Agency Pricing Models: One Job Priced Five Different Ways
Five agency pricing models, shown on one example job so you can see where the risk moves.
Robbert Veer, Founder
8 min read
Agency pricing models are the ways an agency turns its work into an invoice. The five main ones are hourly, project, retainer, value-based and performance pricing. Each one puts the risk of a job in a different place. An agency can run two or three side by side, matched to the kind of work.
This guide prices one job under all five, so you can see what changes.
What are the five agency pricing models?
The five models differ in what the client pays for and in who pays when a job goes wrong.
| Model | The client pays for | Who carries the risk | Fits |
|---|---|---|---|
| Hourly | Time worked | The client | Work with no clear end, such as fixes and consulting |
| Project | A defined result at a fixed price | The agency | Work you can scope, such as a website |
| Retainer | A set amount of ongoing work each month | Both | Work that repeats, such as SEO, ads and upkeep |
| Value-based | What the result is worth | The agency, with more to gain | Work with a large payoff you can measure |
| Performance | Each result delivered | The agency, almost fully | Work where you control the inputs and both sides trust the tracking |
- Hourly pricing is a rate multiplied by the hours worked.
- Project pricing is one fixed price for a defined piece of work.
- A retainer is a fixed monthly fee for an agreed amount of ongoing work.
- Value-based pricing is a price set from what the result is worth to the client, with your cost as the floor.
- Performance pricing is a fee paid per result, such as per lead or per booked call.
Most marketing agency pricing you will meet in a proposal is one of these five, or two of them joined.
How does each model price the same job?
The same job can produce five different invoices. The example below is made up, and its only purpose is to show where the money and the risk go.
Northgate Digital is a made-up agency. Its cost per hour is $100 and it wants a 20% margin, so it sells an hour at $125. Its client is Maple Street Dental, a made-up practice at maplestreetdental.example, which wants more new-patient bookings from its website. Northgate estimates 90 hours for a rebuild. The dentist says a new patient is worth $1,200 in the first year.
| Model | The quote | If the job goes to plan | If it goes badly |
|---|---|---|---|
| Hourly | $125 an hour | 90 hours, $11,250 | 120 hours, $15,000, paid by the client |
| Project | $11,250 fixed | A cost of $9,000 and a 20% margin | 120 hours cost $12,000, a loss of $750 |
| Retainer | $1,500 a month for 12 hours | $18,000 a year at a 20% margin | 15 hours a month and no margin |
| Value-based | $24,000 fixed | A cost of $9,000 and a 62.5% margin | No extra patients, and a client who paid for a promise |
| Performance | $200 per new patient | 5 a month, $12,000 a year | 1 a month, $2,400 a year against $9,000 of work |
Hourly. The practice pays $125 for every hour. If the rebuild takes 120 hours where 90 were planned, the bill rises from $11,250 to $15,000. The agency's margin is safe. The client's budget is not, so an owner may refuse an open-ended hourly quote.
Project. The practice pays $11,250 whatever happens. At 90 hours the agency keeps a 20% margin. At 120 hours its cost is $12,000 and it loses $750. The risk has moved to the agency, so the scope has to be in writing.
Retainer. The practice pays $1,500 a month for 12 hours of ongoing work on the site, which is $18,000 a year at a 20% margin. If the work creeps to 15 hours a month, the margin is zero. A retainer fails quietly, one extra request at a time.
Value-based. Five extra patients a month at $1,200 each come to $72,000 in a year. Northgate asks $24,000, a third of that. Its cost is still $9,000, so its margin is 62.5%. The price holds only if the owner believes the patients will come, and belief takes proof.
Performance. The practice pays $200 for each new patient the site brings. At 5 a month that is $12,000 a year. At 1 a month it is $2,400, set against $9,000 of work already done. At 10 a month it is $24,000. The agency carries nearly all the risk, and it needs tracking that both sides accept.
Which pricing model fits which kind of work?
Three questions pick the model. Can you define the scope? Can you measure the result? Do you control what produces the result?
