The customer segment makes the difference
The DNA of your SEO agency tells you how to determine your customer segments based on region, size or industry.
Depending on the range of services you offer, you also know which customers do not meet your requirements. For example, a startup at an early stage is not a good SEO customer for various reasons (lack of adaptation to the product market, lack of budget, initially no SEO basics, etc.).
Also, think of the difference in creating SEO value for a startup and an established ecommerce company with some technical issues.
You can use a strategic tool like the business model to map your current customer portfolio and determine who your ideal customer profile is. You can answer questions like:
- Who are the customers?
- Where are they in their growth phase?
- What are their sources of income?
Perhaps you specialize in a specific industry like Medical SEO, Legal SEO, B2B SaaS, etc. Or maybe you just want to focus on online businesses or just businesses.
It is also important to look into your agency's history and analyze your mistakes in client and project selection. You will remember the bad offers and the misaligned offers – match them and learn from them:
- 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 have all of the above factors affected your income?
Knowing who is refusing to secure certain prices and not destabilizing your policy is just as important as identifying your preferred customer segment. That way, you won't start renegotiating from scratch every time a prospect contacts you.
Eventually, if it's not a qualified lead, you have to say no.
Formulate the (perceived) value and forecast it
Now that you've figured out which customers you want to work with (the ones that make sense from a pricing perspective), you need a simple process to better understand your worth.
Even if you know your gross margin (the gap between your costs and your potential pricing) and your core qualification principles, there is a fairly uncertain input you need to evaluate to complete the formula – the perceived value of your agency's services.
There are many possible variables in your qualified lead's mind: your brand, your referrals, other market participants, other offers received, their history with other vendors, etc.
It's hard to take into account all of them, and it's a slippery road anyway.
It's more efficient to set up a data-driven process using a reliable forecasting method. This will make a difference in your positioning and help you be transparent and trustworthy while bypassing the subjectivity inherent in perception.
Translate SEO results into business results
To determine the relevant inputs that will affect the customer's business, you need to consider the following:
- The unbranded organic traffic that you can directly influence through the SEO campaign.
- Look for seasonality and the yearly trend of your targeted keywords.
- Inertial traffic is only affected by seasonality (as if the website's ranking stopped).
- The time output towards the goal of improving visibility, whether linear or exponential.
- The average CTR curve for the top 10 positions for each mix of SERP features and device sharing shows you the actual clicks that can be used to reach your customers.
With all of the above data, you can estimate results based on clicks and conversions instead of rankings, thus creating a closer connection between your proposed SEO strategy and its potential business outcomes.
In addition, you can highlight the difference in traffic with and without your proposed SEO campaign. This means you can also calculate what the equivalent looks like in PPC – an objective number that anchors the price in.
The inclusion of this external comparison shows the value of SEO and gives customers the opportunity to research and evaluate the projected result, taking into account a clear context.
Set the right price
With this equivalent, you not only create a trustworthy pitch, but also know the perceived value benchmark. You are also transparent from A to Z, which is an added value for building customer relationships.
For example, let's say you have a customer whose estimated Google Ads value for the projected 12 month scenario is $ 875,000. A $ 10,000 retainer might not sound that far-fetched considering that this customer has to be a gamer in a highly competitive international market and the extra conversions you can generate are no small matter.
Or, it is a customer with an estimated Google Ads worth of $ 63,000 over a 12 month period. Then a $ 500-700 deductible seems more plausible – it's likely an SMB in a limited geographic area that needs help raising the bar in their market.
Regardless of the client profile you want to serve in your agency, this efficient use of search data allows you to create realistic business scenarios that allow you to determine your prices without painful estimates.
Again, you can point out that SEO is an investment and the traffic you generate for the customer is here to stay. There is a cumulative value that goes beyond paid media results when you think long term.
Also, for accountability, you can go a step further and set your SEO goals according to the forecasting benchmarks for a reliable starting point for measurement.
Monthly retainers. One-time projects. Success fees.
Given the agency's business model and the fact that SEO is a long-term investment, the monthly recurring revenue (MRR) is the pricing that makes the most sense.
But the question of one-off projects will arise – should you accept them or not?
As with any clarification process, it depends on how your defined pricing policy integrates exceptions.
Sometimes there can be benefits in accepting a one-time deal if you consider:
- Technical audits as a separate service.
- Advisory service.
- SEO training.
It can also work if you feel that there is a significant benefit to be gained.
Maybe it is a new industry you want to enter or an experimental project that your agency wants to investigate. In these cases, you can agree on a three-month project and set expectations accordingly – not rigid results, but an experimental setup to pinpoint the SEO potential.
This can of course be a starting strategy that leads to the next steps if the first results are promising.
When evaluating such leads, it is good to do your preliminary keyword research with a "low-hanging fruit" lens and identify the SEO opportunities early on. For example, evaluating the difficulty level of the target keywords or the additional traffic generated if those keywords hit the top 3 will give you a good idea of your customer's market and your potential ROI.
Another added value for your SEO offers is the success fee. You should do this every time you start a collaboration. You not only communicate trust from the start, but also motivate your team to deliver beyond the agreed results.
Are we looking at the competition?
The right price is mainly influenced by your costs, your profit margins and your customer profile. However, you should be aware of your agency's competitors and their pricing policies to determine if they have anchored perceived value on a different scale.
When you are on a different level than the market is used to, your positioning and perceived worth play an important role in the final decision.
In business theory, this pricing approach is called the value-based approach.
In an HBR article, a quick guide to value-based pricing, you'll find the following definition:
"Value-based pricing is the method of setting a price, with which a company calculates and seeks to achieve the differentiated value of its product for a certain customer segment compared to its competitors."
With all of the inputs available, you now know how to set and explain the Differentiated Value of your agency.
Creating a pricing strategy that aligns with your agency's business model can be a daunting undertaking.
Analyzing cost, price, and perceived value can help you think about all of the components that balance your incentive to sell and the customer's incentive to buy:
- The cost structure of your agency.
- The customer segments you want to serve.
- The customer profiles that you say no to.
- The perceived value of your SEO services, calculated through a reliable and transparent forecasting method (taking into account the additional visits and conversions you can get and how they might compare in a PPC campaign).
SEOmonitor's forecasting module highlights the value equivalent of Google Ads and allows you to view all calculations down to the level of a keyword to make a transparent and valuable price decision (which you can present to your customers).
This is just one of the many solutions we have developed to help SEO agencies acquire, manage, and retain more clients.
Join us on our journey to bring more transparency to the SEO industry.