Three proposals on the desk. One says 15% of ad spend. One says $2,500 a month, flat, six-month term. The third says no retainer at all, just $65 for every lead they send you.
They look impossible to compare, and that's partly by design.
Short answer first. Marketing agencies charge in five main ways: a monthly retainer (a flat fee for ongoing work), a percentage of ad spend (usually somewhere between 6% and 20% of what you pay Google or Meta), pay per lead, performance or revenue share, and project fees for one-time work like a website or an account build. Most local businesses land on a retainer or a percentage of spend. Which is fair for you comes down to how much you spend on ads and how cleanly your business can count a lead.
We'll go model by model, including what each one quietly nudges the agency to do (they all nudge), how the math shifts as budgets grow, what tends to be billed extra, and the contract terms we'd push back on. We won't quote our own prices here. We'd rather you be able to pick up any proposal from any agency in The Woodlands or Houston and know what you're actually buying.
Marketing agency pricing models at a glance
Start with the whole menu. The ranges below come from two published surveys of agencies plus what we see in proposals that local owners forward to us, and we've labeled which is which.
| Model | How you're billed | Agency is rewarded for | Main risk to you | Usually fits |
|---|---|---|---|---|
| Monthly retainer | Flat fee each month for a defined scope | Keeping you as a client | Paying the same for less effort over time | Most local businesses with steady budgets |
| Percentage of ad spend | Commonly 6% to 20% of media, often with a monthly minimum | Your budget going up | Advice to spend more instead of spend better | Larger or fast-scaling ad budgets |
| Pay per lead | A set price per form fill or call | Lead volume | Junk, duplicate or shared leads | Testing a new market or service line |
| Performance / revenue share | Percent of sales, or a base plus a bonus | Closed revenue (as they can measure it) | Attribution fights; high-ticket bias | Businesses with clean sales data in a CRM |
| Project fee | One price for a scoped deliverable | Finishing on scope | Change orders; nobody owns results after launch | Websites, account builds, branding |
How common is each? The best-sized dataset we found is Lunio’s 2021 PPC agency pricing survey, with 883 responses. It found 35% of agencies charge a fixed retainer regardless of spend, 21% charge a percentage of ad spend, and only 4% use performance-based pricing. Grain of salt, though. The survey is from 2021, and a big share of respondents were in the UK, where rates run lower.
A smaller, newer dataset is SE Ranking’s 2023 agency pricing survey. It polled only 135 agencies (the authors say that's too few for statistical significance), but it breaks out the US and Canada: a median monthly retainer of $1,863, a median project of $3,625 and a median hourly rate of $112. Nearly half of the US and Canadian agencies (47.9%) priced on a monthly retainer only.
Is a marketing retainer worth it?
A retainer is a flat monthly fee for an agreed scope: say, managing Google Ads and Meta, a monthly report and a call, and up to a set number of ad creatives. You know exactly what you'll pay, and so does the agency. That predictability is the main reason it's the most common model.
The incentive problem is quiet. Once the fee is locked, the agency earns the most by keeping you happy with the least hours. In month two, someone is in your account every few days. By month fourteen, a junior account manager might log in on Thursday afternoons. Nothing in the price changes, so nothing forces the effort to stay up.
So a retainer earns its keep when the scope is written down in deliverables you can check (how often search terms get reviewed, how many new ads go up each month, what the report contains) and when you can see the work yourself, because you own the ad accounts and can open the change history any time you like.
The fee also has to make sense next to your media budget. Small budgets get hurt here. A $1,500 flat fee on $3,000 of monthly ad spend means half again on top of every dollar you give Google. On $20,000 of spend, the same fee is 7.5%. Neither number is wrong by itself, but at small budgets you should ask whether the retainer covers more than the ads (SEO, your Business Profile, landing pages) or whether a lighter setup would do.
Our rule of thumb is blunt. If the management fee is more than the ad budget, the plan is upside down unless there's a lot of non-ad work in it.
Percentage of ad spend agency fees: the math at $3k vs $30k
Percentage pricing is simple to explain and scales automatically. Spend more, pay more. Lunio found most agencies on this model charge between 6% and 10% of spend, and you'll see 15% to 20% from agencies that work with smaller local accounts, usually with a monthly minimum attached.
Watch what a 15% fee does at two very different budgets.
| Monthly ad spend | 15% fee | Flat $1,500 fee | Flat fee as % of spend |
|---|---|---|---|
| $3,000 | $450 | $1,500 | 50% |
| $10,000 | $1,500 | $1,500 | 15% |
| $30,000 | $4,500 | $1,500 | 5% |
At $3,000, 15% is only $450 a month. Very few agencies will manage an account properly for that, which is why percentage contracts almost always carry a floor ("15% of spend or $1,000, whichever is greater"). Read the floor before you read the percentage. On a small budget, the floor is your real price.
At $30,000, the same 15% is $4,500 a month. Does a $30,000 account take ten times the work of a $3,000 account? Somewhat more, sure. Nowhere near ten times. So bigger advertisers push for tiers (say 15% on the first $10,000, then 10%, then 7%) or a flat fee.
