Pricing models every email marketing agency should test

Key takeaways

• Test multiple models – Don't rely on one pricing method. The most profitable agencies use a mix of retainers for stability, project fees for specific work, and performance pricing to prove value.
• Protect your gross margin – Your pricing must cover all costs, including platform fees, software, and team time. Aim for a gross margin (the money left after direct costs) of 50-60%.
• Price for value, not hours – Move beyond hourly rates. Frame your fees around the business outcomes you deliver for clients, like increased revenue or customer retention.
• Structure retainers carefully – A good retainer defines clear deliverables, includes a buffer for revisions, and has a process for handling out-of-scope requests to prevent profit erosion.
• Track your metrics – Know your cost per campaign, team utilisation rate, and client lifetime value. This data is essential for setting profitable prices and choosing the right agency pricing structures.

What is an email marketing agency pricing strategy?

An email marketing agency pricing strategy is your plan for how you charge clients for your services. It's more than just picking a number. It's about choosing the right commercial model that makes your business profitable, aligns with the value you create, and fits how your clients want to buy.

For email marketing agencies, this is crucial. Your work combines creative design, technical setup, strategic planning, and ongoing analysis. A poor pricing strategy means you work hard but don't make good money. A great one turns your expertise into a sustainable, growing business.

Your strategy should answer key questions. How do you cover your costs for email platforms like Klaviyo or Mailchimp? How do you bill for a one-off campaign versus ongoing management? How do you share in the success you generate? Getting this right is your first step to better profits.

Why do most email marketing agencies get pricing wrong?

Most agencies start by copying what others charge or using simple hourly rates. This is a mistake. Hourly billing punishes you for getting efficient and fails to capture the true value of your strategic impact. You end up trading time for money with a hard ceiling on earnings.

Another common error is not accounting for all costs. An email marketing agency pricing strategy must include the direct costs of doing the work. This means email service provider (ESP) fees, design software, premium templates, and the time of your strategists and copywriters.

If you don't build these into your price, your gross margin (your profit after direct costs) disappears. For example, if you charge a client £3,000 but your ESP fees and team time cost £2,000, your gross margin is only 33%. That leaves very little to cover your overheads and actual profit.

Finally, many agencies are scared to charge what they're worth. They worry about losing a client to a cheaper competitor. But competing on price is a race to the bottom. The most successful agencies compete on results and value, which allows for stronger, more profitable agency pricing structures.

How should email marketing agencies structure retainers?

Retainers provide predictable monthly income in exchange for a defined scope of work. For an email marketing agency, a typical retainer might include a set number of campaigns, ongoing list management, performance reporting, and strategic consultation. The key is to define the deliverables clearly to avoid scope creep.

First, calculate your costs. Add up the monthly ESP cost for that client, the estimated hours for your team (strategy, design, copy, build), and a buffer for revisions (we suggest 15-20%). This gives you your cost base. Then, apply your target gross margin. If your costs are £2,000 and you want a 60% margin, you need to charge £5,000.

Your retainer agreement must have a clear process for "out of scope" work. What happens if the client suddenly wants five extra campaigns? Define how these requests are approved and billed, either at a pre-agreed project rate or an hourly fee. This protects your profitability.

Retainers are excellent for building long-term client relationships and stable cash flow. They form the backbone of a scalable email marketing agency pricing strategy. Specialist accountants for email marketing agencies can help you model retainer profitability and track it accurately.

When should you use project-based billing models?

Project-based billing models charge a fixed fee for a specific, one-off deliverable. For email marketing agencies, this is perfect for website integrations, one-off campaign builds, template designs, or marketing automation setup. The client pays a single price for a completed project.

To price a project profitably, you must scope it meticulously. List every task: discovery, strategy, copywriting, design, build, testing, and handover. Estimate the time for each and multiply by your blended team hourly rate. Then, add a contingency (at least 20%) for unexpected changes or complications.

The biggest risk with project-based billing models is underestimation. If you quote £5,000 but the work takes twice as long, your margin evaporates. Always get very specific about what's included (e.g., "three rounds of revisions") and what triggers additional charges before you start.

Projects are a great way to work with new clients or handle special requests from retainer clients. They can also be more profitable than hourly work if you're efficient. However, they don't provide the recurring revenue that makes an agency business stable and predictable.

What is performance pricing and does it work?

Performance pricing, or value-based pricing, ties your fee to the results you achieve. For an email marketing agency, this could mean a base retainer fee plus a bonus for hitting specific targets, like a percentage of sales generated from email or a fee per new subscriber acquired.

