Establishing the right values when pricing a service is a challenge for most communications agencies. However, for your business to grow and prosper in a healthy way, giving in to pressure from clients and limiting yourself to the prices charged by your competitors can be a shot in the foot.
There are several ways to set prices, including: cost-based pricing, price per piece produced or hour spent performing the task, monthly fee, among others.
With Inbound Marketing gaining more and more strength and attracting new followers every day, a new form of remuneration has started to be used: the success fee . If you are not yet familiar with this pricing mechanism, we invite you to read our post and understand more about this concept. Let's go!
What is Success Fee?
The success fee is a model based on pricing architects email lists uk based on results achieved in specific work goals, i.e., it is a fee charged considering the performance of the service provided to the client. It is a strategic option for small and medium-sized companies.
As this is an agreement in which you only pay for the return obtained, small and medium-sized agencies end up opting for this model, which works as a complement to the monthly fee.
In this sense, it is essential that the goals related to pricing are clear in the contract, whether they refer to increasing the volume of leads, sales rate or churn rate, for example.
Why use success fees in your agency?
Focusing on results has never been so popular. Today, with the exponential increase in investments in digital marketing, measuring results is an essential factor for those seeking to be more assertive in their investments in advertising and marketing.
After all, this is the only way to understand which actions work best and which need adjustments. In this case, by opting for the success fee, the agency feels more motivated to enhance the performance of its clients through good strategies.
There is also another very important point when it comes to implementing the success fee as a pricing method: the trust that the client places in you. After all, this shows that they believe in the potential of your agency and will spare no effort to achieve the desired success.
But, just as important as taking into account the client’s success is realizing that your agency also stands to gain from it. That’s because this pricing model is an excellent way to build a rich portfolio quickly.
Finally, it is essential to pay attention to aligning expectations with the client, taking care to carry out constant assessments of the return on investment.
Unlike the monthly fee, this pricing method can optimize results over time, which is already a good reason to adopt it in your agency.
Thus, both sides walk side by side in the pursuit of the same objectives, promoting a more business-oriented mindset (such as sales and customer retention) and less focused on the scope of activities.
What goals should you consider and how to price them?
Considering that there are a number of operational costs involved in developing a project, it is essential to use this method together with the monthly fee. Once this is done, it is time to determine which goals you should adopt to be able to price more effectively .
Check out the main metrics to monitor:
Conversion rate
Conversion rate is one of the most important metrics for those who adopt digital marketing for their business. It is an indicator related to the actions performed by users on a given channel.
When a visitor converts on a form or buys a product, for example, we have a conversion. In practice, the calculation takes into account the comparison between the number of visitors and the number of conversions.
By monitoring your customers' conversion rate, you can know the return on investment and identify possible bottlenecks that are preventing them from achieving better results.
The good news is that calculating the conversion rate is very simple (even for those who hate math). This is because tools like Google Analytics have features that provide data for analyzing this and other important metrics.
In this case, simply divide the number of conversions obtained by the total number of visitors. Once this is done, it is time to put your analytical profile into practice and understand what the results show about your strategy and optimize it to achieve better results.
Opportunities generated
The second metric concerns leads that have already passed the qualification stage, that is, they are proven business opportunities, as they have already shown interest in the product or service that your client offers.
From there, it is the sales team's role to approach them and start a conversation, since these leads are already mature enough to acquire the solution to a pain or need.
But remember, no matter how many leads you have, opportunities need to be generated at the same frequency. Otherwise, it means that the nurturing process after the conversion from visitor to lead is not being done assertively, thus harming the qualification process.
Sales
Finally, one of the most important metrics for any business. Here, we talk about the conversion rate of opportunities to sales, an indicator responsible for keeping the company flowing and growing.
One of the first things to do if this metric is too low is to analyze the salespeople's approach: is it adequate? If not, it may be time to rethink this factor in order to improve your sales conversion rate.
In addition to this, there are other metrics that are just as, or even more, important for sales. Check them out:
Customer acquisition cost (CAC);
Average ticket;
Customer Lifetime Value (LTV);
Return on investment (ROI).
It is important to emphasize that transparency is the first step to implementing success fees in your agency. Remember, as important as creating strategies that make your client profit is thinking about the results of your own business.
Now that you know what a success fee is and which metrics to consider, how about calculating the values of your agency's proposed work in a practical way? Access our free pricing calculator and understand the expected profit and external costs of your jobs.