Most companies and agencies, regardless of margins or other tricks, charge a management fee. For search marketing, typical management fees range from 15 to 50%, typically depending on the campaign budget. Most media companies are in the middle around 25% to 35%. Agencies usually range from 15% to 30%.
Licensing fees are the second type of technology fees and are related to the marketing technology your company uses. The simplest example would be your CRM or marketing automation system. If the agency you work with licenses the software on your behalf, they may take part because they service that software. Let's say you work with an agency and you have materials that need to be printed.
The agency may not print the materials, but instead subcontract them to a printing partner. In turn, they would mark that service between 10% and 20% to cover their function of research, organization and administration of the provider. If an agency operates on a percentage pricing model, you can expect to pay between 10 and 15% of your total monthly ad spend for the service. In digital marketing, you can base your pricing model on the cost of the specific services you offer.
During this time, they'll collect logins, files, talk to you about your goals, audit what you've been doing, developing a marketing strategy, and then uploading and creating all the pieces needed for the launch. It is very common in the digital marketing industry for agencies to sell services that they don't really know how to do or that they don't offer in-house. When a marketing or advertising agency or consultant has to travel, whether for a meeting, trade show or photo shoot, that cost will be budgeted as a separate travel cost or within your hourly rate. By designing a client-oriented digital agency business plan, you can align your services with high demand.
By offering flexible or discounted annual pricing plans for digital marketing agencies, you're in a position to claim a lasting relationship. Another way to determine value is to look at the customer's time-to-live value (LTV) or current marketing acquisition cost (COA). Charging a flat fee for any project is an easy way to manage a digital marketing agency, especially if you have the skills and resources for a particular service. Marketing agencies know that marketing is a long game, so they set the duration of their contracts to maximize the potential for success of their projects.
There are many ways to approach structuring agency fees, but I'm going to explain the approach that has worked for my digital marketing agency, Salted Stone. If you've worked with marketing agencies in the past, you've probably come across several different pricing models. You may not see all the line items on the invoice, but either way, you're paying similar amounts, they're simply packaged and marketed differently. More importantly, if you want to scale, you can end up raising the prices of digital agencies or switch to a different pricing model.