Thought-Leadership Pricing, Part 1: Most Common Pricing Models
In this three-part series, we aim to help financial marketers get a grip on the esoteric market for thought-leadership pricing. In part one, we break down the most common pricing models and the scenarios when each makes the most sense.
Working with an outside writer or agency to help produce thought leadership and content marketing is a complex endeavor with many moving parts.
One of the biggest components financial marketers must navigate is determining how much to pay for an outside writer or agency.
As our e-book on this topic explains [insert link to e-book landing page], once financial marketers begin their search, they often encounter a confusing ecosystem of providers with different ways of charging for their work.
To help financial marketers find some clarity on how pricing for thought-leadership writing works—as well as determine which model is the right fit for their project—we are embarking on a three-part blog series (based on our e-book) that covers the following:
- Part 1: Most Common Pricing Models
- Part 2: Variables That Influence Pricing
- Part 3: Ideas for Maximizing Your Budget
Pricing Model No. 1: Fixed Fee
A fixed-fee pricing structure involves a set price and a clearly established scope for the process and deliverable of a given project.
This model works best when many, if not all, of the variables—word count for the final deliverable, number of interviews with subject matter experts (SMEs), rounds of edits, etc.—of a project are well-known or clearly defined at the outset.
For instance, if you as a financial marketer have a clear sense of the amount of work required and the process that should be followed to create the deliverable, and you know the exact budget you have to spend, a fixed-fee model is likely the best option.
Finally, this pricing model also works well when the project is a high-value, recurring project, such as a quarterly or annual report. Because the extent of work required to complete these recurring projects is well understood, both parties can generally agree with a high level of comfort on a fixed-fee price.
There are many instances, however, when a fixed-fee model isn’t a good idea—for you or the writer. If this is your first time doing a certain type of project, or your first time working with a particular writer or agency, you might want to stay away from this arrangement.
Fixed Fee at a Glance:
- Provides cost certainty
- Establishes a clear scope, or extent of the work required to complete a project
- Easy to adjust the scope at the outset to meet budget constraints
- Limits process flexibility
- Difficult to account for scope creep (when the work on a project goes beyond what was initially agreed upon between both parties)
- Requires more front-end work to determine the scope and process
Pricing Model No. 2: Hourly
Commonly used by law firms, consulting firms, or other specialized professional services firms, paying a financial writer hourly has become a popular model.
The low end of the hourly rate spectrum is somewhere around $50-$100/hour for individual freelancers, while the upper end can be as high as $300-$400/hour for larger, more specialized agencies.
Overall, using an hourly pricing structure is best when the variables of a project are largely unknown or a firm is working with a writer or agency for the first time. The hourly structure can be used as a price-discovery mechanism to see how much work it actually takes to complete a project, and it allows both sides to determine if they have a good working rapport and if the writer’s skill and style is a good fit for the client.
Of course, there are drawbacks with hourly pricing.
Because the variables of a project may be unknown, agreeing to an hourly structure—with no mechanism for capping the hours—can result in cost overages if the project ends up taking longer than anticipated. Often, these overages can occur when the client wants to expand the scope of the project by including more SME interviews, requesting additional rounds of edits, or asking for a longer, more complex final deliverable.
Another potential drawback of an hourly construct is that it rewards time spent working on a project more than the ultimate value of the deliverable.
If it takes a writer a long time to work on a project—and the end-result isn’t satisfactory—then you as a financial marketer aren’t getting good value. This is especially true if the reason that it took the writer a long time is because the first draft was way off the mark and you had to ask the writer to do multiple rounds of major rewrites.
From the writer’s perspective, if you become more efficient because you have gained institutional knowledge by working with a client over time, you are able to add more value for the client. But, because you are able to work faster, you are rewarded with … a lower paycheck!
This could result in the writer raising the hourly rate or becoming discouraged from doing projects with you. Both of these things could be a hindrance to forming a strong, long-term partnership that benefits both sides.
Hourly at a Glance:
- Accounts for unknown or difficult-to-quantify project variables
- Allows for flexibility
- Aligns pricing with effort expended
- Requires tracking time expended against the budget
- Less price certainty
- Rewards time spent, not value delivered
Pricing Model No. 3: By the Word
Paying a writer a per-word fee is the simplest and most traditional payment model. Most newspapers, magazines, and journalists have been using this model for decades.
Per-word pricing ranges from about 50 cents a word on the low end to $4 a word on the high end, depending on the topic and the experience of the writer.
Although it is simple to understand, we believe this is the worst pricing model. That is why we never use it at Wentworth Financial Communications.
Why? Put simply, its simplicity overlooks what is actually valuable about quality writing. There is a reason why the quote, “If I had more time, I would have written a shorter letter,” has been attributed to so many of history’s greatest thinkers and writers.
By only using word count as a proxy for value, the by-the-word model only takes into account one variable of the work it takes to complete a project; it doesn’t account for the amount of research or SME interviews required to gather the information.
Financial marketers might be tempted to pay a writer by the word, but we assure you, it can undercut the value you get. The writer may feel incentivized to complete the work as fast as possible, thus sacrificing quality. Or, if you don’t have a cap on the number of words, you may be incentivizing wordiness, which is especially problematic in an era of ever-decreasing attention spans.
That said, there are rare instances when this model can work moderately well. For content pieces that are short, straightforward, and require no interviews or research, some writers may be fine agreeing to a by-the-word fee.
By the Word at a Glance:
- Simple, easy to understand
- Widely accepted among publishers
- Rewards in-depth, text-based content
- Uses length as a proxy for value
- Doesn’t account for research work
- Incentivizes wordiness
Pricing Model No. 4: Retainer
Many financial marketers may want to engage in a retainer relationship with their most-trusted writers or agencies.
The retainer may be time-based (for example, 50 hours of work per month) or production-based (three white papers and two blog posts per quarter).
Retainers can be advantageous because they allow financial marketers to secure the availability of their highest-value resources; at the same time, retainers allow the writers or agencies to deliver consistently high-quality work on shorter turnaround times. In addition, many agencies or writers may offer retainer-based discounts if the client commits to a certain volume.
Still, while many writers or agencies may covet retainers, financial marketers should be wary of working with someone who insists on a retainer-based relationship right off the bat.
We are big believers in the “date before you marry” philosophy. We don’t think it makes sense for either side to commit to a retainer before they have had a chance to work with each other. Retainers should only be used when you have a trusted writer or agency on hand as well as a clear sense of your content plans for an extended time period.
Retainers at a Glance:
- Secures trusted resources’ availability
- Encourages faster turnaround for new projects
- Fosters strategic partnerships
- Requires significant up-front planning
- Depends on mutual long-term commitment
- Requires more visibility into pipeline
The bottom line is that none of these pricing models is a silver bullet. They all have relative strengths and weaknesses. The best model is a function of the specifics of your project and how much visibility you have at the outset into those details.
One method we often recommend for new clients is to do an initial project on an hourly basis. This allows us to get a sense for what is required to complete the project. Then for subsequent projects, we will recommend converting to a fixed-fee model, or possibly a retainer relationship, once we have a better sense of the client’s needs.
Stay tuned for the next blog post in our three-part series on the different variables that influence pricing—no matter what model you use.
Until then, download our e-book, which provides a deeper dive on the things that financial marketers need to understand about the world of thought-leadership and content-marketing pricing.