Points based pricing and bucket pricing are the easiest pricing models to build for a digital marketing agency.
However there are pros and cons to all agency pricing models, regardless of the model you choose. It's your duty to know what's right for you, and what's right for your clients.
In our opinion, as it relates to ease of explanation, buckets is slightly easier to sell than points because it’s really quite clear what clients get.
When you talk about adding in this “points” process, you have to educate clients on what you’re selling, so you add a level of complexity and confusion to the sales process generally. Also, make sure to incorporate these sales strategy examples into your process if you need some quick wins.
This is not necessarily a bad thing, but still something to note.
Where Points Pricing Might Fail
There are of course downsides to points, too. I particularly feel similar to how my friend Eric Pratt from Revenue River feels about the points pricing model.
Eric says, “Points pricing is just like giving your clients a Chinese Menu of services to offer. Do you want egg rolls this week? Or do you want spring rolls? Should we do 4 blogs, or should we do social?”
I think Eric is on to something here.
You’re letting your clients swap in and out services, and it removes the value you give them.
You are very much service based at this point still, and not necessarily focused on your clients goals and achievements.
You’re working for a point system, as opposed to working for the client’s success.
Now, you might say you have their goals in mind, but your pricing doesn’t back that up.
Points also inevitably ends up in some kind of weird bargaining situation with clients, especially if they've ever worked with an agency before.
Your client will say something like, “well, I’d rather you guys not spend 45 points blogging this month and just spend 40 points blogging instead, and instead of spending 25 on emails, just spend 20 points, so that way we have an extra 10 points we can allocate to this other thing I’ve got going on.”
Of course, your answer here MUST be a “no,” but you’re going to end up in this bargaining negotiation which is uncomfortable across the board.
That being said, points pricing is a wonderful solution for so many agencies, especially if done really well, so don’t be discouraged.
So you might be thinking to yourself, then what other option is there? What else could we possibly do?
Consulting your favorite search engine just might help you work on your new favorite pricing model.
Introducing... Value Based Pricing.
Why You Should Use Value Based Pricing
Value based pricing is an elevated approach to pricing your services because it extends itself above and beyond just service based models that are fixed fee or fixed price approaches.
Value based pricing is a model that ties your efforts to the goals and expected outcomes of the clients success.
It’s a little more complicated than what most people would like to explore, but it works liked a charm when implemented effectively.
The idea here is to understand the CAC and LTV of your clients, which we talked about already, as well as your own CAC and LTV.
You want to understand what value you’re going to be bringing into your customer’s world, and what kind of payment you should expect based on those goals and values.
This is going to be something that expert marketers will want to review deeply, and not something to jump into unless you’re completely comfortable with cost calculations.
In order to dive deeper into how value pricing works, check out the value based pricing guide and case studies from HubSpot called Nail Your Pricing Strategy.
Value Based Pricing requires you to have a strong grasp on project management while really focusing on long term goals - not just project costs or project based line items.
With this kind of value based pricing model, you separate yourself from things like time materials, number of hours you're working, and your hourly rate.
You're able to truly embody a retainer model that's focused on the outcome your client needs.
A question I often get from other agencies when I give workshops is, "what strategy does Web Canopy Studio use to retain their clients for long term engagement?"
And the answer is… kind of a combination of all 3 that I’ve mentioned.
We start almost every single one of our clients off with a starter service.
In the past we’ve used bucket pricing, and we’ve also used points pricing exclusively.
What we’ve found is that every single client is a unique case. Literally every customer we have needs a unique approach.
Once we sell a fixed cost solution to them, we take that time to get to know them and understand their goals. We strive to "wow" them by over delivering and completing the project quickly.
Then, we custom tailor the right package for them moving forward.
Often times it’s a value based approach, but not always.
Experiment with what works for you, and explore one of these new options.
If you find it helpful to test with a client, then be brave and give it a shot.
