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Simple Strat's Move to Points-Based Pricing

Posted by Tyler Samani-Sprunk on March 27, 2018
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Have you ever wondered why our logo is a ‘not equal’ sign?

It’s because we believe that every company’s marketing strategy should be unique. Each company has its own challenges, goals, and target customers. For that reason, what works for one company may not be the best solution for a different organization.

This idea that every company needs a custom strategy bleeds into everything we do. It’s why we start every long-term client engagement with a research and strategy project before recommending ongoing tactics. It’s why you don’t see us recommending a rebrand to every company we work with. And it’s why, today, we’re announcing a major change to the way we price our services.

But before we get to that, let’s go over a brief history lesson.

How Agency Pricing has Evolved

Historically, there are three common ways marketing and advertising agencies have charged for their services.

First, there was the commission model. This was all the rage back in the Mad Men days. Most of an agency’s work back then was creating advertisements for traditional media. They made their money by charging a percentage of a client’s media spend. So, if you were spending $100,000 on TV ads and your agency charged a 15% commission, your total bill would be $115,000.

Then, new forms of media began to pop up and agencies started to realize that they were providing valuable time on strategy that was essentially being given away for free. So, they moved to the hourly model.

Some agencies still charge this way today, but we think this is a broken system.

Why would you pay more for an agency to move slower? How can you predict in advance how much something will cost? Can you be sure that the same service won’t change in price each time you need it?

Other people realized these flaws as well, and as a result, many agencies began to charge fixed rates. Instead of hourly billing, they would negotiate the deliverables and the monthly price in the contract.

For example, a client’s contract might include weekly blog posts, online advertising management, and social media management for a set price of $5,000 per month. This worked better than hourly pricing, and it’s the way we used to bill for our services.

But this model is broken too.

Why the Change?

Most of us in the marketing field have heard the old saying, “I know that half of my advertising is working, I just don’t know which half.”

But if you’re saying this in the year 2018, something’s gone awry.

The truth is, with today’s technology, we can track the performance of almost all marketing tactics very accurately. With HubSpot’s tools, for example, we can tell a client exactly how much revenue was influenced by a specific Facebook ad.

You can also determine how much traffic and leads come from traditional techniques like direct mail and in person events, thanks to the integration of traditional and digital strategies.  

With this kind of information available, your marketing strategy should be constantly changing to reflect the latest insights you’re getting from your performance data. You should consistently be cutting out things that aren’t working, doubling down on things that are, and running small experiments for continuous optimization.

Not only does your strategy need to be unique, but it also needs to be flexible.

And herein lies the problem – when you have a defined set of deliverables in your contract with a marketing agency, it’s difficult to change and adapt. What happens when Facebook kills your organic reach and you need to shift your strategy from organic posts to ads? Or when you’ve reached your website traffic goal and need to focus more energy on your conversion rate?

Every time things change regarding the services you need, you have to renegotiate your agency contract. This usually means that companies and their agencies don’t change as often as the data tells them they should. That’s a big problem when you’re serious about growth.

Introducing Points-Based Pricing

To solve this problem, Simple Strat is now using a points-based pricing model for our services. In points-based pricing, every client gets a monthly points allowance that they can use for any of our services. This model allows us to provide our clients with more transparency and flexibility than ever before.

Points-based pricing is transparent because every client always knows exactly what a service will cost in advance, without having to request a quote or estimate. Current clients can look at the list of our services and corresponding point values at any time. These point values are the same for everyone, and everyone pays the same price per point.

We believe this level of transparency is what our clients deserve, but what really gets us excited is how flexible this new system is. 

Since our client contracts aren’t tied to specific services, we can easily change and adapt a client’s strategy. We start every client engagement with a unique plan for how we recommend their points allowance should be used based on our initial research. Then, each month we review that plan as well as the past month’s performance. If a client has an unforeseen need, something isn’t performing as well as we need it to, or the data shows us an exciting new opportunity, we can quickly adjust a client’s plan to adapt to the situation. 

We’re not the first agency to move to this new pricing model, but it is a recent advancement in the industry. We’ve piloted points-based pricing with several clients over the last few months with great success, and we’re actively speaking with agencies across the country that are making this shift. We’re excited to announce that we’re ready to roll this out for every new client going forward. We can’t wait to see the results we can create with this greater flexibility. 

If your company is serious about growth and you want to learn more about what a points plan could look like for you, give us a shout!