This model aligns your incentives perfectly with the client's goals. You succeed when they succeed. It demonstrates immense confidence in your ability to deliver. A common structure is a lower monthly management fee combined with a 5-10% commission on revenue driven directly from your email campaigns.

Performance pricing works best when you have clear tracking and attribution. You need to prove the revenue your work generated. It also requires a client who is open to a partnership model and has the systems to measure results accurately.

The debate between retainer vs performance pricing isn't about choosing one. Many top agencies blend them. They use a retainer to cover their core costs and effort, and add a performance element to share in the upside. This hybrid approach can be the most profitable and client-friendly model.

How do you calculate costs for a profitable pricing strategy?

You start by knowing your numbers inside out. For an email marketing agency, your direct costs include email platform fees (Klaviyo, Mailchimp, HubSpot), design software, any purchased templates or stock imagery, and the fully-loaded cost of your team's time (salary, benefits, taxes).

Calculate your blended hourly rate. Add up the total annual cost of your delivery team (salaries, employer taxes, pensions) and divide by the number of billable hours available in a year. If your team costs £150,000 and has 2,000 billable hours, your rate is £75 per hour. This is your minimum cost for time.

Then, add your software and platform costs per client. If a client needs a £300/month Klaviyo plan, that's a direct cost that must be included in your fee, either marked up or passed through transparently. Never absorb these costs in your service fee.

Finally, apply your target gross margin. Most healthy agencies aim for 50-60% gross margin. If your total direct costs for a service are £2,000 per month, charging £5,000 gives you a 60% margin (£3,000 gross profit). This margin pays for your rent, marketing, leadership, and leaves actual profit. Using a financial planning template can automate these calculations.

What metrics should you track to refine your pricing?

Track your gross margin by client and by service. This tells you which clients and which types of work (e.g., campaign builds vs. strategy) are most profitable. If your margin on a client is below 40%, you need to either increase prices or reduce the cost to serve them.

Monitor your team's utilisation rate. This is the percentage of their paid time spent on billable client work. A good target is 70-80%. If utilisation is too low, your costs are too high for your revenue. If it's consistently near 100%, your team is overworked and you're leaving money on the table by not hiring.

Calculate your client lifetime value (LTV) and client acquisition cost (CAC). If it costs you £2,000 in sales and marketing to win a client who pays £1,000 a month for 6 months, your LTV:CAC ratio is 3:1. A healthy agency aims for a ratio of 3:1 or better. This metric justifies investing in better clients.

Track average revenue per client. As you test new email marketing agency pricing strategies, this number should increase. It shows you're moving upmarket and capturing more value. Industry benchmarks, like those in the AI impact report for agencies, can provide useful context for your metrics.

How can you test new pricing models with existing clients?

Start with a conversation, not an invoice. When a retainer is up for renewal, schedule a review. Show the client the results you've achieved—increased open rates, revenue generated, subscribers grown. Then, propose a new structure that reflects that increased value.

For example, you could move from a simple monthly fee to a hybrid model. Propose keeping a core retainer for maintenance and reporting, but adding a performance bonus tied to a specific, agreed-upon metric like revenue from new product launches.

Another approach is to unbundle your services. Instead of one large retainer, offer tiered packages (Silver, Gold, Platinum). Each tier includes more campaigns, more strategic time, or more advanced automation. This lets clients choose their level of investment and often upsells them to a higher tier.

Testing is low-risk if you frame it as an evolution of your partnership. You can pilot a new performance element for one quarter. If it doesn't work for the client, you can revert. The goal is to find agency pricing structures that feel fair and exciting for both of you.

What are the biggest pricing mistakes to avoid?

Never compete on price alone. The client who chooses you because you're the cheapest will leave you for someone cheaper. Compete on your expertise, your results, and your strategic partnership. This allows you to maintain healthy margins.

Avoid hourly billing as your primary model. It caps your income and incentivises you to work slower, not smarter. Use hourly rates only for very small, undefined pieces of work or as a fallback for out-of-scope requests on retainers.

Don't forget to increase your prices. Costs rise every year (salaries, software). Your value increases with experience and results. If you never raise prices for existing clients, your margins get squeezed. A standard practice is a small annual increase of 5-10%.

Finally, don't go it alone. Your email marketing agency pricing strategy is a core commercial decision. Getting input from a specialist who understands your business model can save you from costly errors. It's one of the smartest investments you can make in your agency's future.