March 30

How Much Should Social Media Marketing Cost?

This is a reprint of a post I originally wrote for Ad Age back in 2008. And while at the time I wrote it as the President of an ad agency, as I sit here now the owner of a Social Media Marketing agency, I realize, it’s just as valid now as it was then. We in the marketing world still place value on and charge by the time it takes to do something versus the value that something creates. And too often in social media marketing, clients are still valuing execution over developing a sound social media strategy. So give it a read and then let me know, what you think?

Lately, I’ve grown fond of reminding our staff and myself that we are in the thought business. And while unfortunately our clients most often reward us (as we do ourselves) for our execution of thought, at our core, agencies are thinkers and our greatest value to clients is our ability to think.

But it seems like not a week goes by that I’m not involved in a conversation with a colleague, client or both, about an estimate, a fee or some form of compensation matter. It always starts with someone feeling something just shouldn’t, couldn’t possibly take that long and cost that much.

I’m not surprised because we agencies did it to ourselves. We started charging by the hour, which immediately devalued thought and began valuing execution. Then we started undercutting each other with lower-cost bids, cut-rate commissions, etc.

And with the death of the 15% commission and the continued movement away from commission compensation and towards cost-plus or fees based on dedicated agency resources, we continue to divert attention away from that which matters most — thought and more importantly the value of thoughts.

This is nothing new and certainly not just the province of small agencies, as large agencies too have to justify costs. But having worked at firms of all sizes, I must confess smaller agencies do have to deal with this issue more often.

Over the years I’ve tried many, many different arguments to help those that would challenge the validity of a “high estimate” or “hefty fee.” But I’ve recently found what seems to be the most logical and effective of all arguments. A simple question that I pose each time this conversation arises. And while it doesn’t stop the conversation, it at least alters it and moves it from a focus on execution to a focus on outcome and value.

I simply ask to the party challenging the cost, “How long does it take to think a thought?” They usually respond that they don’t know and turn the question back to me.

To which I respond, “Depends.”

I ask if they would prefer a perfect thought? A half-baked one? A big thought or small one? A legal thought or maybe a dirty one? I could go on. The point is we never really know how long it will take to think a thought, especially a really good one. Yet every day in our business we are asked to tell clients how long it will take and then ascribe a cost based on the amount of time we think it will take. Like we have a magical calculator that has a special connection with time and space and somehow can spit these things out in neat little estimates for signature.

Which leads us to the second half of this thought. How much should a solid good ole thought cost? And should that cost be based on the time it takes to think it or the value the thought itself creates?

I’d vote the latter. The blockbuster ad that drives a 20% increase in sales is just as valuable to the client if thought of in five minutes or five days. So why should a highly creative agency be penalized for being efficient? Likewise, big ideas can often be elusive. But a blank check isn’t fair either. After all, clients have finite budgets.

So what is the right answer? There isn’t one. Compensation is an imperfect science at best. The first step is for clients and agencies to learn to trust again. Clients need to invest in agencies and agencies in clients. We need to create compensation packages that underwrite effort and reward brilliance regardless of how long it takes. Clients and agencies need to recognize that four singles are just as valuable as a home run. We all need to rededicate ourselves to the core offering — thought — and ensure that the person or persons responsible for creating the really big, really valuable thoughts are justly compensated.

So, now that you’ve read what I think… tell me what you think. I’m all ears.

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social media, Social Media Agencies, social media agency, Social Media Management, social media marketing, Social Media Marketing Strategies, Social Media Marketing Strategy, social media planning, social media strategy

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  1. Does blogging good, free content then also chip away at the high value we put on thought production? For a while, publishing followed your better thoughts = higher price formula. Fincaial Times > NYT > TimesPic, cost-wise. Now we give away what are sometimes our BEST thoughts, which certainly affects the thought-market. Sure, as a social media manager myself, I understand it demonstrates our ability to think good thoughts… so here’s hoping that the good outweighs the bad.

  2. Tom so glad I found your article while reading and popped on over here. While I am not in social media field, my field of work (still service oriented) still applies to what you have written here. Cost of time spent vs cost for the idea itself. Unfortunately, for both parties – clients and businesses from their respective point of view, time is money – literally. There’s fixed and variable costs a business incurs – wages, contractors etc etc. It’s no wonder why majority of service based businesses focus on cost in execution of a task rather the cost or value created from the idea itself. As an employee, I would love to come into work 1 out of 5 days a week, with an awesome bunch of value creating ideas and still be paid a full time salary! But I don’t think the boss would see value in that 🙂

  3. Interesting article but pretty much without value, to me at least. OK, our ideas are valuable. But you offer no advice at all on how to value them.

    Clients demand, rightfully so, some answer to their question of how we price our services. This article offers nothing in this regard, except a bit of dialogue sure to piss off a client, i.e., “I ask if they would prefer a perfect thought? A half-baked one? A big thought or small one? A legal thought or maybe a dirty one? I could go on.” Do you really have this conversation with your clients?

    Sorry to be so caustic, but I was hoping the article would actually answer the question posed in the headline.

  4. Thank you for this article. We have been struggling with this for some time. This article will help me change the course of the conversation to one of intellectual capital versus products or goods sold.

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