How do Facebook Ad Agencies Value Their Services?
Many businesses engage the services of an agency to manage their Facebook, Snapchat, and Instagram advertising. Hiring a Facebook ads agency enables businesses to outsource a team of specialists for a fraction of the expense of hiring a full-time digital marketing expert. Here’s a short rundown of the most common social advertising agency pricing schemes.
1. Agency fee
This is the most typical pricing strategy for digital advertising. It offers a fixed charge, depending on the agency’s overall advertising budget. The agency rate typically varies between 10% and 50%, depending on the kind of medium used and the quantity of work accomplished. Typically, this agency pricing covers all services supplied, making it an all-inclusive approach. There may be expenditures that are not covered by the agency rate, so be sure to verify that before you begin. The advantage of the agency rate is that it gives the advertiser a clear pricing mechanism.
2. Monthly flat rate
In this pricing model, an agency will charge a fixed monthly flat cost for its services, regardless of the amount spent. Many small firms choose this technique since it gives a steady monthly charge that is the same, regardless of the job performed. This paradigm, however, has certain expensive drawbacks. Businesses pay a flat rate, which means the agency earns money by dividing the number of hours performed on the project by the monthly charge. If the project necessitates more labor, the agency’s profit will be lowered for each additional hour performed.
3. Flat rate + agency rate
The flat rate + agency rate model combines the two previous concepts. Advertisers pay a lower flat monthly charge as well as a lower agency rate than in any of the preceding standalone agency pricing models. The advantage here is that firms seem to benefit from the reduced price approach. However, this is sometimes deceptive since companies see two cheap figures, but the whole cost is frequently greater than the solo agency rate or flat monthly charge. Make sure to double-check your rates in relation to your whole ad budget, both now and in the future. This might assist you in determining the exact cost of this pricing strategy.
4. Retainer payments every month
This strategy is common in the creative field or for “do it all” firms that perform branding, graphic design, video production, web development, and so on. The monthly retainer model requires a company to pay a set hourly cost for services and pay for a block of hours in advance each month. This method is effective since firms have engaged a part-time specialist at a fixed hourly charge. This implies that the job is adaptable to the demands of the company.
5. Revenue-share or cost-per-action (CPA) model
Some agencies may use a revenue sharing or a cost-per-acquisition (CPA) approach. In this technique, a company contracts to generate results (for example, leads) for a fixed cost with the agency, which then provides results that are less than that amount. If the agency is talented and capable of producing outcomes at a lesser cost, they retain the difference, and the agency becomes profitable. It also provides the advertiser with a stable cost per result and less risk if the price per result swings or increases in price. While this strategy seems to be sound on the surface, it fails on several levels.