How Much Does Digital Marketing Cost? - Episode 16

The subject of this probably quite short podcast is how much does digital marketing cost? I will take a look at hourly rates, day rates, pricing by value or fixed pricing, the points based system, some industry norms, typical costs for projects at Red evolution and have a look as well at what the alternatives might be. If you don't want to hire an agency, you want to maybe take the whole thing in-house. And this is something that certainly some larger organisations do. Sometimes they also bolt on the help of an agency, but it's not a cheaper alternative, um, to, to working with an agency. So although sometimes if you're new to hiring agencies, the costs can seem high. The alternative of building your own team is, you know, quite considerably more. Plus, you're not necessarily getting the breadth of experience that you're going to get from an agency. Welcome back to the Digital Marketing From The Coalface podcast. And today it's just me. No Alex, no Julie, no guests, just me. So, uh, thanks for listening. And this podcast is actually in response to a question that was sent in by one of the people listening who listens to the podcast, and she wanted to remain anonymous, but basically she was saying that she was in the market to buy digital marketing services, but she really didn't have any clue about costs. She didn't know whether the courts that she was getting back were competitive, whether they were right, whether it was too much or whether or not even, um, it wasn't the kind of quote that was going to deliver anything of value. You know, it was like a, maybe a really cheap quote that just didn't seem feasible, didn't seem realistic. So the subject of this, um, probably quite short podcast is how much does digital marketing cost? So we'll take a look at say we I we'll take a look at hourly rates, day rates, pricing by value or fixed pricing. Uh, the points based system, some industry norms, typical costs for projects at red evolution and have a look as well at what the alternatives might be. If you don't want to hire an agency, you want to maybe take the whole thing in-house. So we'll cover quite a lot in a short podcast, and we'll start by looking at something that pretty much everybody would understand. And that's hourly rates or day rates. So some agencies will simply court a day rate or an hourly rate. And then every time you ask them to do something, they will say, yep, that's going to take us ten hours or two hours or one hour, whatever it is, it's pretty much the same as when you take your car to get it serviced or repaired. You'll often get an invoice back and it will have parts and labor, and the labor is just a multiplier. multiple multiples of an hourly rate, a multiple of an hourly rate. So everyone pretty much understands how hourly rates work. The only challenge with hourly rates is that quite often people don't understand how long things are going to take. Going back to the car analogy, it's exactly the same. If you need your car repairing and it needs new brake pads, for example, well, a good mechanic will probably replace the brake pads in an hour, but some people might not know that. They might think, oh well, that might take a day or something. So hourly rates, hourly rates are good up to a point, but they don't really help you budget. They don't really help you understand how much money you need to invest unless you understand how the scope of work is going to be delivered, or how long it's going to take to deliver the scope of work. But they've got a part to play. They're simple. Everybody understands them. They're still widely used. Uh, we don't use them here at Red evolution. Um, but, but a lot of agencies do. So an alternative to hourly rates. And you might argue it sounds ultimately like the same thing is a price by value or a fixed pricing. It's probably better to think of it as fixed pricing. So you go to the agency and you say, we need X and the agency come back and say, yep, the price for doing that is Y. So you know exactly what you're going to pay. And there's no chance, if you like, of the scope of work extending and the agency coming back and saying, oh, you know, this has taken a bit longer than we thought and it's going to be another two hours or something along those lines with a, with a fixed pricing and the agency are committing to deliver whatever it is you're looking for for a fixed price, and they'll arrive at that fixed price based on how long it's going to take, who's doing it. They might even factor in the value of the work that's being done as well. So if the work is of particularly high value branding work, strategy work, things like that, then there might be a premium attached to it for that associated value. Um, there's also another system which is similar to fixed pricing, which is well. Similar to fixed pricing and similar if you like to. Hourly rates in some respects. Although it's. It gives you a bit more certainty about what you're going to pay for something. And that's the points based system. So points is, is, is quite simple. But at the same time, a lot of people look at it and go, well, why don't you just give me a price? Because a points based system effectively means that you buy points off an agency. So you might buy, um, you might buy fifteen points for one hundred pounds per point. So you've spent fifteen hundred quid. You then spend those points by saying to the agency, we need X or we need Y. And they come back and say, yep, that's fine. That's two points. That's three points. That's five points. You know, the idea really with this is that you get away from thinking about the money that you're spending, and you just spend these mythical points a little bit like, I guess in a casino, um, where you buy chips and you, you're not throwing, you know, pound notes, five pound notes or in my case, you know, pound, pound coins and twenty pence coins, um, onto the table. You're actually spending something that isn't real money. Um, so there's, there's an element of, of kidology, I think with the points based system, but it can work really well and, and it moves the conversations away from, from thinking about money and just thinking about the end result. Um, points based systems are quite popular. Um, we flirted with it for a while and thought about it, but then we decided to revert back to like a fixed pricing model. So somebody asks us to do something or we agree that something needs to be done. Um, and we give a price for, for delivering it. Um, when it comes to what these hourly rates and fixed prices might actually be, then industry norms are probably for freelancers who are doing various digital marketing jobs. Freelancers are probably charging somewhere around anything from at the lower end, thirty quid an hour up to the higher end, maybe fifty, sixty quid an hour for for a freelancer. Remember, a freelancer hasn't got the overheads of an agency, so they can be a bit cheaper. Um, there are other challenges with freelancers. I mean, freelancers are great, and most of us in the agency business have been freelancers at some time or other. Um, but they're the kind of rates that freelancers would charge. Again, they might give you a fixed price, but probably that fixed price is going to be broadly based along the, along the lines of how many hours it's going to take them to do the job. Um, moving up to agencies, I would say at the lower end, agencies charge maybe sixty, seventy quid an hour. That's at the lower end. At the higher end, it can be one hundred pounds an hour, maybe one hundred and fifty pounds an hour. But I guess the norm, the average kind