In 2017 I wrote a blog titled Secret Agency Cost Formula (For B2B Marketing Agencies). The blog was a deep dive into the way agencies price their services and why pricing, for what appears to be the same services, can be different from agency to agency. The blog took on a life of its own and was retweeted and linked across the globe. It still ranks as our number one blog every month.
The blog went viral because it appealed to agency owners who wanted to understand best practices around pricing, and to agency clients who wanted to better understand how agencies price their services and what they should be getting for their dollar. In this blog, we will dive deeper into the way B2B marketing agencies price digital paid media lead generation services.
While I will focus on B2B lead generation pricing, the actual pricing components can be applied to B2B and B2C paid media lead generation services. There are a few differences that I will note in this blog.
Before I demystify digital lead generation pricing, I will walk you through some steps so you can understand the evolution of marketing and advertising pricing along with the terminology that ties all the marketing services and pricing together in the end.
The History of Agency Pricing
I think it’s good to understand the evolution of advertising agency pricing.
Back in the 1960s, advertising agencies charged 15% for all media buys, including TV, radio, direct mail and outdoor advertisements. That commission covered all the creative, research, strategy and other agency overhead costs. The problem with that methodology was that the scale was not proportional to the work involved and allowed agency owners to become very wealthy.
Here is an example: On a $5M media buy, a 15% commission ($750,000) might make sense if you were cutting three commercials and using the rest to purchase media placement. But what happens if those three commercials are used nationally and the media buy is $100M? The commission the client would pay would be $15M dollars, but the agency’s only real incremental costs would be planning, execution and the actual media placement. Bigger agencies were stealing money at 15% on large media buys.
Over the years all of it changed as large clients began noticing how much agencies were making. Clients (or shall I say procurement departments) began to view advertising as a commodity, negotiating contracts down and down. Commissions came down over time to 12%, to 10%, to 7.5% and then even lower for big media buys. When digital arrived, agencies charged a 50% commission that included all the strategy and creative, because most digital media buys were under $1M and not comparable to the larger TV and radio media spends.
In the late 1990s, agencies also started changing their mix of services and pricing. They began charging fixed prices for the real value they brought to the table around research, strategy, planning and creative, and from there they built in a lower commission for media buys. That brings us to where we are today, which is a mix of both systems. We will try to help you cut through the clutter and understand what exactly you are paying for and what a B2B lead generation program should cost you.
What Makes Up a Digital Lead Generation Program?
There are a few basic ingredients that B2B digital marketers can use to drive inbound leads. They are:
1. Organic Search
Sometimes referred to as natural search, this is when someone types an inquiry into a search engine (example: Google) and gets a list of potential web pages to visit.
Organic search results can be influenced by a variety of search engine optimization (SEO) techniques that include creating valuable content that resonates with your audiences, link building, and so much more. From my experience, the quality of these leads tends to be the best for B2B organizations. We are not focusing on organic search in this blog, but I think it’s important to note that if you have the time and money to devote to a comprehensive SEO strategy it is the best way to generate leads long term.
2. Paid Media
This is sometimes referred to as pay per click, paid advertising, paid social or paid search. It is executed in a variety of ways, including text ads that show up on Google search, banner ads that show up on different sites as a user is surfing the web, paid social ads on platforms such as LinkedIn, Facebook, YouTube, etc., or the use of tactics that employ retargeting, geofencing or programmatic digital techniques. We’ll focus on paid media for the remainder of the blog.
How Agencies Price Digital Lead Generation Services
Paid media purchases are typically tied together by the agency services below. These services are usually packaged together in three phases to build out and manage B2B lead generation programs:
- Phase One: Planning Services (including research and strategy)
- Phase Two: Creative and Content Services
- Phase Three: Digital Media Buys and Program Management
Phase One: Planning Services (including research and strategy)
Phase one usually includes strategy, research and planning services that an agency executes in about two weeks for a smaller campaign and up to two months for a larger campaign. Here is where B2B and B2C can differ. In the B2C space, it’s typically pretty easy to set up a lead generation program. For instance, if you’re selling pizza or real estate services, the target audiences are broad, the product offering is easily understood, and the sales cycle is short. On the B2B side, target audiences are smaller, the product offering can be complex, the price point is higher and the sales cycle is much longer. Given these factors, smart B2B companies take the time and money to invest in strategy, research and planning.
Here is an example. If you are a composite manufacturing company trying to connect with product development engineers in the defense, aerospace or medical device space (maybe an audience of 30,000 people globally) your margin for error is very small. Your goal is to locate these buyers, serve them ads specific to their industries, convince them to fill out a form and then work for several months — or longer — to sell them manufacturing services that could be $1M or more. Everything needs to align throughout the sales process to give you the greatest opportunity for success, and you won’t know the end result until you have invested several months of marketing. For this to happen, you must know where these very specific audiences are spending time and what resonates with them. You can’t play the guessing game here. Strategy, research and planning are crucial for a successful lead generation campaign.
It’s also important to make a note about tracking ROI. In the B2C world, if you are running a lead generation campaign around selling pizzas, you’ll know your ROI in a few weeks. That’s not the case when it comes to B2B and is part of the reason why B2B agencies charge more than B2C agencies for these types of programs. The need for deep, accurate data is very important to uncover the ROI of these campaigns. It takes a lot of time and effort to collect and analyze data to tie back to converted sales.
