Let's eliminate the hourly rate: we leave money on the table


One of the hottest topics and very controversial discussions about r / ppc concerns rates and what you should charge. What does an agency charge? What should I charge as a freelancer? How do you bill if you work with Amazon against Google or Facebook?

Different ways to charge customers

There are many models for billing a customer. No model is perfect and you have to do what is good for your business in the end.

Hourly

Bill every hour of your time and note the number of hours you have worked this week. This is one of the most common ways for freelancers to pay their time.

For

Work more hours and you know you will be paid more (all things being equal). Customers love the hourly rate as they are familiar with designers and other creative industries.

Against

When you get better and it takes less time, you end up earning less money for your task. How does it make sense? In my opinion, this is the main drawback of the hourly rate.

Percentage of Expenses

Scale allowing you to spend more money and bill each of your clients more money at the end of the month. This is the most common way of billing agencies. That's what customers expect to hear, but more and more customers do not want to pay that way, as this can lead to abuse.

Benefits

If customers trust you and spend more, you see an increase in your agency's revenue. higher expenses. Assuming that this increase results in a profitable business, both sides can benefit.

Against

Not all customers like this because some agencies can abuse it to spend money without making it profitable. In addition, some customers do not think an agency should receive $ 10,000 a month, even if it manages a large advertising budget with a good ROAS.

This can lead to a "bargain" on agency fees or agency dismissal and internal management. These are due to a lack of value for what agencies can do and think that they are easily replaceable. You can not create an outside point of view for your business.

Monthly Mandate

Impose a fixed or monthly fee for the work agreed in the contract and the proposal.

For

Billing remains simple and both parties know what to expect each month. It is easier to sell to customers than the other methods above. Customers are less likely to have the impression of being ripped off.

Against

Creep of the litter may increase workload, but it may be more difficult to increase this monthly fee. If you do not think about where you will be in a year with this customer, you may end up with an unprofitable customer.

Based on performance

We do not use this product as widely, but we have an interesting model. done with customers. You set a target based on the business figure you bring to the company. When you reach different levels, you are paid at this level.

Advantages

Customers love this because they feel that the agency puts the skin in the game. If the agency knows how to do what it does and if the client site is excellent, you can make a lot of money every month.

Against

It depends on trust on both sides and a site ready to be converted. If this site is not good, you can spend a lot of time going anywhere. In addition, some customers may not pay the bonus even after the agency has done a remarkable job. I have been working on an account in the UK where this has happened.

Mixed model

Do a combination of the above operations. You may be doing monthly strategy fees, then 5% of monthly advertising spend. You can make a monthly provision with a valued performance bonus. You can mix this model in many ways.

For

It gives you a basic deduction for each client, but gives you the benefit if the work increases and the client wants a deeper relationship. You can earn more money to cover your costs.

Against

A more complex pricing model that some customers might find more complicated. It may be more difficult to explain to some clients or disable them because you still have a percentage of the corresponding expenses.

Delete this hourly rate

Once you start billing at the time, you often discuss the duration of a task. .

This may be because the client thought it would take less time or thought it might take less time because he was doing it himself

If you spent all your time talking hours and duration of a task. On the bill, the conversation moves away from the results to go to work.

This change is to pressure you to be faster in a task, where there is not always a faster way to do it. Sometimes, faster is not better if you do not achieve the same result.

Less time spent on a job means the customer spends less money on marketing. Many consider marketing as a cost center, while it is an investment center. In my experience, the majority of hours-loving customers are simply trying to find the cheapest person to do the job.

The hiring agency A at $ 50 the hour will be the same as the hiring agency B at $ 100 or $ 150 / hr. We all know that this is not the case.

If the price of agency B goes down, it tells the customer that this set of jobs is worth it. Even though it will cost you a lot more money to deliver the job. We must stop selling hours and start selling results.

No solution valid for the future

Although I am convinced that there is no good answer to what we should be imposing as an industry, I also think we should stop selling us leaving money on the table. The best way to leave money on the table is to compete on prices.

If you've heard this before, tell me, you're talking to a great customer and the brand is the one you want to work with. They love you and you like them … you have this first appointment atmosphere. They ask you what is your price for the project and you explain to them your rate structure.

There is this pause and you just wait for them to answer. What makes only 30 seconds gives the impression of minutes. The client then tells you that another agency can do the job for X or that your hourly rate of $ 150 / hour is too high because they talked to someone who can do it for $ 100 less expensive.

Do not value the work can come from a lack of understanding. the task and what it takes to deliver. What's worse, it's that the customer does not appreciate the task and simply wants someone, anybody … to be the cheapest agency to do the job. job. Big brands are known to be as bad as SMEs.

What are you doing? Some agencies will lower prices and not change the scope of work. The price of other agencies will drop but will require a change of scope of work. Other organizations will simply say that they are not competing on price and that it is the cost of doing the job right the first time. Both parties must understand that the success of each other creates a rising tide that lifts all boats. Creating a win-win partnership is the only way for both parties to succeed and be in business in a year. Do not forget that an agency is a business and must generate profits. Killing the hourly rate can help us achieve this as an industry.

Duane Brown will participate in a panel discussion on profitable pricing strategies at SMX East on November 12.


Opinions are expressed in this article those of the author invited and not necessarily the search engine Land. The authors of the library are listed here .


About the Author

Duane has been described by his mystery man and digital nomadic friends. He has lived in 6 cities on 3 continents and visited 40 countries around the world. He uses his curiosity for people and his love for observers to organize better marketing campaigns for his clients. After leaving Toronto in 2011 to gain an international vision of the world. He has worked for Telstra in Australia and for brands such as ASOS, Jack Wills and Mopp (purchased in 2014) in London, UK. He now lives in Montreal, Canada, where he helps brands grow through data, CROs and marketing at Take Some Risk Inc.

.



Source link

Leave a Reply