HOW MUCH DOES A MARKETING RETAINER COST?
Retainer fee ranges may differ based on location and agency size but they typically won’t cost less than $1000/month for small businesses and can far exceed that for larger ones.
And, while new or small businesses may balk at the idea of spending $1000 or more per month on a retainer, if they stop and consider what they are getting in return the value is undeniable. Just compare the services covered in your proposal to the cost of an in-house marketing department and you’ll see a retainer is an amazing deal!
Take True Co’s example proposal for Cupcakes & More. The monthly services outlined in the proposal include marketing strategy and analytics, Facebook and GoogleAds management, and conversion optimization for a webpage. Monthly cost: $2,000.
Now let’s say Cupcakes & More decided to add an in-house marketing department to their business instead. In the interest of keeping it simple, say their marketing department only has two employees: a marketing director with the experience to oversee and manage their day-to-day marketing efforts and a marketing coordinator with the variety of skills needed to complete day-to-day marketing tasks. This bare bones team could, with the right people in these roles, potentially provide the same services offered in the example retainer. So let’s compare the cost.
GlassDoor puts the average salary (here in Lancaster, PA) for a marketing director at $120,000/year and a marketing coordinator at $51,000/year. Based on those numbers, the monthly cost for Cupcakes & More’s small marketing team comes to $14,250! When you compare that to most retainer fees of $2,000/month, the retainer starts to feel like a steal…which it is!
Now that you can see how affordable retainers are in comparison to hiring a full-time team, you may be feeling skeptical. How can an agency charge so much less for the same services? There has to be a catch, right?
Nope. There’s no catch.
Serving multiple clients at once means an agency can afford to offer access to their skills at a much lower rate than a marketing professional employed by only one company. Think of it like the cost of a meal at a 5-star restaurant compared to the cost of hiring a full-time personal chef. The meal is just as delicious whether it’s made in the restaurant or made in your home but the price skyrockets when you are the only one eating the chef’s food.
And, while enterprise companies may have the marketing needs to keep an entire marketing department busy year-round, most businesses can see significant growth with far fewer man hours invested in their marketing. For those companies, a retainer relationship with an agency will execute their marketing strategy just as well as an in-house marketing department at a fraction of the cost.
HOW DO I KNOW I CAN AFFORD A MARKETING RETAINER?
The first step to judging whether you can afford a retainer is to set your marketing budget. It’s important to remember, when you’re determining your marketing budget, to look at it as an investment rather than an outright cost. The money a business spends on marketing should, if all goes according to plan, make its way back to them through new customer acquisitions and increased sales.
A popular method for determining a business’s marketing budget is to allocate a percentage of its gross annual sales. For example, a business that grosses $2 million a year and allocates 1% of its sales to marketing would have an annual budget of $20,000. And, while what percentage a business chooses to allocate to their marketing budget varies widely (anywhere from 1-25%), researching average marketing budgets in your industry is a good place to start.
Once you have an idea of what percentage of sales other businesses in your industry dedicate to their marketing budget, you can see how the industry average fits into your own company’s overall expenses and decide what percentage is right for you.
Every business is different but True Co. generally recommends that a company reach a minimum of $300k in gross annual sales before committing to a retainer.
HOW WILL I KNOW MY RETAINER IS WORKING?
A retainer proposal should clearly outline goals and expectations of the marketing strategy it contains. It should also specify how results will be measured and relayed to the client and in what intervals (weekly, monthly, bimonthly, etc).
With all (or most) of your marketing efforts consolidated under the umbrella of a retainer, it’s much easier for an agency to track and report on your marketing strategy’s progress and calculate key performance indicators, like your ROI (exactly how many dollars you made for each dollar you spent). These reports will provide you with valuable insight into your marketing strategy’s performance and help you gauge your retainer agreement’s success.
Don’t forget that your marketing budget is an investment which means you may not see an immediate return from your retainer. Of course you want to pay attention to the reports you receive and watch for red flags (significant downturns, etc) but you should also be sure to give the agency’s strategy time to find its footing before you decide it has failed.
BENEFITS FOR THE CLIENT
The first benefit of a retainer agreement for the client that probably comes to mind is that it keeps costs predictable. It’s much easier to feel secure about investing your marketing budget when you can see exactly how much you will be spending and the services you will be receiving in return over the course of the retainer agreement.
And, while we’ve already discussed the obvious value of having access to a full team of talent without the considerable overhead cost of supporting that team, here’s another value-add for you: retainers often translate to better rates per service than using marketing agencies on a project by project basis.
Because retainers have their own benefits for agencies, they will often charge less for their services when they’re packaged in a retainer than when they are packaged as one-off projects, in order to incentivise clients to choose the retainer.
But financial benefits aren’t the only reasons retainers are often the best choice for clients. Expediency is another significant perk. Having a marketing agency on retainer basically holds a company’s place at the front of the line should changes or additions to their marketing needs arise.
Due to the long-term nature of the retainer relationship, agencies will often prioritize requests for additional marketing services from their retainer clients over project clients in their queue. So, if a retainer client suddenly needs help with a temporary marketing issue, the agency will typically be able to address it sooner than if the client were to call a different agency out of the blue with the same request.
Should these additional needs be something the client expects to be consistent, the retainer is also easily scalable and can be adjusted to include them moving forward. In these ways, a marketing retainer not only saves client’s money but time as well.
BENEFITS FOR THE AGENCY
Just like their clients, agencies benefit from the consistency of a retainer. Working with the same client(s) from month to month facilitates better planning and delegation of work tasks, leading to enhanced workflow. It also means less of the agency’s time needs to be directed towards attracting new business. They can focus on marketing their clients, instead of marketing themselves.
Retainers improve the quality of the agency’s services as well. Not because agencies intentionally offer subpar work to non-retainer clients but because the long-term nature of a retainer relationship enhances the marketing team’s efforts themselves. Just like a salesman is more likely to make a sale when they’re knowledgeable about the product, so is a marketer able to market more effectively when they know their client’s business inside and out.
The deeper familiarity agencies develop with their retainer clients over time allows them to refine their client’s message and brand voice and better tailor their marketing strategies to the business’s specific needs. The lack of time constraints also allows marketers to be more creative with their strategies and capitalize on the latest trends and insights in marketing, making a retainer relationship especially beneficial for data-driven marketing agencies like True Co.
These agencies are always looking for new ways to turn the data they mine into growth for their clients and retainers are highly conducive to this process. Data-driven marketing agencies will capitalize on the long-term nature of a retainer by utilizing marketing experimentation methods, like A/B testing and multivariate testing, using what they learn to then grow their client’s business.
WHEN TO USE A RETAINER
WHEN NOT TO USE A RETAINER
If you find yourself agreeing with the statements in the latter category, then you may be better off inquiring about an agency’s short-term packages and that’s just fine. Agencies offer them for a reason!
If you mostly agreed with the statements in the first category then congratulations! You’re ready to focus your marketing efforts and grow your business with an agency retainer!
We hope this guide has answered every last one of your questions about marketing retainers and given you the confidence to take the next steps on your marketing journey. If you have a question we didn’t cover here, let us know!