Your digital marketing firm should be charging a flat fee not a percentage of media spend.
Digital marketing can be a highly effective way for businesses to reach their target audience and drive sales. However, one common mistake is paying a monthly management fee that is based on a percentage of your media spend and not a flat fee.
Here are some reasons why you should be paying a flat fee:
- A flat fee is more transparent: With a flat fee pricing structure, you know exactly how much you’ll be paying upfront. This can help you budget more effectively and avoid any surprises down the line. In contrast, a percentage of media spend can be more difficult to predict, as it can fluctuate.
- A flat fee aligns incentives: When marketing firms charge a percentage of media spend, they have an incentive to encourage businesses to spend more on advertising. This can lead to a conflict of interest, where marketing firms are more focused on increasing their own revenue rather than providing the best possible service to their clients. With a flat fee, marketing firms are incentivized to focus on results and provide the best possible service.
- A flat fee is fairer: When marketing firms charge a percentage of media spend, they may be penalizing businesses for their own success. If a business sees a significant increase in sales and needs to increase their ad spend accordingly, they may end up paying more to their marketing firm even though the firm is not necessarily doing more work. A flat fee ensures that businesses are only paying for the work being done, regardless of how successful their campaigns are.
While a percentage of media spend may seem like an attractive pricing structure at first glance, it can ultimately create conflicts of interest and incentivize marketing firms to focus on increasing their own revenue rather than providing the best possible service to their clients.