by Segun Adeyemi
From individual freelancers to organized corporate firms, there is an increasing number of people and companies that offer digital marketing services such as content marketing, search engine optimization, social media marketing and other similar services.
Traditionally, digital marketing agencies like many service based businesses usually bill a lump sum based on a project or a per hour rate while working for clients. There are a number of issues that serve as limitations to the growth of such businesses as a result of these pricing models.
The first thing is the cap on revenue. This is something that affects many service based businesses using the hourly billing because the maximum that can be made in a given day is the number of billable staff you have multiplied by the rate you charge per hour. If you also bill per project, the number of projects you can take on at any point in time is limited by the number of available staff to work on it. This makes it hard to make money or grow big.
Project based billing is also unpredictable for both the client and the agency. As an agency, in one month, you could land a number of big projects from several clients and make significant revenue while the next month, you struggle to land one project. This may lead you to regularly hire and let go of employees as a result of these cycles and unpredictability. This is very bad for the morale of employees and can hinder their productivity.
The difficulty in acquiring new customers is another issue you have to deal with using the project based model. It costs significantly more to acquire a new clients than it does to retain a current one.
These are a few of the challenges of the current project based/hourly-billing model and why I think agencies around the world have started considering a subscription model.
Does adopting a subscription model solve all these issues? Not necessarily. However, there are a few specific benefits for digital marketing agencies that choose to adopt a subscription model
1) It is easier to predict revenue with a subscription model. This makes it easier to plan and to focus on developing creative campaigns that convert for clients. This increased focus from your employees also leads to increased productivity.
2) Beyond predicting your revenue, a subscription pricing model also help increase your agency’s earnings. This is because clients are locked in for a longer period as they would usually sign up for a monthly, quarterly or bi-annual plan and you have the opportunity to keep them longer with a compelling service.
3) The subscription model also helps you improve your customer relationship and retention. When you charge your customers on a recurring basis, you are forced to maintain a good relationship and ensure that you are delivering value for the money they are paying you. This investment in customer relationship leads to deeper client relationship and increases your ability to retain such clients.
4) A subscription model also helps you plan your finances better and gives your employees more assurance that the company will always have enough cash flow to pay their salaries.
5) With a subscription model, it is easier to upsell new expertise and services to existing clients.
How to get started?
Getting started will require some form of creativity but it is most likely that you are already offering services that can be packaged into different plans for a recurring billing model.
Many digital agencies usually offer services along the lines of Search Engine Optimization and Search Engine Marketing, Content Creation and Marketing, Email Marketing, Social Media Marketing, Product Design, Website and Mobile App Development, Digital PR, Online Reputation Management and other similar online advertising services.
This is the future of most service based businesses globally and Nigeria will not be an exception. One of the infrastructures that will be required for this to become popular includes simple payment solutions that are tailored for subscription billing. This is our focus at Amplify, we help businesses adopt the subscription model by helping them accept recurring payments and providing all the tools they need to manage and make sense of such payments.
If you run a digital marketing agency in Nigeria and you are considering the subscription model or want to learn more about the subscription economy in Nigeria, visit www.amplifypay.com