Why Percentage Of Spend Is The Best Pricing Model For Agencies

The Andrew Faris Podcast · October 31, 2023 · 32 min

Summary

This episode argues that a percentage of spend pricing model is the most effective for agencies working with ecommerce brands. Andrew Faris, an experienced e-commerce growth strategist, explains how this model aligns agency incentives with brand success, fostering transparency and driving mutual growth. This approach minimizes conflicts of interest and encourages agencies to optimize for profitability rather than just activity.

Key takeaways

• Agencies should consider a percentage of ad spend as a primary pricing model to align incentives with clients' growth.
• This model encourages agencies to focus on profitability and scaling, rather than just hitting spend targets.
• Transparency in results and a clear correlation between agency performance and client success build stronger, more trusting partnerships.
• It shifts the agency-client relationship from a vendor-provider dynamic to a partnership focused on shared outcomes.
• For brands, this model means agencies are genuinely invested in maximizing return on ad spend and overall business growth.

Themes

Topics covered

Episode description

Lots of people have strong opinions about how best to price an ad agencies, and I&#39;m one of them. I&#39;ve seen this from all sides: brand, agency employee, aggregator CEO, and now agency owner. After all that, I&#39;m convinced that charging a percentage of spend is the best model for agency pricing, at least to a certain stage of DTC businesses. In this episode, I make the case for why, then tell you exactly how I price AJF Growth. SUBSCRIBE ON YOUTUBE The Andrew Faris Podcast is now available on ⁠⁠⁠⁠⁠⁠⁠⁠⁠YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠ at www.youtube.com/@andrewfarispodcast. EPISODE SPONSOR Add supply chain experts to your team at a drastically lower cost than you&#39;re expecting by hiring More Fractional Supply Chain, a service of my friends at More Staffing. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.morenow.co⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and use the code AJF20 to get 20% off your first 3 months. REFERENCED IN THIS EPISODE: "Building The Process For Meta Ads Success" (Spotify, Apple) FOLLOW UP WITH ANDREW Follow Andrew on Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠@andrewjfaris⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Email Andrew: podcast@ajfgrowth.com Work with Andrew: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.ajfgrowth.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ EPISODE MUSIC Music Intro: "⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Tell Me Mama⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠" by The Devious Means Music Outro: "<a hr

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Frequently asked about this episode

What does this episode say about paid acquisition?

Agencies should consider a percentage of ad spend as a primary pricing model to align incentives with clients' growth.

What does this episode say about founder & leadership?

This model encourages agencies to focus on profitability and scaling, rather than just hitting spend targets.

What does this episode say about finance & fundraising?

Transparency in results and a clear correlation between agency performance and client success build stronger, more trusting partnerships.

What does this episode say about paid acquisition?

It shifts the agency-client relationship from a vendor-provider dynamic to a partnership focused on shared outcomes.

What does this episode say about paid acquisition?

For brands, this model means agencies are genuinely invested in maximizing return on ad spend and overall business growth.

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