates for individuals will vary depending on their seniority level and the number of hours they expect to work on your project. This is all related to the length of experience they have, and the cost of their time sacrificed.

Fixed Rates Based on Deliverables or Packs

Some agencies offer packs or retainers based on a predefined set of deliverables or services, as opposed to hours. This is a good solution for brands who may not know exactly what they need, as these packs are often designed to serve as a standard digital success model. Additionally, the agency will always deliver what's been agreed on, without the back-and-forth of over or underuse of hours each month. However, these agencies are not typically available to pick up one-off tasks or projects outside of the contract (or at least, not without an additional fee). So, if you are a brand who needs an agency who acts as an extension internal marketing production team, and can help you execute whatever is needed as it arises, this may not be the best solution for you.

Performance Models

Some agencies charge exclusively based exclusively on their results. Performance models typically fall into one of the following categories:

Cost per Lead: some agencies charge purely on a Lead basis. In other words, you pay them for each lead that they are able to drive for your business. The cost per lead or sale depends greatly on the potential value of each lead. However, this can be a slippery slope, as agencies who only get paid per lead will often prioritize quantity over quality, and you may end up with a high volume of leads that will never purchase your product or service.
Shared Revenue - this typically works best for sales focused brands like eCommerce stores. In this model, agencies will make a percentage off of the revenue generated from their marketing activities.
Mixed Fee + Performance Model - These are a great model for businesses who don't have a lot of money to invest upfront, but also want to ensure that they're getting the best services. This mixed model creates a shared-success dynamic, in which the potential for growth is high. It also reduces the risk on both sides, as the agency is guaranteed to get paid every month, so they will focus on higher quality leads as opposed to lead volume.

Percentage of Media

Some brands, especially bigger companies with large yearly marketing budgets, will have a specific project that needs to be done and will hire an agency to execute that. In this case, instead of paying on a monthly or performance basis, the client will pay the agency to complete the entire project. This is very common for Development or Design projects, but it is also common for a brand to put out an RFP for Analytics and SEO work as well. Typically, payment for longer projects is done in smaller chunks throughout the project.

Project Based

Hidden Fees of Working With a Digital Marketing Agency

Transparency is an important factor when selecting a digital marketing agency. Here are some hidden fees to lookout for:

Commissions - Many agencies, even those who do not work on a percentage of media, will take a commission on the ad investment that they manage. This is particularly common if the agency is the one putting forth the investment and invoicing the client for services + media at the end. This is why we recommend that clients always maintain ownership over the payment methods used for paid media platforms like Google Ads or Facebook Ads.
Kickbacks - Many agencies will receive kickbacks from publishers if they can bring more advertisers to their platform. In other words, they may receive a sort of bonus by getting you, as a brand, to advertise on a specific network or publication. While kickbacks are technically illegal, there are many ways of circumventing the legal system to make them work.

Other things to consider with an agency partnership

Billing terms and Cadence

Every firm bills in different ways, sometimes their billing cadence is not set in stone and can be negotiated for a better deal. If they insist payment is due before any work begins, you have every right to question this and ask if you can pay on net-30 terms.

Delivery Dates

Sometimes dates set for delivery by the agency may not align with your own schedule or timing for product release and will impact members of your team or other contractors responsible for work and their own timelines.

Therefore, it is completely acceptable to ask for timelines to be sped up or pushed back to keep coincide with your internal calendar. The agency may not be able to accommodate the request all the time, but you are well within your rights to ask.

Length of engagement

Digital marketing agencies will always structure their deals differently and while none is necessarily better or worse for, you should understand what is being proposed and if that works well with your company structure and timelines.

It is definitely within your rights to ask if the length of engagement can be shortened (for example, from 12mo to 3mo with an automatic extension). As with the others above, the firm may not negotiate on it in which case you have to decide if this agency is the right fit for you.

Pro tip: if they require a 12-month contract then you should make sure you have a 30 day out in the contract. If the project delivery is not meeting the standard you expect, you need a way to get out of it early with no penalty for a breach of contract.

Choosing the Right Digital Marketing Agency for Your Brand

Price is only one of the many factors to consider when choosing a digital marketing agency. What are the others? Check out our article, the 10 most important questions to ask a digital marketing agency.

Want to learn more about partnering with us? Codedesign is a digital marketing agency specializing in data-driven online sales and lead generation solutions for brands in a variety of verticals. Contact us to schedule a consultation with one of our digital marketing experts.