Three pricing models
Agencies charge in one of three ways, sometimes in combination. A flat retainer buys a bundle of hours and deliverables. A percentage of spend — commonly 10 to 20 percent — scales the fee with your budget. A hybrid sets a floor retainer and adds a percentage above a spend threshold.
All three are defensible. The problem is that only one of them is easy to compare across providers, and it is not the one most commonly used.
What the fee genuinely covers
Real work sits behind it: strategy, campaign build, creative production, ongoing optimization, reporting, and an account manager who answers the phone. At a good agency that is worth paying for, and the cheapest option in the market is often the most expensive once wasted media is counted.
What the fee should not cover is the coordination overhead of the agency itself — the internal status meetings, the handoffs between teams, the time spent assembling a report from six platforms. That is their inefficiency being billed as your service.
The percentage-of-spend problem
Percentage pricing has an awkward property: the fee rises with the budget even when the work does not. Doubling spend on a campaign that is already built and running is often an afternoon of work, not double the labor. Under percentage pricing it doubles the fee.
It also creates a quiet incentive against the recommendation you most need to hear, which is "spend less here."
Questions that get straight answers
Ask for the fee as a percentage of your total budget, all-in. Then work out your working media ratio: the share that actually buys ads. Ask what happens to the fee if your spend drops by half. Ask what is included when you want a new promotion live this week. Ask who does the work — the person in the room, or a team you will never meet.
Providers who price transparently answer these quickly. That responsiveness is itself the signal.