These are the strategy, research and planning activities agencies may charge for:
- Competitive research
- Industry research
- Audience research
- Keyword and SEO research
- Analysis of a client’s current analytics
- Messaging and positioning
- Digital strategy
- Digital marketing plan
- Analysis of results
Budget for Phase 1
Pricing for phase one can vary. Agencies price these services by the number of hours they will need to complete each task. Hourly costs typically range from $150 an hour to $225 an hour for a reputable agency utilizing U.S.-based staff.
Larger B2B companies spending $50M in lead generation programs across various products and channels globally could spend a few million dollars on the research and strategy phase. B2B companies with $150,000 to $3M to spend on lead gen programs should plan to budget $15,000 to $100,000 for this phase.
Phase Two:Creative and Content
Phase two includes creative and content services, which typically take agencies two weeks on a smaller campaign and up to three months on a larger campaign. In this phase, agencies are creating themes and taglines for campaigns, building or revitalizing web sites, and creating assets (pieces of content) that motivate a buyer to act and push them further down the sales funnel.
These are the creative and content activities agencies may charge for:
- Mood boards
- Branding/rebranding/brand guidelines (if necessary)
- Banner ads
- Case studies
- White papers
- Graphic elements
- Thought leadership papers
- Landing pages
- Other assets
Budget for Phase 2
Pricing for this phase can vary by the amount of content that is needed to drive the program being delivered. Most agencies price these services by the hours they will need to complete each deliverable. Prices typically range from $135 an hour to $185 an hour for a reputable firm utilizing U.S.-based staff.
For typical B2B companies spending $150,000 to $3M a year in B2B paid digital lead generation programs, plan to spend anywhere between $15,000 to $150,000 for phase two. Note that this price could be more if a website build is required or a complete rebranding is needed. It could also be on the lower side if the client already has usable content that can be repurposed for the program.
Phase Three: Digital Media Buys and Program Management
Now that the strategic plan and content assets are built, it’s time to put them to work. Phase three runs on a month-to-month basis and consists of buying paid media (pay per click) or paid social ads, along with program management fees.
These are the digital media buys and program management fees agencies may charge for:
- Purchase of display ads on websites
- Search engine ads
- Retargeted ad buying
- Geo-targeted and programmatic ad buying
- LinkedIn, Facebook, YouTube and Pinterest ads
- Program management fees
- Analytics and reporting
Budget for Phase 3
Pricing for this phase varies based on the number of impressions a company wants to generate, the price of keywords they want to bid on, and ultimately, the number of leads desired by the client. These goals are typically benchmarked against the amount of media spend. For smaller programs, we very rarely see a monthly spend of less than $7,500 move the needle in the B2B space (plus add 30%+ for program management and media buying services).
Putting Pricing All Together
So, at this point, you may be wondering, “why does pricing vary so drastically depending on the agency you speak to?”
Let’s start by discussing the fact that 50%-60% of digital agencies turn over their accounts every six months to a year. These “digital shops” usually use your current content, focus media buys around general (not researched) keywords and sometimes will even utilize bots to inflate artificial traffic to your site. These agencies price their services ridiculously low compared to the reputable agencies that most B2B businesses want to engage with. These lower-end agencies are typically 30%-60% less in price, and as a result, they confuse the marketplace.
Lower-end marketing firms will take a few thousand dollars to set up an account, create a “strategy” and run your paid media programs with a commission or fixed fee attached. These firms know you will initially be happy to see your traffic increase, but over time you’ll see that converted business does not follow. These are not reputable firms, and they are usually staffed with employees who have little to no marketing knowledge/experience or the work is offshored to groups overseas. Run away from these firms before you lose your digital equity.
It’s also important to note that as the media spend increases in most B2B digital agencies that run lead generation programs, the percentage of the other campaign-related costs goes down. Think about it – no matter how small your campaign is, it still needs planning and creative. Not to mention, you can’t just set up a paid program and forget about it. It needs to be checked daily, and adjustments need to be made weekly in terms of bidding on keywords, ad placements, etc. The costs associated with planning and campaign management is more than worth it for your bottom line, even for small campaigns! I can’t tell you how often we get inquiries from B2B companies that were seduced by lower-end agencies and their pricing but are frustrated by the lack of results.
How Reputable Firms Price
Below are some standard pricing ratios for programs put together by reputable agencies in the B2B space. There are many, many variables to consider, like the amount of work needed to better optimize a website for conversions before a program begins, the amount of existing content a company may have that can be repurposed, the types of digital ads and/or programs that will be used to drive leads to a site, plus the types of audiences someone needs to reach to drive conversions.
The pricing below does not include things such as rebranding, heavy positioning or messaging work, or deep research that may be needed for global campaigns or around multiple sub-brands.
I hope this gives you a deeper understanding of the way typical B2B paid media lead generation programs work and the costs associated with these programs when working with a reputable B2B agency. Remember, you will always find someone who can do it cheaper, but most agencies that will drive conversion and revenue for your business are going to price their programs inside the parameters noted above.
About the Author:
Scott Miraglia – President
Scott is a balanced risk-taker with nearly three decades of experience starting and growing advertising and marketing agencies. His business acumen is matched with a drive to build creative teams that thrive in open, collaborative work environments. Scott seeks out the best creative individuals, not only to provide quality service to clients but to also help shape the future direction of Elevation Marketing.