The customer segment makes the difference
Your SEO agency’s DNA will tell how you determine your customer segments, whether by geography, size, or industry.
Also, depending on the range of services you offer, you will know which clients do not match your needs – for example, a start-up start-up will not be a good SEO client for various reasons (lack of product-market fit , lack of budget, no SEO basics to start with, etc.).
Additionally, think about the difference between creating SEO value for a startup and an established e-commerce business with a few technical issues.
You can use a strategic tool like the business model canvas to start mapping out your current client portfolio and determining what your ideal client profile is, by answering questions such as:
- Who are the clients ?
- Where are they in their growth phase?
- What are their sources of income?
Maybe you specialize in a specific vertical like medical SEO, lawyer SEO, B2B SaaS, etc. Or maybe you are interested in focusing only on online businesses or only on businesses.
It is also crucial to look at the history of your agency and to analyze your failures in the selection of clients and projects. You’ll remember bad deals and misaligned offers – map them and learn:
- What were your profit margins for each of them?
- How many hours did you spend?
- What other resources did you use?
- What was the monthly recurring revenue?
- How has all of the above affected your income?
Knowing who to turn down to get specific pricing and not throw your policy off balance is just as important as identifying your preferred customer segment. This way, you don’t start trading from scratch every time a potential client contacts you.
After all, if it’s not a qualified prospect, you have to say no.
Articulating (perceived) value and predicting it
After determining which customers you want to work with (the ones that make sense from a pricing perspective), you need a simple process to help them understand your value.
Even if you know your gross margin (the difference between your costs and your potential pricing) and your principles for qualifying prospects, you must evaluate a rather uncertain data for the formula to be complete: the perceived value your agency’s services.
There are many possible variables in the mind of your qualified lead: your brand, your referrals, other market players, other offers received, their history with other sellers, etc.
It’s hard to take them all into account and it’s a slippery road anyway.
It is more efficient to establish a data-driven process through a reliable forecasting methodology. This will make a difference in your positioning and help you be transparent and trustworthy while circumventing the inherent subjectivity of perception.
Translating SEO results into business results
In order to determine the relevant inputs that will impact the customer’s business, you need to consider:
- Non-brand organic traffic that you can directly impact through the SEO campaign.
- Research the seasonality and year-over-year trend of your targeted keywords.
- Inertial traffic influenced only by seasonality (as if the ranking of the website remains immobile).
- Performance over time towards the goal of improved visibility, whether linear or exponential.
- The average CTR curve for the top 10 positions, for each combination of SERP features and device split, showing you the actual clicks that manage to reach your customer.
All of the above data will allow you to estimate results in terms of clicks and conversions instead of rankings, thus establishing a closer link between your proposed SEO strategy and their potential business results.
Additionally, you will be able to highlight the difference in traffic with and without the SEO campaign you are offering. This means that you will also be able to calculate what the PPC equivalent looks like – an objective number to anchor the price.
Bringing in this external comparison will show the value provided by SEO, giving customers a chance to research and evaluate the projected result with a clear context in mind.
Set the right price
With this equivalent at hand, you will not only create a argument of trust, but you will also know the perceived reference value. In addition, you will be transparent from A to Z, an added value in terms of customer relations.
Let’s say you have a customer whose estimated Google Ads value is $875,000 for the 12-month forecasted scenario. A retainer of $10,000 may not seem so outlandish anymore, considering that this client has to be a player in a highly competitive international market and the extra conversions you can drive are no small feat.
Or maybe it’s a client with an estimated Google Ads value of $63,000 for the 12 month period. Then a mandate of $500-700 seems more plausible – it’s probably an SME in a limited geographic area, needing help raising the bar in their market.
No matter what client profile you want to serve in your agency, with this effective use of research data, you’ll be able to create realistic business scenarios that will help you dictate your pricing without the painful guesswork.
Again, you can emphasize that SEO is an investment and the traffic you generate for the client is here to stay. There is cumulative value that goes beyond paid media results if you think long term.
Additionally, for accountability purposes, you can go a step further and set your SEO goals by following the forecast benchmarks, thus having a reliable starting point to measure yourself against.
Monthly installments. One-off projects. Success fee.
Given the agency’s business model and the fact that SEO is a long-term investment, monthly recurring revenue (MRR) is the pricing that makes the most sense.
But the question of one-off projects will arise: should we accept them or not?
As with any clarification process, it depends on how your defined pricing policy incorporates exceptions.
Sometimes agreeing to a one-time deal can bring benefits if you consider:
- Technical audits as a separate service.
- Consulting services.
- SEO training.
It can also work if you think there is a distinct advantage to be gained.
This may be a new vertical you want to enter or an experimental project your agency wants to explore. In these cases, you can agree on a 3-month project and set expectations accordingly – not rigid results, but an experimental setup to identify SEO potential.
Of course, this can be a starting strategy that leads to the next steps, if the first results are promising.
When evaluating these leads, it’s a good idea to do your preliminary keyword research with the objective of “low hanging fruit” and spot SEO opportunities early on. For example, evaluating the difficulty of the targeted keywords or the additional traffic generated if these keywords reach the top 3 will give you a good idea of your client’s market and your potential return on investment.
Another added value for your SEO offers is success bonus. You should do this every time you start a collaboration. Not only will you impart confidence upfront, but you’ll add an extra layer of motivation for your team to deliver beyond the agreed-upon results.
Do we consider the competition?
The right price is mainly influenced by your costs, your profit margins and your customer profile. Still, you need to be aware of your agency’s competitors and their pricing policies, to see if they’ve anchored perceived value on another scale.
If you are at a different level than the market is used to, your positioning and perceived value play a major role in the final decision.
In business theory, this approach to pricing is called the value-based approach.
In an HBR article, A Quick Guide to Value-Based Pricing, you will find the following definition:
“Value-based pricing is the method of setting a price by which a company calculates and tries to earn the differentiated value of its product for a particular customer segment relative to its competitor.”
Now, with all the inputs at your fingertips, you’ll know how to define and explain your agency’s differentiated value.
Creating a pricing strategy that resonates with your agency’s business model can be a difficult undertaking.
Analyzing cost price, and perceived valueyou think about all the elements that maintain the balance between your incentive to sell and the customer’s incentive to buy:
- Your agency’s cost structure.
- The customer segments you want to address.
- The customer profiles you will say no to.
- The perceived value of your SEO services, calculated using a reliable and transparent forecasting method (explaining the additional visits and conversions you can bring and what it might look like in a PPC campaign in comparison).
SEOmonitor’s forecasting module highlights the equivalent of Google Ads value, allowing you to see all the calculations down to the keyword level, for a transparent and valuable pricing decision (which you can present to your clients).
This is just one of the many solutions we’ve developed to help SEO agencies acquire, manage and retain more clients.
Join us in our journey to bring more transparency to the SEO industry.