- You cannot define the scope. Bill hourly, with a cap or a weekly report of hours.
- You can define the scope, and the work ends. Quote a project price.
- You can define the scope, and the work repeats. Sell a retainer with a stated number of hours or deliverables.
- You can measure the result, and you have proof from earlier clients. Price on value.
- You can measure the result, and you control what produces it. Consider a performance fee on top of a base fee.
For a web design agency this often means a project price for the build, sold as web design packages in three tiers. A retainer for upkeep follows, and our post on website maintenance plans covers that part.
Every model needs your cost per hour as its floor. Our guide on how much to charge for a website shows how to work it out.
What does performance pricing depend on that you do not control?
Performance pricing depends on who is reached, what is offered and who follows up. An agency rarely controls all three.
Our own data shows how far the first of those can move a result. In our study of 3,570 cold emails, three groups of companies were emailed.
| Group | Who was emailed | Positive replies |
|---|---|---|
| A | A random sample from the other 80% of companies | 0.50% |
| B | The 20% with the weakest websites, generic email | 1.60% |
| C | The 20% with the weakest websites, email naming the problem | 2.35% |
Selection made a positive reply about 3.2 times more likely. The gap between groups B and C was not statistically significant. In that test, the list moved the result more than the wording did.
The study covered Dutch companies and email only, so read it as a direction. Now picture a pay-per-lead deal where the client supplies the list. You would be paid on a number the client largely decided.
If you take a performance deal, keep a base fee that covers your cost. Write down who supplies the list, who answers the leads and how a result is counted.
How does your pricing model affect how you win clients?
The model decides how hard the first yes is. A stranger will agree to a small fixed price long before a 12-month retainer.
This matters most when you find clients through outreach. An owner who has never heard of you is weighing one question, which is what happens if this goes wrong. A fixed price for one defined fix limits the damage. A monthly contract with no end date does the opposite.
So put your offers in order.
- Lead with a project that fixes the problem you wrote to the owner about.
- Offer the retainer once the project has gone well.
- Bring up value pricing when you have a result to show, written up as a web design case study.
This is the one place where Leadodo touches pricing. Leadodo is software for finding and reaching prospects, and it does not set or suggest prices. Your Outbound Machine opens with a posted letter, and Twip's findings on the owner's website become its opening line. A fixed price for fixing that finding is a natural first offer.
How do you move a client from one model to another?
Change the model at a natural break, with numbers from the work you have done. The end of a project and a contract renewal are the two clearest moments.
| The move | What to bring |
|---|---|
| Hourly to retainer | The last three months of hours, and their average as a fixed monthly amount |
| Project to retainer | A list of what the site needs every month after launch |
| Retainer to value-based | The results the retainer produced, in the client's own numbers |
Give notice in writing, and check what notice period your contract sets.
Questions
Which agency pricing model is best for a new agency?
Project pricing for defined work, with hourly billing as the fallback. A new agency has no results to price on value and no cushion for a performance deal. Fixed prices also teach you what your work costs, as long as you track your hours. Our guide on how to start a marketing agency covers the rest of the first 90 days.
Is a retainer better than project pricing?
A retainer is better for work that repeats every month, because it gives both sides a number they can plan on. Project pricing is better for work with an end. A web agency can use both, one after the other.
What is value-based pricing for an agency?
Value-based pricing is a price set from what the result is worth to the client. Your cost is the floor and the client's gain is the ceiling. It needs a number the client agrees with, and proof that you have delivered that kind of result before.
Is performance-based pricing a good idea?
It works when you control what produces the result and both sides agree how a result is counted. Keep a base fee that covers your cost. Without one, a slow month for the client becomes an unpaid month for you.
Should agency pricing be on your website?
Publish prices for work you sell in the same form each time, such as website packages or a care plan. Show custom and value-priced work as a starting price or a call. A visible price tells a cold prospect whether a reply is worth their time.
Next step. Pick the model, then find the clients it fits. Leadodo finds businesses, scores their websites and runs outreach to the ones with the weakest sites. See the features.
