Cost Plus v. Value-Based, a Comparison of Inbound Marketing Pricing

Investing in inbound marketing efforts can lead to high costs that customers may not always understand. Where all that inbound marketing money is going is no trade secret. It’s usually based off of one of two models – cost plus or value-based. In terms of inbound marketing agency pricing standards, you likely fall under one of the two. In this article, we hope to outline a little bit about how each model uses its resources and to define what exactly it is that you are paying for. 

Cost-Plus Inbound Marketing

The cost-plus model is built off of overall costs including a mark-up which may range from thirty-five percent to 100 percent or more depending on the digital marketing agency you selected. The costs paid on a cost-plus model are going towards the oversight required to complete a project, in addition to overhead and the general costs of doing business.

No two agencies divide their costs the same, sometimes making it difficult for the consumer to choose the right one for their needs. For example, one agency may pay $20/hour for a service that another agency pays three or four times the same rate. Also, if one were to compare two agencies offering a $3,500 monthly fee, it does not necessarily mean you will be getting the same services from both. Thereby, cost-plus hinges on knowing what services you are being provided with and what costs make the most sense for your business.

Value Model of Inbound Marketing

The value model is based on identifying the projected outcomes for a given marketing campaign and what those outcomes are valued at. Let’s say a campaign is expected to attract 100,000 customers to your business. The value model is about identifying the value per customer and then paying out according to the net result.

Due to the focus on the result rather than the process, a value model won’t necessarily include details on blog posts or search engine optimization strategies. Instead, a marketing agency on a value model will use their resources to achieve the objective rather than to fulfill a defined plan of how many blog posts you need or where you need to rank in a search engine.

Neither Model is better than the other

Though every marketer has their preferences, there is no superior pricing model for inbound marketing. Neither guarantees any result or customer acquisition and in the end, it still comes down to the intelligence and performance of the agency to achieve a campaign’s full potential.

Both cost-plus and value-based pricing models are used every day to great success. If you’re interested in building an online brand or in accomplishing a series of specific objectives, you may find more appeal in going with a cost-plus model. If your bottom line is an end-objective such as generating a specific number of leads or hitting a specific conversion number, there may be more for you under a value-based inbound pricing model. Be sure to evaluate both models, according to your own desires.

When selecting an inbound marketing agency for your brand, start by identifying what objectives you hope to accomplish. By working your way backwards from these goals, you can decide what pricing model is most advantageous to your company. There is no one way to run a marketing agency and thus, it never hurts to ask questions if you are not sure about what you’re committing to. Knowing how your financial investments will be spent is key to understanding how inbound marketing works and how a campaign affects your company’s business.