Win Work
How to Price Digital Marketing Services: 3 Models
Work out your floor rate first, then choose between hourly, project and retainer pricing — with one retainer priced three ways to show the difference.
Pricing is two decisions, and most people only make the second one. The first is your floor rate — the number below which the work costs you money — and it is arithmetic, not judgement. The second is which pricing model to quote, which is judgement, and depends on how predictable the scope is.
Get the floor wrong and the model does not matter: you will be efficiently unprofitable.
Step one: the floor rate
The mistake is dividing a target salary by 2,080 hours. Nobody bills 2,080 hours, and that calculation produces a rate that guarantees a loss.
Assume a target income of $70,000, overheads of $8,000 a year — software, insurance, accounting, professional subscriptions — and 1,800 working hours after holiday. Assume 30% of those hours go on work nobody pays for: pitching, admin, invoicing, proposals that go nowhere, and your own marketing.
- Billable hours:
1,800 × 0.70 = 1,260 - Cost to cover:
$70,000 + $8,000 = $78,000 - Floor rate:
$78,000 ÷ 1,260 = $62 an hour
That is break-even before tax and before a single hour of profit. It is not your price. It is the line below which you are paying for the privilege of doing the work.
The 30% is usually optimistic
Non-billable time on a first year of freelancing is often much higher, because winning the work is
the work. Run the calculation at 50% and see what the floor becomes — $78,000 ÷ 900 = $87 an hour —
and price for the year you are actually in.
Step two: the three models
| Model | Quote it when | How it fails | Who carries the risk |
|---|---|---|---|
| Hourly or day rate | The scope genuinely cannot be defined — audits, consulting, ad hoc support | You are paid for effort, so getting faster cuts your income | The client |
| Project or fixed fee | The deliverable is definable and finite — a site migration, a strategy, a campaign build | Scope creep eats the margin invisibly | You |
| Retainer | The work is ongoing and the value compounds — management, content, reporting | Scope drifts upward month by month until the effective rate collapses | You, slowly |
There is a fourth model — performance-based — and it is the one to be most careful with. It only works when you control enough of the funnel to be responsible for the outcome, and when the attribution is agreed in writing before anyone starts. If the client’s sales team closes the leads, you do not control the outcome.
The same retainer, priced three ways
Assume the work is monthly search management: reporting, ongoing optimisation and a monthly call. Assume it genuinely takes 32 hours a month.
| Model | Quote | Effective hourly | Against a $62 floor |
|---|---|---|---|
| Hourly at $95 | $3,040 | $95 | Comfortable |
| Fixed retainer | $2,500 | $2,500 ÷ 32 = $78 | Workable |
| Fixed retainer, scope drifts to 45 hours | $2,500 | $2,500 ÷ 45 = $56 | Below the floor |
The third row is the one that actually happens, and it happens gradually — an extra report, a second stakeholder on the call, a landing page “while you’re in there”. Nothing in the month feels like a problem. The rate fell 28% and nobody sent an email about it.
This is why a retainer needs an hours ceiling written into it, not as a threat but as a trigger for a conversation. “Included: up to 35 hours a month. Beyond that we agree the next piece of work separately” is a sentence that costs nothing to write and saves the margin.
The pricing template has a retainer profitability calculator that works out the effective hourly rate and the maximum hours a retainer can absorb before it stops being profitable — which is the number to know before you quote, not after.
What actually sets the number above the floor
The floor is arithmetic. The price is a position, and four things move it:
- The size of the outcome. Work that plausibly moves $500,000 of revenue is not priced like work that moves $50,000, even when the hours are identical.
- Scarcity of the skill. Not “how hard it is for you” — how hard it is for them to find someone else who can do it.
- The risk you are absorbing. A fixed fee on an ambiguous scope is you underwriting their uncertainty, and it should cost them for it.
- Speed. Delivering in three weeks instead of eight is worth something to a business with a launch date, and nothing to one without.
None of those is “what competitors charge”. Competitor rates tell you what other people decided about their own cost base, which you cannot see.
Three pricing mistakes worth naming
Quoting before scoping. A number given on a first call becomes the anchor for everything afterwards, including the parts you had not heard about yet. “I’ll put a scope and a price together” is a complete answer.
Discounting instead of reducing scope. A 20% discount trains the client that the first number was invented. Removing 20% of the work keeps the rate intact and makes the trade explicit.
Building the fee as a percentage of ad spend. It ties your income to their budget rather than to your work, and it means you get paid more for recommending they spend more. The pricing template covers the fee-versus-media-spend question in detail, including the pass-through arrangement that avoids the conflict.
Publishing a price or not
Publishing a starting price filters out the enquiries you cannot serve, which saves the most expensive thing you have — the non-billable hours in the floor calculation above. Publishing a full price list invites comparison on a single axis and loses you the scoping conversation.
The usable middle is a starting-from figure with what it includes: enough to disqualify, not enough to compare line by line.
Once the number is settled, it belongs in the proposal with the scope it buys, and then in the contract with the payment terms and the exclusions. A price agreed in a conversation and never written down is a price you will be renegotiating in month three.
How the number is presented decides how it is read. A figure with the hours, the deliverables and the ceiling visible beside it invites “is this the right amount of work”; the same figure on its own invites “is this negotiable” — which is what the buyer is actually deciding when they reach that section.