The conflict is obvious once you see it. If the agency's income rises when your budget rises, then "you should spend more" is always slightly self-serving advice. Sometimes it's correct. A Spring HVAC company that runs out of budget at 11 a.m. every weekday in July is leaving calls on the table. You just want that recommendation backed by impression share lost to budget and cost per booked job rather than a hunch.
On any percentage deal, ask whether the fee is figured on actual spend or on the budget you approved (actual is fairer). Ask which platforms count: Google Ads, Meta, Local Services Ads, Microsoft. LSA needs very little management, so 15% of it is a lot of money for not much work. And if any media is billed through the agency, find out whether there's a markup on top of the fee. If they pay Google and invoice you, ask to see the Google invoice.
Pay per lead marketing agencies: what you're really buying
Pay per lead sounds like the agency finally has skin in the game. No leads, no bill. For some businesses it's genuinely fine. For most, the fine print decides if it's a good deal or a slow leak.
Start with how the contract defines a lead. Is it any form fill? A call of any length? A call over 60 seconds? Does a second form from the same person count again? What about the caller who wanted a job, or the one selling SEO? If the contract says "a lead is a submitted form or a phone call," you will pay for spam and wrong numbers.
Ownership is the other trap. Plenty of pay-per-lead outfits run the ads in their own account, send traffic to their own landing page and route calls through their own tracking number. Stop paying, and the phone number, the page and every bit of data walk out the door with them. Some sell the same lead to two or three companies in your area. (If you've used Angi or Thumbtack, you already know how that feels; we compared them in Angi vs Thumbtack leads.)
Run the numbers against doing it yourself. Say an agency charges $75 per lead and you buy 40 a month: $3,000. If your own Google Ads account produces leads at $50 including management, you're paying a $1,000-a-month premium for not owning the asset. If it produces them at $110, the per-lead deal is cheaper, at least until they raise the price.
We think pay per lead earns a spot when you're testing a new service line or a new part of town before committing, or when you truly can't carry a fixed cost right now. Insist on exclusive leads, a written lead definition, a dispute window (credits for spam and duplicates within a set number of days), and recordings of the calls.
Performance-based and revenue-share pricing
Paying a slice of revenue sounds like perfect alignment. In practice it's rare for local service businesses, and the surveys agree: 4% of the agencies in the same Lunio survey priced on performance, and in SE Ranking’s survey only 6% used performance pricing, always alongside another model.
It's rare because a revenue share only works if both sides trust the revenue number. The agency needs access to your CRM or invoicing, every lead has to be tagged by source, and you need an agreement on what counts. Is a repeat customer who first found you through an ad two years ago "theirs"? What about the homeowner who saw a Meta ad, then searched your name on Google, then called from your truck wrap? Each answer moves money.
There's also a selection bias. An agency paid on revenue will chase whatever closes biggest and fastest. If you're a remodeler, that might mean full kitchen jobs in Creekside Park while the bathroom refreshes that keep your crews busy get starved.
What we've seen hold up is a hybrid. A smaller base retainer covers the real labor, and a bonus rides on a number you can both see without arguing, like booked appointments in your scheduling software or cost per booked job under a target. Nobody has to audit anybody.
Project fees, setup fees and minimum terms
Project pricing covers work with a clear finish line: a website, a brand identity, a Google Ads account build, a landing page set. SE Ranking's US and Canada median of $3,625 per project is a reasonable midpoint for small jobs. Websites run far wider; we covered that in what a website costs in The Woodlands.
Setup fees are the hybrid between a project and a retainer. They're normal, and they're fair when the setup produces something you keep. A good setup fee should buy you:
- Conversion tracking installed and tested (calls, forms, bookings), with the right actions set as primary goals.
- Call tracking numbers assigned to each channel.
- Campaigns built from scratch or rebuilt, with negative keyword lists and location settings documented.
- A written account map you could hand to the next agency.
If a setup fee buys "onboarding" and nothing on that list, ask what it pays for.
Minimum terms are where owners feel trapped. Three months is reasonable for paid ads, because the first few weeks go to learning and the algorithm needs data. SEO commonly runs six, since it takes longer to show anything (see how long SEO takes). Twelve months for a small local account? We wouldn't sign it.
Then check what happens when the term ends. Month-to-month with 30 days' notice is friendly. Automatic renewal for another full term is not.
