September 06, 2002
How To

How Much Should Marketing Consultants Charge? Seven Steps to Figure Out Your Rates

SUMMARY: If you are a marketing consultant who is either trying to figure out what to charge, or mainly charging by the hour, you definitely need to read this invaluable advice from Moira Vetter right away.
Includes her own formula for figuring out whether you will make
enough money at your current rates.

Knowing what you are worth is harder to project, yet far more
fruitful, than knowing how many hours your schedule allows.

Assess the value of your services

Regardless of market instability, you must find relevant poles
for anchoring your pricing. Your fee structure should consider:

1. Going rates: Hourly & Project. Refer to: a) local market, and
b) competitor fees

2. Clarify the tangible results and/or revenue your effort will
earn the client

3. THE BIGGIE: Find the 'Intangible value-add' in what you do?
Often we don’t even bill clients for our magic because it’s
hard to quantify. Get paid for your true value.

Focus on your effort (not your time) and its bottom-line impact.
There rests your ability to assign and command substantial (and
fair) fees for service.

-> Do not limit earnings by quoting using hourly rates

If you price consulting hours at standard rates, you have
created your own price ceiling. You have a fixed number of
hours to sell at fixed rates. Consider adding a Performance
Clause that compensates you more for outstanding results.

If the client seems sensitive to a specific dollar amount,
accommodate the budget and adjust your approach. You can be
profitable *and* match someone’s price, as long as you:
* renegotiate costs
* deliver more efficiently
* deliver less than planned

-> Proving what you are worth

How much is your effort worth in money saved, revenue earned
or channels opened? Now, do the math and validate the business
objective. Focusing on proposed results justifies the cost-
efficiency of your solution. Here’s my formula:

#1. Company Goal = $$$,$$$,$$$ in Revenue this Period (month,
quarter or year)

#2. Existing & New Revenue Goals (2 very different things)
comprised of:

X new sales this period at $X,XXX each
Y recurring/retained contact revenue this period at $Y,YYY each

#3. Sales Close Ratio multiplied out dictates the minimum number
(W) prospects we should be actively developing (communicating,
educating, consulting).

#4. Marketing, Lead Gen & Retention Results from client’s past
activities suggest the amount of respondents averaged from
various activities.

#5. Industry Response Rates for integrated and a la carte sales
and marketing determine if and how we can reach and persuade
the appropriate number of 'suspects' to interact with us.

#6. What is the total Cost?

Consider comprehensive ballpark costs--strategy, creative,
production, distribution, promotion, staff resources. The
entire budget, not just your part of it, needs to be
understood and maximized.

#7. A 3-to-1 Minimum Return on Marketing.

Take the Approximate Sales Revenue you need in the period and
divide it by three. Your comprehensive budget should be less
than 1/3 of the Revenue goal.

Experience means you work faster, with greater impact. That
means your 'economy of effort' should be worth more, not less.

It is tempting to simply "drop your rate" to get a contract
signed. Just remember, there is no way to get paid more money for
less time in an hourly rate structure. Get paid what you are

This advice submitted by:

Moira Vetter
President, Cracker Communications, LLC
VP Membership, Business Marketing Association Atlanta
404-728-0064 / 404-441-7457

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