Understanding The Management Fee
This article focuses on the importance of management fees and why advertising agencies charge them. One of the most frequently asked questions to digital marketing agencies is why is there a management fee? What does this include? What am I paying for?
It is natural for any potential client to worry about how their money is being spent by a marketing agency. You have the right to know whether your money is being properly spent or is just a convenience fee charged by an agency in the name of the management fee. Moreover, when you must pay additionally for monthly ad spending on Facebook, Google, and/or Instagram, you may start doubting the necessity of the management fee.
It is natural to get confused, especially if you are working for the first time with a digital marketing team. This is a valid question and at Cyrusson Inc. we respect every potential client who asks us this. So, let us walk you through the meaning of a management fee and why you pay it to a marketing and advertising agency.
Importance of Management Fee
Essentially it summarizes the fee that a digital advertising agency charges their clients for their time, expertise, experience, and the actual execution of services. We shall be discussing these things in detail below.
#1 You Pay for Time
Digital marketing agencies typically work at an hourly rate. This means that they measure the amount of work for a client through time which then corresponds with a certain amount. Whether there are ongoing monthly services such as running social media ads or Google ads, managing social media posts, email marketing, or SEO – agencies like to do the work on an hourly basis. Depending on the client’s budget, they designate time each month for a project. Every job done for a client – weekly client calls, fulfilling services, and internal strategy meetings – is estimated on a timely basis beforehand. Hourly rates vary from agency to agency with smaller boutique agencies often charging lesser.
Though agencies measure the amount of work they do for a client by time, it doesn’t necessarily mean you need to know the exact number of hours they put in every month. No, you don’t need to know especially if –
- Your agency always has time to listen to you,
- Their services are being fruitful,
- You don’t feel you are paying more than what they are doing.
It is that simple. If your agency has killer customer service and always listens to you, the amount of time they spend shouldn’t worry you. As a business owner, you must be more worried about the results. However, if you feel the agency is lacking any which way in delivering what they promised, maybe it’s time to talk shop with them.
It is no secret that most agencies end up spending more hours on a project than what they are paid for. This happens, in most cases, without the client even knowing about it. But that doesn’t mean that tracking time doesn’t happen after the deal is signed. Agencies like to track time so that,
- They can keep their team on track. It also helps them stay focused on the task at hand. With a timeframe in mind, it becomes easier for a marketing team to utilize its resources.
- Allotting time also helps agencies distribute their resources and manpower for other projects. Typically, any agency doesn’t work with just a client at one time. Time allotments will also assure you that if you are paying $5000 per month to the agency, the time allotted to you will be more than what is given to another client who is paying just $1000 per month. Basically, the more you spend, the more time the agency will give you.
- To track time, most agencies keep a record of every task done and time taken on it. This helps not just the team but makes communication with the client easier. Every time an agency pitches to a potential client, they measure time based on the resources they think they will need each month. Logging helps to know whether those expectations were met. Unfortunately, scope creeps are not uncommon where clients tend to ask more every month without talking about increasing the budget.
- Measuring time helps marketing agencies stay within boundaries (of their resources and utilizations). When the agency aims for a profit with an association, tracking time helps them measure output and outcome. They can then also estimate whether they need to hire more staff for a project since they can measure how many hours each employee spends on projects.
For an agency to be successful, it must strive to be transparent with its client. Measuring time helps achieve this to a large extent. Since agencies can measure the utilization of resources over a period, they can also quote budget estimates easily. However, when (and if) client demands tend to grow every month without talks about budget expansions, agencies tend to push back too.
#2 You Pay for Experience and Expertise
This seems to be quite a no-brainer since you actively seek out an agency that is known to be efficient and effective. Hiring someone who knows their job (and thus charges more) is always better than paying less to someone who has zero skills and no experience. It is obvious that the DIY route will not give you dividends (at least not much) while a subject-matter expert will develop industry-specific strategies that work.
We all pay for experience and expertise – in our day-to-day life. From paying the plumber who fixed, what now seems like an easy job (but you couldn’t do it) in just 10 minutes, to paying the dentist to fix the root canal – we are always paying for expertise. So why not pay marketing agencies for their experience and expertise? After all, these guys have gone to school, paid through grad school, upskilled their knowledge, attended workshops and conferences to know the latest developments. doesn’t it make sense to pay these guys who have put in the effort over the years so that you can get easy and effective digital marketing results?
#3 You Pay for the Execution of Services
You may be wondering what is the execution of services? To put it simply, it is the exact terms of conditions that you signed for with the digital marketing agency before any work began. Confused? Let’s start at the beginning.
When you approach an agency, they would want to know your goals – do you want to increase social media followers, build an email list, increase revenue, and so on. Based on your perceived goals, they would prescribe services that can help achieve them. So, when you sign the contract, you agree to pay X for the services Y to be provided by the agency. These are the agreed-upon services which if not met can be questioned later.
To make things easier, most agencies log their work. They document every action taken; they log every hour put in (this we have discussed earlier). Documentation helps when clients want to know how the work is progressing or if their goals are being met. At Cyrusson Inc. we keep detailed information of every task performed so that our clients know how we are progressing.
So, the management fee you pay the digital marketing agency is also for the execution of services.
Want to Know More?
While this blog was written to help potential clients understand what management fees mean, at Cyrusson we believe that sometimes it’s better to speak one-on-one. If you are not convinced about management fees and why we charge them, feel free to talk to us. Call us today or set an appointment. Let’s sip a cup of coffee and discuss management fees and more!
Cyrusson Inc. is a boutique digital marketing agency that offers multiple services that help boost your online presence. From search engine optimization to PPC ads, from social media management to blog posting, our expertise is wide-ranging. Feel free to contact us if you want to improve your online exposure. We have just the custom-made solution for you.