"Jordan, how much will this social media management cost?"
This question is given to me in 50% of initial sales meetings.
The cost of social media management drastically changes from agency to agency, and from my perspective in this business, it's also the wrong question you should be asking at this point of the buying process.
So to save us all time (and money) I thought I’d give a rationale of how pricing and value work in the industry for agencies.
(It's also the wrong question you should be asking)
There are over 1,330,000,000 results for “social media management cost”:
The majority of resources you find are super generic and often from platforms that try to match you to a wide array of service providers for creating social ads because frankly they have the time and space to create content like that.
The type of person searching for costs first is often a different type of buyer than we deal with normally, but at some point you’ll graduate to wanting a creative agency as you realise that you can hire a freelancer, internalise elements of marketing all you want; but creatives agencies get paid the big bucks as they know what it takes to grow your brand.
Here’s what I found personally worth reading:
Price is always going to be a question in any commercial transaction, it’s human nature.
The long tail Google keywords on the query for "social media management costs" show me that at the end of the day, the process of buying is much the same no matter the product or service.
At some point, all humans flip from risk-taking to risk aversion when we understand that it's a) our credibility, b) job or c) money that's on the line in this decision of spending money with an agency.
Here's what people are asking online:
When you're at this point and cost is your ultimate driving factor on a growth-related activity, your mindset is in the wrong place. Whether you work with us or another agency, really what you should be asking is: how much value can this project create?
The research is pretty clear that what takes to grow a brand is consistent marketing that delivers brand growth. I've given my thoughts on the science of brand growth as it stands today. If you're asking the question of costs, not value, you have a larger mindset shift ahead of you as an entrepreneur or marketer.
I’m going to preface this by saying; the advertising industry for smaller businesses is full of schmucks.
You don’t have the intel that a major corporation with a CMO and marketing team of 40+ people does, so just accept that fact and roll with the punches.
Anyone can start an ad or social agency overnight.
My personal perspective on this whole merry dance is that it’s just better that you the buyer be informed on all the elements that drive our decision-making on price as agency owners.
Game theory is the best model we have for understanding each other, you want the most reasonable price and I want the biggest price to ensure profitability.
The way you have to see the agency business is similar to how airlines price tickets - it’s all about capacity. It is by far and away the biggest driver in our cost-based, and therefore price. At the end of the day, a flight only has so many seats. At different times before the flight (18 months, 12 months, 6 months, 3 months) that ticket is more or less valuable to a prospective buyer. Different profiles also have different requirements of service - such as Business versus Economy versus Budget travellers.
Below is a breakdown of how airline’s set prices and a super interesting chart to show you their profitability based on the types of seats sold.
The same principle applies for me as an agency owner, if we have 5-15 staff and they’re only at 70% capacity for the next month, I’m going to discount work to maximise utilisation across the group.
Utilisation rate is the be-all and end-all for us in profitability as a business.
There are obviously other inputs that go into a quote, like perceived value of the customer, and our hourly rate which is currently $125 ex GST per hour (as at September 2022).
Now that you know all that, you know how I and other agencies are thinking you need to take into account.
If I come to you and quote $2-3k per month, then you need to be 1.5-2x in value created (through $'s or brand awarenes) on that figure for it make sense.
The only person that can inform us whether that is good enough, is you the customer.
For Neuralle, any quote takes into account the number of stages that go into the project. We always price to fit, I don’t have flat packages of $2,000 or $10,000 because it makes no sense to not optimise the price to your situation or my situation and lose you as a client because I’m not fluid.
Too many people in this business of expertise are unwilling to move and have oddly trained customers to expect packages.
The stages we need to take into account no matter whether we're doing TikTok Marketing, UGC Ad Creative, Social Ads or Influencer Marketing are:
Based on these estimates and our $150 rate, a project that’s 30hrs it could easily add up to $4,500 ex GST. If we offer a retainer then and think that it’s 12-15hrs per month for 2 months, then you’re looking at $2,250 ex GST per month plus or minus some profit incentive in our quote to maintain utilisation.
You can see how much projects can range, if we’re doing everything it could be $5,000 or $12,000 very quickly. Or big-ticket creative projects for brand awareness that can turn into $100,000 projects.
Retainers are what we estimate capacity and time to be often over a 2 or 3-month basis.
Now when I work with people I give them three options before drafting a proposal that depends on their situation:
I feel like this gives everyone the freedom to pick and choose what works best for them. The commission option works for us if we’re confident in your product, and is also fantastic for an agency to experience the upside with you by offering a slightly lower retainer.
There is no right answer for how much you should be paying for an agency or social media management, it comes down to how YOU see the value we’re providing and whether you think we can 2x your brand, profitability or time by taking over that role.
Our job is to align with that as best as possible, so hopefully, this helps you in all future decision-making when engaging an agency to get a deal done quickly and save you time in the process.