How to Price SEO: 6 Common Pricing Models Explained
Getting the price right is one of the biggest headaches for freelancers, especially when starting out. You need to strike a balance between what you want and your customers expectations.
And that often goes beyond the amount you charge. How you charge is often equally important. Not every customer will be happy to work with the uncertainty of a hourly rate. Similarly, some clients might object to project based fees and so on.
Depending on what type of customers you want to work with, you might have to use one or more pricing models.
Common SEO Pricing Models
If you are thinking of offering SEO services, here is a breakthrough of the most common pricing models in SEO.
As the name suggests, in fixed fee model you set up a flat price for specific work, without taking individual factors like size and age of the site, current setup or the amount of work required into consideration.
Fixed fee pricing model is simple to market and might be attractive to some buyers, especially those with little knowledge of SEO intricacies and very price weary. But since it doesn’t take variables that affect the time and effort required in delivery into consideration and given the complexity of SEO projects, using this pricing model might result in your business generating loss.
Pay for Performance (Traffic or Sales)
In the Pay for Performance model clients pay you only if to deliver a predetermined result. In SEO those results typically include reaching certain rankings for a term or terms, specific traffic levels etc. Some companies also use profits / sales as a metric of performance.
Pay for Performance is a risky model though, unless you either agree to deliver an easily achievable result or are more than sure of what you can do. Otherwise you might be doing all the work without a guarantee of payment.
Not to mention that recently there has been a surge of questionable SEO companies offering a variation of price for performance model. Needless to say, it slowly gets associated with them.
Hourly Price Consulting
Working by hourly rate is another quite popular way to charge for SEO. In this pricing model you set the price for each hour you work on a clients project. Since SEO projects often require a lot of tweaking, going back and forth, changing strategies etc. to deliver results, an hourly rate can offer the best return on your time investment.
But working on hourly price plan is far more complex than just working out your hourly rate. Most of the time clients won’t accept a hourly consulting without at least some indication what their final bill might be like. Therefore, before you even do anything on a project and start getting paid, you might have to work out all tasks in the project, estimate time required to complete each task plus define a procedure of approval. Your clients might also require you to set a maximum hours cap for a project, to ensure they won’t go over budget.
Project Based Price
Similarly to fixed fee model, in project based price you define a flat fee for a project but this time, base it on an estimate of the amount of work and time required to complete it. To do so you need to have the project clearly defined, together with outcomes expected and timeliness for completion. Any tasks outside the scope of work are charged separately, typically through hourly based consulting fee.
Project based pricing is commonly used because it’s simple and well defined. The flat fee you offer is based on a reasonable estimate of the amount of time needed, costs you might incur, expenses etc. Unlike hourly price however, a project fee is not an estimate and cannot change, even if more resources than originally anticipated are needed.
Profit sharing pricing is a form of partnership in which you are compensated for the results you bring. In simple terms, in this model you make money when your client makes money and your payment for work is a portion of your clients profits. Unlike pay for performance pricing though, in which you are being paid when you reach certain milestone or a goal, in profit sharing pricing you get paid a percentage of sales you generate for a client.
But in spite of this model sounding so daunting (after all, it may seem that with a stroke of luck you could retire on one client only, right?) profit sharing agreements usually include a time limit (defining how long after you finish work on the project you still get paid), payment caps and other limitations to prevent SEO becoming a permanent expense.
There is however a significant downside to this model – difficulties with reporting. With the online marketing world becoming so complex, it is often hard to contribute a sale to a specific channel. Search might be just one of the touch points in the process. And it can be difficult to work out exactly what impact you have made on the company’s bottom line.
Lastly, a monthly retainer. In this model you set up a flat, monthly fee for predefined SEO maintenance work. In short, your client pays you a set amount each month in return for a continued oversight and maintenance of a project. Monthly retainer agreement usually includes a defined set of tasks that are performed every month to ensure that the hard work you did on a project is not going to go to waste. Any tasks outside the monthly retainer contract are usually billed separately, usually through hourly rate pricing model.
Monthly retainers are used to encourage long term relationships. Instead of ending your engagement with a client when your work on a project is done, you continue working together, perhaps at a lower capacity to protect their SEO investment.