What's normally included and what costs extra
Two proposals with the same monthly price can contain very different work. This is the table we'd use to line them up.
| Item | Usually included in management | Often billed extra | What to ask |
|---|---|---|---|
| Ad spend | No, paid to Google or Meta | Sometimes marked up if billed through the agency | Is media billed straight to my card? |
| Campaign management | Yes | Extra platforms (Microsoft, TikTok, LSA) | Which platforms are in the fee? |
| Ad creative | Text ads, a few static images | Video, photo shoots, motion graphics | How many new creatives per month? |
| Landing pages | Small edits, sometimes one page | New page builds, A/B testing tools | Who owns the pages if we part ways? |
| Call tracking and software | Varies widely | Tracking numbers, reporting dashboards, SEO tools | Whose name are the tool accounts in? |
| Reporting | Monthly report | Custom dashboards, extra meetings | Does the report show leads and cost per lead? |
| SEO / Business Profile | Rarely, unless sold together | Monthly SEO retainer | Is any organic work in scope? |
Pay particular attention to the tools row. A call tracking account or reporting dashboard set up under the agency's name can be a hostage when you leave, because the phone numbers printed on your trucks and in your Google Business Profile belong to whoever owns that account. We wrote a whole piece on who owns your Google Ads account when you switch agencies; the same thinking applies here.
For the bigger budget picture (what to spend on ads versus management versus SEO), see what digital marketing costs in The Woodlands and Houston and, for Google Ads specifically, Google Ads management cost in Houston.
Contract red flags we'd push back on
Most agency contracts are fine. A few clauses show up often enough that we'd read for them specifically.
Some of these aren't just our opinion. Google’s guide for advertisers working with third parties says that, at a minimum, you have the right to know the clicks, impressions and total cost of your Google ads, that a partner must set up a separate Ads account for you, and that nobody can guarantee a specific ad position on Google. It also tells advertisers to understand the total cost of advertising including the partner's fees, and to get the agreement in writing.
Two more that aren't on Google's list. Watch for termination fees that equal the remaining months of the term, and for language that makes the agency's ad copy, landing pages or audiences their "intellectual property." You paid for them. You should be able to keep them.
One softer flag is a proposal that leads with the price and buries the scope. If you can't tell what someone will do each week, you can't tell whether the price is fair.
Which pricing model fits you? A quick decision tool
Use this in order. Stop at the first step that clearly applies.
| Your situation | Model we'd lean toward | Why |
|---|---|---|
| Under about $3,000/month in ads, one location | Flat retainer with a narrow scope, or DIY with a periodic audit | Percentage minimums eat small budgets |
| $5,000 to $20,000/month, steady | Flat retainer or tiered percentage | Predictable; fee stays a sane share of spend |
| $20,000+/month or scaling fast | Tiered percentage or flat fee with a review every six months | Straight percentage overpays at the top end |
| Testing a new service or area | Pay per lead with exclusive leads, short term | Low commitment while you learn |
| Clean CRM data, clear revenue per job | Base retainer plus a performance bonus | Alignment without monthly arguments |
| Need a website or account rebuild first | Project fee, then decide on ongoing work | Separates the build from the results |
Whatever model you choose, the questions in our list of questions before hiring a marketing agency still apply. And if you're unsure whether you need an agency at all, DIY vs hiring an agency lays out the trade.
If you do one thing this week, pull your last three agency invoices and your last three months of spend from Google Ads and Meta. Add them up. Divide by the number of booked jobs in your scheduling software (booked jobs, not leads). Judge every pricing model against that cost per booked job, ours included.
If you'd like an outside read first, our free Ad Spend Leak Check is a 10-minute video of your Google or Meta account showing where budget is leaking, in your inbox within 48 hours, so you can judge what any agency (including us) would actually be fixing. You can also see how we run Google Ads management.
Frequently asked questions
What percentage of ad spend do marketing agencies charge?
Most agencies that price this way charge somewhere between 6% and 20% of monthly ad spend. Lunio's 2021 survey of PPC agencies found 6% to 10% was most common, while agencies serving smaller local accounts often charge 15% to 20% with a monthly minimum. On small budgets, the minimum is usually the real price, so read it first.
Is a marketing retainer worth it for a small business?
It can be, if the scope is written as checkable deliverables, you own the ad accounts and can see the work, and the fee is reasonable next to your ad budget. A retainer larger than your monthly ad spend only makes sense if it also covers non-ad work such as SEO, your Google Business Profile or landing pages.
Is pay per lead better than a monthly retainer?
Only if the lead definition is tight and the leads are exclusive to you. Pay per lead shifts risk to the agency, but many providers keep the ad account, landing page and tracking number, so you own nothing when you stop. Compare the price per lead with what your own account produces, including management, before choosing it.
What is a normal minimum contract length for a marketing agency?
Three months is common and reasonable for paid ads, since campaigns need a few weeks of data. Six months is typical for SEO. We'd be cautious about twelve-month terms for a small local account, and about auto-renewal for another full term. Month-to-month with 30 days' notice after the first term is the friendliest version.
Should an agency charge a setup fee?
A setup fee is normal when it buys something you keep: tested conversion tracking, call tracking by channel, rebuilt campaigns with documented settings, and an account map. If the fee only covers onboarding meetings, ask what it pays for. Either way, the accounts and tracking set up with that fee should be in your name.
Sean Melton is the founder of First Byte, a digital marketing agency in The Woodlands, TX. A former global CMO of a $250M software company, he has spent his career inside the businesses he markets. His team runs paid social, search, CTV and creative for brands like Equinox, Kroger and Viceroy, and shares what works here.