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How much should we charge?
Hello,
We are a digital marketing agency that has a relatively nice number of clients. Our niche is in hotels. We manage lots of hotels in Europe that are really famous. Right now, we are doing performance marketing for one hotel in Italy, and this month we have a budget of 15K in ads. The current spend this month is 5500€ with a crazy return on ad spend (ROAS) of almost 15.5, and they have generated 105,000€ till now.
We are charging 15% of ad spend, and we think that this is not the right amount that we should charge. We also do social media management for them, and our fee is 4000€ per month. We arrange lots of influencers, and we create and make lots of viral content for the hotel.
We would like to know your opinions on what should be the right price to ask with this performance in performance marketing.
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1 Reply
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I think a key question I have here is are you brand bidding? Because if you are brand bidding this would explain the high ROAS. There is nothing wrong with this, it sometimes can be easy to inflate your stats though.
If you aren’t bidding on brand and you are getting that ROAS then well done.
On the business front, sometimes it’s easy to think “I deserve more” and it’s easy to fall into this trap and get resentful of how much your clients are making from what you are charging.
However, looking at it from the other side if you are looking after “famous” hotels then you do have some legitimate ability to charge accordingly, especially seeing as you are getting results.
Personally, in Australia the normal charge out rate isn’t a flat fee per month it’s estimated for the amount of work required each month.
For example:
Charge out rate for me: $265 per hour
Estimated hours per month: 10
Added spillage (extra hours needed or “cream” for profit: 4.5
Total: 14.5 hours x charge out rate = what I would bill the client.You can inflate the amount of work needed on the account to increase your profit, obviously.
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How much of performance is based on your skills vs the hotel being famous and their brand name?
You don’t say why you should make money. Unless you are doing more then what was agreed in the contract. I don’t see how or why the client should just pay you more. Your client having a great ROAS isn’t a reason to charge them more in of itself. They could argue when things are rough and that ROAS goes down, then you should make less as an agency.
10% – 15% of ad spend is pretty normal. Maybe just break out your fees and do one fee for paid ads and one fee for social media management. Someone said bill hours, which is the worst way to make money in an agency. Either do a flat rate, percent of ad spend or some mixed model based on that. Be prepared for the client to say no or even potentially walk away because they could find an another agency who would manage ads for 15% of ad spend.
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15% is pretty standard. How much time are you putting into the account? Are they asking for a ton of updates? You shouldn’t just charge more simply because you’re generating more money for them. You should have a standard structure and stick to it, which it seems you have already. Get a good review from them and replicate that success with more clients
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>We manage lots of hotels in Europe that are famous
>Reddit what should I charge
🤔
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