As soon as you launch your campaign, agencies will start contacting you. At some point, you’ll have to decide whether to say yes or no to these agencies.
It’s a big decision. A decision that can be worth tens of thousands of dollars. Unfortunately, there’s no clear right or wrong answer.
I’ll share a bit about our experience from our campaign.
Try it Yourself First, Before Hiring it Out
Through our pre-launch marketing, our Facebook Ads, and our press features, we got to $60,000 on our own. That’s when our campaign started to stall out.
We were still generating sales, but our Facebook Ads were no longer profitable. We were spending more money than we were making to bring in new customers. Although we still had sales coming in, our momentum was slowing down dramatically.
At this point, we had proven that people want to buy our product. We had generated press and interest. I think if this were a normal business, not a Kickstarter, we could have made it work. But given that we had just 1 month to make things work – every single day mattered. We eventually decided to hire a marketing agency.
Our Experience Working With an Agency
The agency helped us raise the next $100,000 or so. Their primary marketing channel was also Facebook Ads. They also managed our cross-promotions, press outreach, and emailed out to their internal email list.
Despite doing all kinds of marketing for us, 90%+ of the sales they generated came from Facebook ads.
The agency did definitely deliver on their promise to help us generate more sales. And, given the chance to do it again, we would choose to work with an agency again.
That said, working with an agency is expensive – which is why I generally recommend trying to do it yourself first. Focus on the pre-launch marketing, and come out of the gates swinging. Do your own pre-launch Facebook Ads, PR outreach, and marketing.
If you can get your marketing to a good ROI and good momentum, then don’t hire an agency. Do it yourself and save the 30%. But if you’re stalling out and are having trouble continuing to generate sales, like we were, then hire an agency to take things from there. If you do work with an agency, do it early – no later than Day 20.
Typical Costs and Fees
Most marketing agencies use a similar cost model. It’s a certain dollar amount upfront, plus a percentage of the campaign. So the breakdown might look something like this:
$5,000 upfront, 30.33% of campaign
– OR –
$3,5000 upfront, 33.33% of campaign
Certain agencies will also charge an extra $1,000 to $5,000 for PR services. Generally I wouldn’t recommend paying extra for PR; instead just put the budget into paid ads. See the “Getting PR” section for more details.
Who Pays for the Ads?
Most agencies will pay for the ads out of pocket. Some agencies charge a lower percentage, but ask you to pay for the ads. For example, they might only charge 18% of the campaign, but the ads come out of your pocket.
Other agencies only take a percentage of the sales they’re responsible for generating. Instead of taking a portion of the whole campaign, they tag specific links and only charge you for the sales generated from those links.
At the end of the day, the agency you choose depends on large part on your goals. Your goals might look like:
- To raise the largest amount of funds possible. Having a large number to display can help you get future investors, customers, and retailers. You may have to be willing to accept a lower margin. Most crowdfunding agencies that have the ability to raise a large campaign will take a percentage of your whole campaign. (Example: Funded Today, fee: $3,500 + $32% of total campaign.)
- To have a good profit margin. On the other hand, you might be OK with a lower total raise, but want to have a higher profit margin. You might instead opt for an agency that does not take a % of the entire campaign, but instead only charges for the sales they bring in. (Example: Backer Camp, $600 upfront, 12.5% of tracked sales, you pay for ad spend.)
These were the agencies we spoke to. I’d recommend emailing and/or Skyping each of them to get a sense for which is the best match for you.
An Inconvenient Truth
Here’s an inconvenient truth: agencies don’t work out most of the time. And they’ll still take your initial deposit.
Agencies typically ask you to put down a certain amount of money before they start marketing. This amount is somewhere between $1,500 and $5,000.
This becomes their test budget, so they’re not risking their own money to test your campaign. They’ll then test your campaign for 5 – 10 days, and come back and tell you if they were successful. If they failed, they still keep your money, including the unspent portion.
Although our campaign passed testing, I also know several campaign founders who didn’t pass. It’s very annoying to pay $3,500 to a company and have them come back a few days later, saying it didn’t work and they’re keeping your money.
Unfortunately, this is how this particular industry works right now. But it’s definitely something you should be aware of – even if you hire a marketing firm, until they confirm that your campaign is working out for them, it’s not a done deal.
How to Reduce Your Agency Fees by 30%
Most marketing agencies charge a percentage of the final campaign. For example, they charge 31.33% of your final campaign amount.
What many entrepreneurs don’t realize is that this campaign total includes the shipping paid by backers. The headline number you see on Kickstarter (such as “Campaign has raised $100,000”) includes shipping.
This is also the number that agencies like Funded Today will use to base their fee. In other words, on a $75 product + $25 shipping, for a total of $100, they will base their 31.33% fee on the $100 total. This brings their total fee to $31.33, or over 40% of your actual revenue.
This can virtually kill any chance of making a profit on your Kickstarter.
Instead, if you plan on working with an agency, I’d recommend not charging a shipping fee on your Kickstarter campaign. Move your shipping to post-pay instead. In other words, use a tool like BackerKit to calculate and charge shipping after your campaign ends. Just make sure to clearly publish your shipping rates on your Kickstarter page.
This way, your total fee to pay to agencies is calculated on your actual product rather than your product + shipping fees.
So, Should You Use a Kickstarter Marketing Agency?
Nobody likes paying extra money. And these marketing agencies are expensive. 30% of your campaign is nothing to sneeze at.
But, the honest truth is our campaign would not have been nearly as successful without our marketing agency. They accounted for approximately $100,000 of our campaign.
That said, I also know many campaigns that were successful without working with a marketing agency. So my recommend in general is to try to do it yourself first. Run your own Facebook Ads. If you can get it to convert profitably, then don’t work with a marketing agency.
We only turned to agencies after our own marketing efforts failed. And I think that’s a good approach. Also, if you can approach an agency after having a good amount of traction, you’ll get better terms. We approached Funded Today only after we already had $60,000 in funding, which gave us more leverage in the conversation to get better deal terms.
Haven’t Launched Yet?
It’s best to approach marketing agencies after you already have $10,000+ in funding. They’ll take you more seriously, and you’ll be able to get better deal terms.
To learn how to raise your first $50,000 without consultants – check out our Kickstarter course.