If your agency’s pricing strategy is based on what competitors charge, you’re already in trouble.
Far too many digital agencies price themselves into a corner, undervaluing their services out of fear – fear of losing clients, fear of seeming too expensive, fear of getting it wrong. The result? They work harder than necessary for less profit than they deserve.
But pricing isn’t about being the cheapest. It’s about being the most valuable. The good news? You don’t need to work longer hours to make more money. You just need to price smarter.
Let’s break down the biggest pricing mistakes agencies make and, more importantly, how to fix them.
🚨 Common Pricing Mistakes That Kill Profit
📉 Basing Prices on Competitor Rates
Copying what everyone else charges is like setting your prices by throwing darts at a board – completely random.
Competitor rates don’t reflect your agency’s costs, expertise, or positioning. Worse still, they might be underpricing too. When agencies get caught in a race to the bottom, the only winner is the client who pays less than they should.
💰 Not Accounting for All Costs
Many agencies undercharge simply because they don’t know what their services really cost to deliver. There are direct costs (salaries, software, tools) and indirect costs (admin, marketing, non-billable hours).
A quick formula:
(Total costs + desired profit) ÷ billable hours = minimum hourly rate
If you don’t know this number, you’re guessing. And guessing rarely leads to profitability.
⏳ Charging by the Hour Instead of Value
Hourly pricing is a trap. It caps your earning potential and makes clients scrutinise how you spend your time rather than what you deliver. Clients don’t care if something takes you 10 minutes or 10 hours – they care about the result.
Shifting to value-based pricing means clients pay for outcomes, not hours. If your work generates a client an extra £100,000 in revenue, charging £1,000 for it is a bargain.
🎟️ Offering Too Many Discounts
Discounts might win you a project, but they also:
- Devalue your expertise
- Set bad expectations (clients will always expect a deal)
- Eat directly into your profits
If a client asks for a discount, ask yourself – would they ask their accountant or lawyer for one? Probably not. Instead of lowering prices, offer added value (extra consultation, priority service) instead.
🛠 How to Fix It: Pricing Strategies for Profitability
🚀 Value-Based Pricing: Charge for Outcomes, Not Hours
Your agency should be selling results, not time. Value-based pricing works by aligning your fee with the impact of your work. For example:
- A PPC campaign that generates £50,000 in revenue shouldn’t cost £500
- A website that increases conversions by 30% isn’t just “a few hours of coding”
Make clients see what’s in it for them and price accordingly.
🎯 Tiered Pricing: Give Clients Options, Not Discounts
Instead of negotiating price, structure your services into three tiers:
- Basic – Core service, no frills
- Standard – Best value, includes key extras
- Premium – White-glove, high-touch service
This allows clients to choose their price point, making them less likely to haggle while increasing your chances of selling higher-value packages.
🔄 Retainers vs. Project-Based Pricing: Finding the Right Mix
One-off projects are unpredictable. Retainers provide stability. The best agencies build a mix of both:
- Retainers create predictable cash flow and long-term client relationships
- Projects bring in high-margin work and new opportunities
Want to move clients onto retainers? Start by proving long-term value through projects, then pitch ongoing services to maintain momentum.
📈 Raising Prices Without Losing Clients
If you haven’t raised your prices in the last year, you’re due. Inflation alone means you’re earning less for the same work. Here’s how to do it without scaring off clients:
- Add value first – Improve service, update offerings, refine processes
- Give advance notice – At least 60 days so clients can adjust
- Justify the increase – Show the impact of your work, the results you’ve delivered, and any new skills or tools you’re bringing to the table
If clients push back, be ready with: “We understand budget constraints, but here’s what staying at the lower rate would mean in terms of scope.” In most cases, they’ll see the value.
🔑 The Bottom Line: Price Smarter for Long-Term Success
Pricing isn’t just about covering costs – it’s about profitability, positioning, and long-term sustainability. The agencies that thrive aren’t the cheapest. They’re the ones that understand their value and charge accordingly.
So, take a look at your pricing today. Are you charging what you’re worth? If not, it’s time to fix it.
Your clients aren’t paying for time – they’re paying for results. Charge accordingly.