Founder/CEO of Rankings.io, an SEO agency that helps elite personal injury law firms dominate first page rankings.
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What pricing model(s) do you use for your SEO agency?
This decision impacts many business factors, such as the relationship with your clients, your ability to deliver results and your potential to grow.
In the SEO agency world, there are three main pricing models:
1. Input Pricing: This is capacity billing, also known as hourly billing. The client pays your SEO firm an applied hourly rate.
2. Output Pricing: This is unit-based pricing. The client pays your SEO firm for a set number of something, be it blog posts or backlinks.
3. Value Pricing: This is pricing centered on the results and outcomes. The client pays your SEO firm for quantifiable value of some sort, such as working with senior account executives.
Input pricing and output pricing are cost-based; value pricing is obviously value-based. You should carefully consider the pros and cons of each pricing model.
Input Pricing: Pros
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The main pro of input pricing is that it makes upselling work easier. You come up with an applied hourly rate, then you charge for the time you and your team are putting into each client’s SEO strategy.
Because there’s quantifiable action involved (i.e., your team works a certain amount of hours to produce specific outcomes), clients can see exactly what they’re paying for. They know that for every extra hour they ask you to meet or work on a task, they’ll have to pay a specific rate for your time, which is precisely why it’s easy for you to upsell work, growing accounts along the way.
Additionally, input pricing is beneficial if your SEO agency works with subcontractors/freelancers. Many charge by the hour, not by project, and paying them by the hour is easier to manage: They can log the time they spend on projects, and you can quickly calculate how much you owe them.
Input Pricing: Cons
The con of input pricing? You’re trading time for money.
Input pricing productizes your SEO agency’s services. As you and your team continue tackling projects, you’re naturally going to get better at various tasks, which means you’ll work faster. But since you’re charging by the hour, your ability to work faster will end up becoming a disadvantage come billing time, since fewer hours means less money.
Output Pricing: Pros
If you base your payment on output, your SEO firm won’t take a financial hit as you and your team become faster workers. The client won’t care if you produce their set number of blog posts, backlinks, rankings, etc., a month in 20 hours or 200 hours. As long as the client gets the right amount of whatever they asked for, they’ll be happy. So, the savvier your SEO strategists become, the better your agency’s time-to-pay ratio will be.
Output pricing also makes upselling to clients pretty easy. You can show a client, say, how doubling their number of published blog posts per month will strengthen their rankings for several of their target keywords and receive double the pay for that account moving forward.
Output Pricing: Cons
Output pricing does have some cons, however. For one, it leaves your SEO firm with less flexibility on your tasks.
You have to produce a certain amount of something within a specific time range; there’s no wiggle room. If your team wants to produce slightly less or more of that unit, you’ll have to ask the client.
Similar to input pricing, output billing also locks you into productized services. A client might have paid you for five blog posts, but during the project, your team determines that producing an updated website would be the most beneficial action to take. The problem is that the client hasn’t paid for that particular service. You’ll have to start a conversation with them and see if they’d be willing to pay for a website revamp on top of the blog posts.
Value Pricing: Pros
Your SEO firm won’t be trading time for money with value pricing. Instead, clients will pay you and your team based on the value you’re bringing to the table.
That value can be quantified in different ways. It could be the experience level of the SEO account manager the client gets. It could be prioritized content delivery. It could even be a setup where the client will only pay you if your team achieves a specific result, like generating 20 marketing qualified leads (MQLs) a month.
Value Pricing: Cons
However, a major con of value pricing is that it makes it more challenging to establish and maintain trust with clients. With value pricing, you’re asking to do custom work, and if things don’t go as planned—maybe the senior account manager quits halfway through the project, or you end up not reaching the MQL goal—the client’s trust can fall.
Value pricing doesn’t naturally go hand-in-hand with long-term client retention. Why? With input pricing and output pricing, projects are ongoing. The client pays for a certain number of units or hours in a given time range. But with value pricing, projects are more likely to have a defined start and end. Once a goal is met, the project reaches its natural conclusion.
Because value pricing involves having to upsell clients on an incremental basis, you might not be able to make a good case for additional work. For example, if the client is paying more to have access to your most senior account executive, you simply don’t have someone with more expertise you can put in front of them.
How To Decide On A Pricing Model
The most important thing to consider when deciding on a pricing model is what kind of SEO agency you want to run.
If you want to run a productized SEO agency that scales by volume and has several SEO retainers on deck, cost-based pricing (either input or output pricing) makes the most sense. But if you want a more boutique-style SEO agency, one with fewer clients—but clients who pay more and want deeper levels of engagement—value pricing is your best bet.
You can mix and match these three pricing models, too. For my own agency, I currently use output pricing on our content and value pricing for custom solutions that our enterprise clients want.
No matter which pricing model you land on, make a habit out of regular reevaluation. Keep track of inflation, research your competitors’ pricing and get feedback from your clients to gauge where your current pricing model and prices stand. If you don’t regularly revisit how you’re charging and how much you’re charging, you risk not getting paid your worth.
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Author: Chris Dreyer, Forbes Councils Member
