Brand Agency Pricing

Part
01
of two
Part
01

Brand Agency Fee Structure Case Studies

Two case studies that were built around brand agencies are Grow and Convert and Lead Quizzes. For the former, the circumstances that led to the change in their pricing model was the need to fill an industry gap and offer a premium service, while for the latter, it was the need to lower price so that a considerable risk would not be tied to one client. Their pricing model and uniqueness are discussed further in the below findings.

Grow and Convert

Circumstances

  • For this brand agency, a gap in the industry and the need to offer a premium price for their services led to the change. The founders of the company believe that if brand positioning is off, it doesn't matter what is presented to clients because they won't pay for the services.
  • As a result, they needed to differentiate themselves from their competitors, and "position themselves as a premium service instead of being lumped in with all the other service providers out there."
  • The agency, therefore, defined four criteria to determine their brand positioning. These criteria are the target market, pain points to solve, service uniqueness, and proof of the first three.
  • Grow and Convert wanted to position itself as a brand agency that can "produce educational content that would be interesting/useful to the audience, drive traffic to it, and measure the results — essentially own the entire channel and be held accountable to results."
  • Agencies offering skeletal parts of these encompassing services already charge between $6000-$10,000 per month. But clients want a content marketing service (CMS) that can provide these encompassing services and are ready to pay a premium for it.
  • Providing the encompassing services on the low end will cost an average client about $100,000 a year, and about $500,000 a year on the high end.

Pricing

  • The famous saying that "price is a function of the perceived value of your service" is not lost on the founders of this agency.
  • While some agencies are charging as much as $500,000 a year, Grow and Convert started their high-end services with $6,000 per month, which translates to $72,000 per year. Regardless that this fee was a steal compared to the actual cost, the company started with this pricing because they were without a client base. More so, this pricing enables them to explain their "value proposition in a sales call pretty well."
  • The founders of the agency know that with their competitive price and better service delivery, clients would troop to them inevitably. Today, the company has successfully created new viable service offerings as other agency owners ask them how they get to charge $8,000 per month from clients for their services.

The Uniqueness


Lead Quizzes

Circumstances

  • As a brand agency, Lead Quizzes offers services such as "web design and development, advertising on Facebook, Google, and LinkedIn, landing page creation, copywriting, marketing automation, and shopping cart customization."
  • When it started, the company considered itself a 'full-service agency', because it believes it can solve all the digital marketing problems of its customers. After completing a few projects for clients that they can place a reference to, they upped their game and started charging clients between $3,500 a month to $10,000 a month.
  • But, the company couldn't ensure consistent results for clients because of their diversity, and there were no metrics to measure the satisfaction or otherwise of their clients.
  • Sometime in 2015, the company lost "three clients that accounted for 35% of their monthly revenue." Things started to go wrong and became worst when it couldn't replace the lost clients.
  • Realizing how they have fallen short from being a profitable company to losing five-figure amount overnight, the owners resolve to make changes that included the need to work with "a larger number of clients at a lower price so that no one client would become a huge risk for the business."

Pricing

  • Informed with the knowledge and experience that its sales process was atrocious, Lead Quizzes structured its pricing by productizing its services. This new concept involves "knowing the clients' business, research what they wanted, how much time it would take to fulfill the work, create a proposal, and then hope that they could close them."
  • Therefore, instead of a custom project, the company offered a quiz funnel that "would generate leads and drive people to its offer." The quiz funnel entails the following process: from 'Facebook Ad' to 'Quiz start-page' to 'Quiz' to 'Opt-in page' to 'Results page,' and finally to 'Call to action.'
  • Through this quiz funnel, the pricing is broken down into two steps. The first step is to "manage ad campaigns and optimize quiz funnel" for the client at an investment cost of $2,000 per month, out of which $1,000 can be deposited first as the monthly fee to manage ad campaigns.
  • The second setup is the waiver of the setup fee to "write the client's quiz, get it set up on the company's software, integrate it with client's CRM and make sure everything works." But this second step involves the upfront payment of the $1,000 ad management fee.
  • The setup is expected to "take less than 14 days, and the client won’t be rebilled the second monthly management fee until 45 days" have elapsed. For the speedy completion of projects, the company also incorporates a policy that automatically rebills clients 30 days after their 14-day setup was completed. This has made clients energetic in putting things in place at their ends against their prior lackluster attitude.
  • In a situation where the client paid early enough for the setup, the company would commence "running Facebook ads early at no additional charge," and this makes the client feel good. Today, the company now closes about three clients a week, which has contributed to a turnover of $720,000 in revenue a year.

The Uniqueness

  • The change in the pricing model of Lead Quizzes is considered unique because it centers on an integrated online pitch delivery. So, what clients get to see first in terms of the company's pricing is "so normally we charge $5,000 to set up a marketing campaign and $3,500 per month to manage the ads and optimize the funnel..." Afterwards, the clients see the two steps broken down and considers that the actual lower price has been made affordable for them.
  • If a client objects to the payment of the $2000 fee a month, another integrated online pitch is on standby to encourage the client to commit. Some wordings in between the pitch goes thus, "you said that you earn $1,000 per customer...., based on the lead costs you shared with me, .....we would double the number of leads you generate a month, and you would only need to close X% to pay back your investment."

Research Strategy

We started our findings by looking for companies that fit the profile of our case study. After concise research, we found two, namely, Grow and Convert and Lead Quizzes. Our analysis of the companies was drawn from the accounts of their founders.

For each company, we were able to describe the circumstances that led to the change of their pricing model, how the pricing was altered to create new or more viable service offerings, and how the change was considered unique.


