It's no secret that your online presence is an important factor in reaching your annual goals, from reaching and engaging with new leads to establishing long-standing customer relationships. So, investing in your digital ecosystem should be a no-brainer.
When partnering with a development agency to either create a new website or maintain an existing one, they might offer a variety of pricing options, including an hourly rate or a monthly retainer. So, which pricing model makes sense for your business? In this blog, we cover the pluses and minuses of both so you can determine what's right for you
How Does A Retainer Work?
A Retainer Pricing Model, a favorite among our customers, is an ongoing agreement between a client and an agency where the client pays a fixed recurring fee (usually monthly or quarterly) in exchange for a certain amount of services or resources within that period of time. These arrangements typically last 6 months to a year, depending on the needs of the client and the agency's policies.
Retainer Pricing Model Benefits
1. Cost Predictability
With a retainer agreement, you establish a fixed annual budget with incremental payments for web development services. This predictability makes it easier to manage your finances and plan for future projects.
2. Priority & Guaranteed Support
Retainer clients often receive priority treatment. This means that when urgent issues arise or you need quick updates to your website, your web development team is readily available to address your needs. Plus, retainer-based support encourages service providers to take a proactive approach to address issues and improve your project continually.
3. Task Flexibility
Retainer agreements often provide more flexibility in terms of the scope of work and the services offered. Meaning if an unforeseen 911 task falls in your lap, retainers allow for easier pivots to get the work done right when you need it.
4. Long-term Relationship
Retainer agreements encourage a long-term partnership between your business and the web development agency. This can lead to a deeper understanding of your brand and goals, resulting in more tailored solutions.
5. Discounted Rates
Since you're paying for a set amount of resources each cycle, agencies will often provide discounted hourly rates or waived fees to their customers. So if you are hoping to make continued updates to your website or portal, the retainer model could prove to be a cost-saving option in the long run.
Retainer Pricing Model Obstacles
1. Unused Hours
Retainers are usually structured with a ‘use it or lose it’ mentality, meaning hours do not roll over from cycle to cycle. Therefore, in cycles with lighter development needs, you might find yourself paying for unused hours, which could feel like wasted money.
2. Resource Allocation Limitations
Likewise, there might be instances where your development needs require more resources than your retainer allows for. This may result in needing to push off priorities until the next cycle or paying more to accommodate those needs.
Pro Tip: To avoid this happening to you and to ensure that all hours are planned for, make sure that any digital agency you work with assigns you an effective and proactive Project Manager.
3. Contractual Obligations
Retainer agreements often involve a long-term contract with automatic renewals. This might not be suitable for businesses with limited budgets or those looking for a one-time project.
What Is An Hourly Rate?
In an Hourly Rate Pricing Model, development agencies charge clients based on the amount of time spent on a particular project or task. In this model, the agency specifies an hourly rate, which is the amount the client pays for each hour of work performed. These types of agreements are often used when you have a predefined Scope of Work and estimated budget or when the clients prefer to pay for services as they are requested.
Hourly Pricing Model Benefits
1. Variable Engagement
Hourly engagements offer the flexibility to engage with the web development agency on an as-needed basis, making them particularly beneficial for projects with fluctuating workloads or when you require specialized tasks periodically, such as occasional technical support, graphic design work, or troubleshooting specific issues.
2. No Long-Term Commitment
Hourly arrangements are usually devoid of long-term contracts. For businesses looking to test the waters or gradually scale their project, hourly billing is ideal. You can start with a smaller commitment, evaluate the results, and then expand the engagement if needed. This approach minimizes initial financial risk.
3. Transparent Billing
Hourly pricing provides a clear breakdown of where your money goes. You can see exactly how many hours were spent on different aspects of your project, promoting transparency. Plus, you only pay for the actual time spent on development, which can be cost-effective for shorter-term or one-time projects
4. Task and Scope Oriented
Hourly engagements are generally more task-focused. This can be advantageous when you have specific, well-defined projects in mind. Service providers under hourly arrangements often concentrate on completing these tasks efficiently and within the agreed-upon time frame.
5. Schedule Flexibility
As you are not committed to a specific time frame, you are able to start, pause or stop the clock on tasks and projects as your schedule dictates and needs arise. This gives you the ability to turn your attention to other aspects of your digital landscape if needed.
Hourly Pricing Model Obstacles
1. Cost Variability
The main drawback of hourly pricing is its cost variability. It can be challenging to predict the final cost of a project, and it might exceed your budget if the development process encounters unexpected challenges.
2. No Guaranteed Availability
Since hourly clients are not on a retainer, their projects may not receive the same level of priority. This could lead to delays in getting your project completed, especially during peak periods.
3. Limited Scope
Hourly pricing may incentivize web development agencies to complete tasks quickly to maximize billable hours, potentially sacrificing the thoroughness and quality of the work.
Which Model Should You Choose?
The decision between retainer and hourly pricing ultimately depends on your specific business needs and circumstances.
- Choose a Retainer: If you have ongoing web development needs, prefer predictable costs, and value a close, long-term relationship with your development team. Retainers work well for businesses seeking to continually improve and expand their online presence.
- Choose Hourly Billing: If your project is short-term, doesn't require a long-term commitment, and has fluctuating requirements. Hourly pricing can be more cost-effective for one-time projects or smaller businesses with limited budgets.
Both retainer and hourly pricing models have their advantages and disadvantages. The key is to align your choice with your business goals, budget, and the nature of your web development needs. While most of our clients prefer to work with us in a retainer format, we do understand the importance of finding the right pricing structure for your unique circumstances.
We work closely with our clients to tailor solutions that best suit their objectives, ensuring high-quality web development services that drive success in the digital world. If you're unsure which model is right for you, don't hesitate to reach out to us for a consultation. We're here to help you make the best choice for your business.