Internet Marketing Billing and Rates: What’s Fair?

Ian Lurie Feb 26 2007

scaleHow much should you pay for internet marketing?

When you hire an internet marketer you’re getting something that’s part commodity and part value.

The commodity is the actual hours put into the project. It’s me and my team sitting at a keyboard, typing up a report or organizing a meeting. It can unfortunately also include development – this task is not a commodity, but has become regarded as one, and pricing structures must account for it.

The value is the expertise of the marketer, and their effect on your company’s performance. It’s me and my team researching, analyzing, designing, testing, launching, etc..

So how do you balance the commodity and the value components in a formula that lets everyone walk away smiling?

A Mix
I suggest a mixture of hourly- and performance-based fees. Some examples (hourly rates are just for example):

$150/hour plus 10% of the total online ad dollars spent, but those ad dollars must show an aggregate 3:1 return on investment, and you must spend a minimum of $xxxx.

$250/hour plus 10% of all online sales.

$150/hour plus 10% of net profits above last year’s profits.

The first of these options is loosely based on traditional models, but builds in a measured ROI requirement. The other two are tightly based on the company’s performance.

In my experience, the first works best for bigger organizations. They’re used to this model, and they’re comfortable with it. The latter two work better for smaller organizations, who need to see sales growth right away and are less concerned with things like the long tail, brand building, etc..

Keep it Flat
The last option we sometimes look at is a flat monthly retainer. This can work well because it allows the marketer so much flexibility as to exactly which tasks they perform each month.

But, it can also degenerate into a hagglefest, with the client asking what they can cram in each month, and the marketer looking for ways to manage workload profitably.

What Do You Do?
I’ve struggled with this for over a decade. If you have another way you bill, or think that traditional methods work best, drop me a line. I’d love to get a discussion going on this.

tags : conversation marketing

2 Comments

  1. Agreed, with a small tweak.
    My experience is that clients usually like to mitigate risk on the upper end as well. Meaning x% is shared up to a ceiling.
    In other words, you get to share the spoils at a certain rate, but if the spoils are HUGE, you don’t get to share in all of them.

  2. In Israel, the common model for adwords advertising is 15% of the adwords budget.
    The 15% model does not take into consideration work hours and actual success and I think the models suggested here might be more relevant.
    I will try this with some customers and see if it works as these models have more of a win/win concept in them

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