When a client is looking to create a new digital product, they can choose to either build an in-house team, hire and build a group of experts in the field to work full-time on the project, or they can hire an outside digital agency, like us.
If taking this route is something you’re interested in, then it would be good to understand the types of partnership models that are available when hiring an agency. There are 3 main models for digital agencies like ourselves:
Each model has its pros and cons, but it’s key for the correct model to be chosen for a successful client-agency partnership to create the best possible outcome for the project at hand.
Fixed-price model
A fixed-price model is the most common model that we see when shopping around, and it’s usually the most requested when we’re pitching to clients. Here’s how it usually goes – The clients sends a brief outlining specification and project goals to the agency, and then the agency returns an offer with a fixed price for the expected labour and materials. This will include the number of revisions allowed, rounds of feedback, project timeline and payment terms.
This type of pricing model for a digital product usually only works for short-term or small projects, and when a client knows exactly what they’re looking for in a final product. This is because when working out a fixed price for a completed product, an agency will need to figure out exactly how long it’ll take for each specification to be delivered. For a long-term project, it’s almost impossible to figure this out when the scope of a creative project is likely to change.
After initiation of the project, the agency will normally create a more comprehensive project brief that also includes business goals, a list of detailed deliverables, specifics on performance and functionality, comprehensive timeline, and project milestones. Once this is signed off, the agency will stick to this word for word and provide the completed product based solely on this document.
Pros
- The project cost is capped so there are no worries about things getting out of hand
- Everything is pre-agreed and the agency can just “get on with the work”
- Core needs for the project are focused on
Cons
- The exact product specified will be delivered, but a project scope will limit an agency from adjusting to create the best possible product – the client will be stuck with features that turn out to be non-essential
- The construction for a fixed-price model estimate is extensive and can take a long time if the project is big
- Project milestone reviews will be limited to only the project goals and deliverables
- Some agencies can overprice fixed-price projects to mitigate the risk of the scope altering from the research and design phases
Labour and materials model
The labour and materials model is the most straight-forward of the bunch. The client sends the project brief outlining specifications and project goals to the agency, and they agree to a working budget. Sometimes here, an agency can provide a working estimate which means they’ll be able to give an estimated cost for particular milestones or sprints of the project.
This pricing model works well for all types of projects, large or small, and is flexible enough when a client doesn’t know exactly what they want in their digital product. Once the project brief is agreed upon, work can commence right away and is paid in agreed intervals.
Because of the nature of the flexible workload in this model, it means that the brief can be readdressed at milestones in the project and the scope can be adjusted according to the results of the project deliverables. Essentially, an MVP (minimum viable product) can be created and tested as the project continues, and the results of the testing can be acted upon right away even if they don’t match with the original brief.
Pros
- The client pays for what they need and the agency gets paid for the work completed. Nothing more, nothing less
- It’s more efficient for product publication because delivery is made more frequently, meaning the MVP can be published and tested whilst the agency works, so the client can change the direction if it’s not working as intended
- If the client doesn’t like where things are heading, they don’t have to buy any more time
Cons
- It’s more hands-on for the client as it usually requires more regular contact and feedback
- Some deliverable items might take a little longer to complete if specialists need to be brought in for an updated scope
Retainer model
And finally the retainer model, which is the closest out of any model to employment without actually employing an actual in-house team. A budget or price is set for each month and the client has their own dedicated team/member in the agency that works for them according to the budget either full or part time.
This pricing model is usually better for longer-term and larger projects as the partnership itself is usually agreed for at least a few months. The idea here is to brief the agency with the general vision and goals of the project, and for them to work directly with the client on building the product, getting feedback at more regular intervals.
Just like the labour and materials model, because of the flexibility of the workload in this model, the brief can be readressed and scope adjusted based on the results of the work along the journey. As well as having access to a project specific team, a client will also get support for things outside the scope of the project if requested, including product support, training and consultation.
Pros
- Cheaper for the client than employing their own in-house team
- The client will get a dedicated team specific for their project
- Shares the benefits of both the fixed-price and labour and materials models
- The scope is flexible, so the project goals can adapt according to what’s working and what’s not
Cons
- It can still be a large commitment to make from the client if they choose a hands-on approach with the team
- If work needs to be halted for whatever reason, the agency will still need to be paid for the pay period they’re under contract