Part
02
of two
Part
02

Brand/Packaging Design Budgets

After an exhaustive search through several credible sources, it appears that information on the brand/packaging design budgets of some large consumer packaged goods companies, along with details on how they allocate that budget, is unavailable in the public domain.


Helpful Findings

  • In a case study, Nestle KitKat in the Philippines partnered with McCann WorldGroup Philippines to overhaul packaging and design, along with additional marketing activities, with a budget of about $500,000.
  • Gagarina Babic, who serves as the director of brand design at Nestle USA, spearheaded a $1.6 billion packaging redesign project for the Natural Bliss and Coffee-mate, as well as Artisan Cafe, brands for Nestle.
  • Unilever was able to save more than $566 million in 2018 when it shifted to in-house marketing, which it viewed as more efficient than agencies. Its brand and marketing investments amounted to $7.16 billion in 2018 compared to $7.57 billion in 2017.
  • LEK predicted that in 2019, 75% of CPG brand owners will increase their spend on packaging.
  • The leading drivers of brand growth include the preference of consumers for more suitable options, the shift to premium offerings, and preference for increased optimization.
  • According to a study by eMarketer, 33% of companies that partnered with brand agencies desire better designs/creatives, 30% seek different pricing models, and 25% want a more flexible working model. Also, 33% would probably terminate their partner brand agencies because of pricing, while 19% would do it because of new management, and 16% selected cost overrun as the reason.
  • Around 55% of in-house agencies in U.S. companies said that they would outsource video creation to external brand agencies, while 52% said they would outsource creative functions.


Research Strategy:

The packaging design budget and breakdown of large CPG companies remain strictly internal corporate information that is not publicly available. However, we provided insights into packaging design in the CPG industry, as well as details on agency vs. in-house agencies. The research strategies we employed are available below.

We began by examining case studies on packaging design for CPG companies, hoping to find financial information on these projects. We explored case study databases, such as WARC, and brand agency websites. We were able to find some case studies from WARC, but they did not verify that the budget is specifically for packaging design since it also includes other campaigns. Case studies from brand agencies do not include their budget or spending.

Next, we searched for reports and news for CPG companies such as Unilever, Nestle, P&G, General Mills, etc., regarding their packaging design spending. We explored industry and packaging-related sites such as Packaging Digest, PR Week, Campaign Live, etc. We are hoping to find any information on packaging design budgets and partnerships with other brand agencies. Additionally, we looked for surveys and studies that could provide information on the average spending on package design for CPG companies. Unfortunately, we were only able to find information on overall advertising and marketing spends, and we could not get any data points for triangulation.

We then scoured for annual reports and financial statements for both the CPG advertisers and brand agency partners, hoping that they mentioned packaging design budgets. However, there were no financials provided that were specific to this area.

Finally, we broadened our search beyond CPG, hoping that we could at least provide overviews for the in-house and brand agency allocations. We found survey results from eMarketer providing insights on company expectations and outsourced functions to external brand agencies.

In conclusion, we were unable to determine the packaging design budget of large CPG companies, specifically, which may be because brand agencies usually do not disclose this information for privacy reasons. However, we were able to determine that Nestle allotted a budget of up to $500,000 for packaging revitalization and other marketing activities (ex. KitKat), and Unilever saved more than $566 million after considering in-house marketing.

Sources
Sources

From Part 01
Quotes
  • "position themselves as a premium service instead of being lumped in with all of the other service providers out there."
  • "produce educational content that would be interesting/useful to the audience, drive traffic to it, and measure the results — essentially own the entire channel and be held accountable to results."
  • "Price is a function of the perceived value of your service"
  • "value proposition in a sales call pretty well."
  • "community content promotion, paid facebook promotion, and targeted link building for SEO."
Quotes
  • "web design and development, advertising on Facebook, Google, and LinkedIn, landing page creation, copywriting, marketing automation, and shopping cart customization."
  • "three clients that accounted for 35% of their monthly revenue"
  • "a larger number of clients at a lower price so that no one client would become a huge risk for the business."
  • "knowing the clients' business, research what they wanted, how much time it would take to fulfill the work, create a proposal, and then hope that they could close them."
  • "would generate leads and drive people to its offer."
  • "manage ad campaigns and optimize quiz funnel"
  • "write the clients' quizzes, get it set up on the company's software, integrate it with clients' CRM and make sure everything works."
  • "take less than 14 days and the client won’t be rebilled the second monthly management fee until 45 days"
  • "running Facebook ads early at no additional charge"
  • "so normally we charge $5,000 to setup a marketing campaign and $3,500/month to manage the ads and optimize the funnel."
  • "you said that you earn $1,000 per customer...., based on the lead costs you shared with me, .....we would double the number of leads you generate a month and you would only need to close X% to pay back your investment."
From Part 02
Quotes
  • "L.E.K. Consulting conducted its second annual Brand Owner Packaging Study with 250 brand owners across the CPG spectrum, including food, beverage, pet products, healthcare, and personal care."
  • "Reflecting their belief in the central role of packaging, brand owners are planning to open their wallets. Three-quarters (75%) anticipate an uptick in packaging spend next year — up from 40% who predicted an increase in 2017 and 65% in 2018. Of those who plan to raise spending, nearly a third (32%) expect to do so by more than 10%."
Quotes
  • "Unilever saved more than 500 million US$566.25 million on marketing last year as it said it created more content in-house while making existing assets go further."
  • "The world’s second-biggest advertiser’s total spend on brand and marketing investment BMI dropped 400 million to 7.16 billion from 7.57 billion in 2017, but a source close to the company said the decline was largely driven by currency differences."