of hourly rates that agencies might charge are around about seventy, eighty, ninety pounds an hour or something of that order. Again, some of the work that they do, they might charge a higher hourly rate for some of the more senior people that are working on strategic work and maybe branding work and things like that. Um, so here at Red evolution, we tend to work with most of our clients on retainer, which means that they spend a set amount of money every month. Um, now that can vary. You know, we're fairly flexible and we don't tie people in with contracts. Um, but the retainer model means that as a business, you know, that you're making a regular investment. So every month you're maybe spending a couple of grand on your digital marketing, helping you to grow your business, get more customers, generate more sales, raise your profile and start to be, you know, thought of, um, in your marketplace as thought leaders. So the, the retainer model is, is for the most part, what we do, we do a little bit of project work. And for us, retainers are at the lower end with some of the smaller businesses around about fifteen hundred quid a month. And at the higher end, closer to five grand a month, five thousand a month. And it very much depends on what you're trying to achieve, how quickly you want to achieve your objectives. So like I said, typically we are at at fifteen hundred a month at the lower end and maybe five K a month at the higher end. And that is broadly in line with industry norms. There are some agencies who would probably not be interested in retainers that were, say, less than five K and more. Normally they're looking for retainers around about maybe the ten K mark, but that's, you know, usually with larger organisations who are making significant investment in their online marketing, maybe they're doing a lot of paid search, they're doing a lot of activity in social, creating videos, creating lots of content, blog posts, etc.. Um, so their industry norms, if you like, around costs and some of the typical costs, uh, that we charge here at red evolution. Um, but what are you actually buying? Well, you know, it sometimes can seem expensive hiring an agency, but what you're actually buying is a, say, for example, a fractional, uh, strategy expert or a fractional designer. And by that, I mean, you know, you're buying a bit of a designer and you're buying a bit of a search engine optimisation specialist or a bit of a writer. And obviously there's a premium attached to that. And because you're only buying some of the person's time if you like. Alternatively, you can create your own in-house team. And this is something that certainly some larger organisations do. Sometimes they also bolt on the help of an agency. But I mean, if you think about how much that's going to cost, you know, if you're a small business, you're maybe employing twenty people, turning over a few million pounds and you think, you know, I don't want to spend three or four thousand pounds a month with an agency. I'm going to set up my own team. Well, well, typically you're going to need probably somebody creative, creative, you know, design someone who can design, someone who can write, um, someone who can run the show, I guess. So I'd be surprised if you were going to come back with much change out of, say, one hundred and twenty thousand pounds a year to hire those people. So if you make good use of them and you, you know, keep the team busy and the team are bringing in the work, then that's fine. That's a good investment. But it's not a cheaper alternative, um, to, to working with an agency. So although sometimes if you're new to hiring agencies, the costs can seem high. Um, the alternative of building your own team is, um, you know, quite considerably more. Plus you're not necessarily getting the breadth of experience that you're going to get from an agency. Um, and that's also something that's worth considering. The only other thing really to think about with your marketing spend is the software that you use. There are lots of fantastic tools out there to help you run your digital marketing more effectively. I mean, there are tools like a paid or Marketo, HubSpot now Hubspot's, the tool that we've pretty much hung our hat on and we use HubSpot ourselves. Uh, we think it's a great piece of software. It integrates your customer relationship management system, your CRM, which helps you better understand and serve your customers, understand their needs and make sure that you're delivering what they need and presenting them with opportunities, or presenting them with information about other services that you might provide in order to perhaps get more business from them. And also marketing automation is wrapped in with that. And that's basically a software that will help you communicate with people effectively. So you can set up some automated communications. So if somebody does one thing, like they maybe fill in a form on your website, they automatically get an email with some information in it that might be useful to them, that kind of thing. Um, and you can also use tools like HubSpot for creating landing pages, which we've discussed in previous podcasts, the landing page, you know, think of it like almost like a one page website that's got a very specific offering in it so that you might run a paid search campaign and send the clicks. People click on the adverts through to the landing page, which has got a form on it which you want them to fill in in order to maybe provide them with some more information and, and maybe start a conversation with a view to at some point, maybe in the future doing some business with them. Um, there are other software systems that you can, that you can buy to help with, um, your marketing. There are tools to help with writing. There are, you know, uh, artificial intelligence tools to help with writing. Um, lots of different things. I mean, typically a HubSpot installation, a HubSpot implementation would cost around about six, seven hundred pounds a month. Again. And to the uninitiated, that might sound like quite a lot of money, but in the software as a service world, um, five, six hundred pounds a month isn't a fortune. So you've got to think about all of this stuff as having the potential to bring in new business and help you grow. So it's not a pure expense. Um, I mean, we're not a big business. We're a small agency. There's only ten of us. And, you know, we've been using HubSpot now for the last, I don't know, five or six years, something along those lines. We pay, I think, for the service we've got, we pay about five hundred quid a month for it, but it makes everything we do so much easier. Everything's joined up, everything's integrated. So it's, it's a really useful, powerful piece of software. So kind of. That's it really. I mean, the the costs are what they are. I've, I've spelled out what industry norms are. I've spelled out the different models that agencies employ in order to sell their services. And I've outlined some typical costs that we charge here at Red evolution. Um, most agencies are in a similar ballpark. And if any of this isn't clear or if you want me to expand on. You want us to expand on any aspect of how much does digital marketing cost? The question, um, that was sent in, then send in your question. Fill in the form, send us a question and we'll either namecheck you or answer anonymously as it as it was in this case, and provide you with as much help and information as we can. Next time we'll be back with either Julie or Alex or Julie and Alex. Um, this time it's just me, Dave Robinson, and thanks for listening and see you next time.