Retainer strategies and pricing models
Retainers are a great option for clients who need help on an ongoing basis. To create retainers, you need two things: a strategy and a pricing model. Continue reading to learn how to select both.
Choose a retainer strategy
Here are two retainer strategies to consider.
Project-first approach
The project-first approach uses a small portion of a client’s budget to create a minimum viable product (MVP) that addresses the essential tasks. You can spread the rest of the budget across multiple months to take care of any additional nice-to-have tasks, as well as some growth-focused tasks. This approach is also referred to as “MVP + iterate”.
A project-first approach is great for some clients because they don’t use their entire budget on a one-off project. Instead, they can get a working product that they can use to start generating revenue, and then continue to iterate on the product over time.
Retainer-first approach
Retainers can be compared to marriages, representing a significant commitment even in the early stages of a business relationship. To approach this commitment cautiously, you can propose a more limited version of a retainer to your client, allowing both parties to "date" and assess compatibility before fully committing to a long-term contract.
If your client wants to take an even smaller step towards committing to a retainer, recommend an audit. This is the perfect way to demonstrate the value of your services.
Select a pricing model
Below are descriptions of 4 pricing models and their ideal application.
Hourly pricing model
This is the simplest pricing model. In this model, a client agrees to pay a specified sum in advance to secure a number of hours over an agreed period of time. Generally, hours are set aside each month, and if the client doesn’t use them, they lose them. Alternatively, you can agree in advance a maximum carry-over amount, which allows your client to carry over a specified amount of unused hours.
Ideal for: Projects that are almost complete or if clients have requested additional hours beyond the original scope.
Project-based pricing model
This pricing model takes the total estimated cost for a project and splits it into a monthly fee for the duration of the project. For example, if a $20K project will take 4 months, the client will be invoiced $5k at the start of each month.
It’s important to attach expected deliverables for each payment so you have no issue justifying invoices. However, remember to maintain focus on high-level deliverables, rather than individual tasks or hours spent.
Ideal for: Agencies that have a high volume of projects and want to guarantee consistent monthly income. Additionally, this type allows agencies to schedule their resources in advance.
Time-based pricing model
The time-based pricing model is one of the most common models used by agencies. This model allows agencies to schedule their resources in advance, usually charging daily, weekly, or monthly rates. Time-based retainers also provide financial stability, which is essential to scaling an agency.
Ideal for: Agencies that want to scale their team and want predictable cash flow each month.
Value-based pricing model
A value-based pricing model (also referred to as a revenue share model) focuses on how much value a set of deliverables will bring to a business. This type of pricing model is difficult to get right because you are charging a monthly fee for a projected value that you will deliver. So, instead of charging a fixed fee, align your pricing with the success and revenue generated by email campaigns, for example.
This model is highly customizable, and the specific details and percentages can vary. It's important to have open discussions with the client to align on expectations and goals before finalizing the pricing structure.
Ideal for: Agencies that are confident in their expertise and are comfortable offering a proactive approach to retainers.
Implement a value-based pricing model
Here's an outline of how you can implement this pricing model and present it to clients:
- Determine key performance indicators (KPIs)
Identify the metrics that directly impact the client's business goals and revenue generation.
- Set pricing tiers
Create different pricing tiers based on the client's needs and desired outcome. Each tier should have specific KPI targets and corresponding revenue share percentages. For example:
Tier 1: Conversion uplift of 2-3% = 5% revenue share
Tier 2: Conversion uplift of 3-5% = 10% revenue share
Tier 3: Conversion uplift of 5% and above = 15% revenue share
- Present the value proposition
Explain the benefits of value-based pricing with revenue share to clients. Emphasize that the agency is invested in their success and will work to improve the agreed-upon KPIs. This model provides an opportunity for the client to achieve a higher ROI while minimizing upfront costs.
- Explain the monthly reporting and revenue share process
Clarify how the agency will track and report on the agreed-upon KPIs. Provide a clear outline of how revenue share will be calculated and when the client can expect to receive their portion of the generated revenue. Transparency and clear communication are essential in establishing trust.
Maximize the value of retainers
When creating monthly support services, you can use multiple tactics to make sure you maximize your retainers to be more profitable.
Define service offerings
Create a detailed outline of the specific services you will include in the monthly retainer. This can include email campaign strategy, design and coding, content creation, list management, analytics and reporting, A/B testing, and automation workflows. By defining what services are included, clients understand the value they are receiving and are usually willing to pay a higher retainer.
Provide strategic consulting
Position the agency as a strategic partner by offering consulting services. This can involve regular meetings or check-ins with clients to discuss their overall marketing goals, review performance metrics, provide recommendations for optimization, and help them achieve their objectives. Strategic consulting adds value and justifies a higher retainer fee.
Include ongoing optimization
Continuous optimization is crucial for email marketing success. Offer ongoing monitoring and analysis of campaign performance, and provide regular optimization suggestions and improvements based on data insights. If you demonstrate a commitment to constantly improving results, you can justify a higher retainer price.
Provide dedicated account management
Consider assigning dedicated account managers to clients to ensure personalized attention and support. Account managers can serve as a single point of contact, understanding the client's unique needs and providing tailored solutions. This level of personalized service can justify a higher retainer fee.
Offer additional value-added services
Consider offering additional services that complement email marketing, such as landing page design, social media integration, or marketing automation setup. These additional services can expand the agency's value proposition and potentially justify a higher retainer price.
Deliver transparent reporting
Provide detailed reports and analytics that clearly demonstrate the value and impact of the email marketing efforts. Transparency in reporting helps clients understand the return on their investment and justifies the retainer pricing.
You will learn more about reporting later in this course.
Access the Klaviyo support services retainer template and use it as a starting point to build your own support services retainer document.