Hourly Rates for Fractional CMO Services
Fractional CMO Hourly Rate and Fees Structure
The average hourly rate for a Fractional CMO varies significantly because of how many service providers claim to offer Fractional CMO services. You should first determine if you are paying for the services of an actual marketing executive. Many claim to be Fractional CMOs although they do not have actual experience as a Chief Marketing Officer or Marketing VP. A truly experienced CMO will cost more than self-proclaimed Fractional CMO.
Fractional CMO has become an extremely popular buzzword in the business world. It generates over 1,000 keyword searches on Google every month. The popularity of “Fractional CMO” has resulted in a number of organizations claiming to offer Fractional CMO services. Advertising agencies, marketing consultants, digital marketing firms, professors, and even staffing firms now claim to be Fractional CMOs. Unfortunately, there is no standard or certification required for earning the title of Chief Marketing Officer (CMO). Which creates confusion and begs the question “What is a Fractional CMO?“
Are You Paying a Qualified Fractional CMO
There are three factors that we suggest considering when looking for a Fractional CMO
1. Experience – A high-caliber CMO will have held the position of Chief Marketing Officer (CMO) or Vice President of Marketing in a large company or Fortune 500 corporation. If your business is under $100 million in revenue, you may want to consider someone with experience as a Vice President of Marketing in a mid-market company.
2. Education – We recommend a Master’s Degree, preferably MBA, or Masters of Marketing.
3. Results – The right Fractional CMO for your needs should have measurable results to exemplify their skills and abilities.
The issue is that many of these “Fractional CMO” service providers do not have actual experience in developing and executing marketing plans, growth strategies, executive management, or department development. Furthermore, most lack the big-picture perspective and knowledge of Geo-Economical and political factors that are critical in today’s digitally connected and highly volatile global marketplace.
These factors should be considered when asking, What is the average Fractional CMO Hourly Rate?
Focus on ROI for the True Cost of a Fractional CMO
The demand for Fractional CMOs has grown significantly over the past five years or so, following suit with the demand for other outsourced executives, such as CFO’s and CIO’s. This Outsourced CxO aka Executive-as-a-Service model has offered a financial advantage for many organizations. It provides the most valuable benefits of a CxO without the burden of traditional employment costs, including benefits, paid time-off, bonuses, dedicated work space, etc.
However, the Fractional Chief Marketing Officer (CMO) is the only Executive-as-a-Service that generates revenue, essentially making the Fractional CMO an investment, rather than an expense. Many organizations fail to realize that the hourly rate for a fractional CMO is less important than the revenue growth a Fractional CMO should generate. In other words, the cost of a Fractional CMO should be a small portion of the revenue growth they generate for your business.
Therefore, a Fractional CMO is not someone you want doing your day-to-day marketing activities. They are not who should be creating content such as blogs, social media posts, and videos. They should not be the ones creating advertisements or designing graphics. These functions are not worth the rate a true CMO charges, and if the CMO is focused on these activities, then they are not providing your business with the strategic and leadership skills a true CMO offers. The skills that strengthen your brand, create demand for your products and services, improve profit margins, and generate substantial growth. These are results that generate a return on marketing investment.
Return on Marketing Investment (RoMI)
Retaining a Fraction CMO is an investment, at least for a highly qualified CMO. Just as with any other investment, it should be measured by Return on Investment (ROI). We view Return on Marketing Investment (RoMI) as a primary KPI for the analytics that we report to our clients. RoMI analyzes marketing expenses and measures them against revenue growth during the same period. This single metric provides a summary of the financial return generated by the Fractional CMO.
The true cost is not determined by the Fractional CMO Hourly Rate, it should be measured as a percentage of the Return on Marketing Investment (RoMI) generated by the CMO. Actual CMOs do not quote hourly rates, they provide a set fee based on the Scope of Work.
How Much Does a Fractional CMO Cost?
Instead of asking the Fractional CMO’s hourly rate, the better question is “How much does a Fractional CMO cost?“
While an hourly rate is common for outsourced work, it is best suited for simple services or unique projects. As the complexity and depth of the service offering increase, so does the variance between estimated billable hours and actual total fees. Experienced and knowledgeable Fractional CMOs will be able to provide a thorough proposal that provides a flat fee structure and clearly defines the scope of work. These fractional cmo packages provide a great example.
Hourly fees are often an indicator of an amateur. Quoting projects by an hourly fee is often an indication that the service provider lacks the experience to accurately gauge the entire scope of work. They do not actually know what exactly is needed to achieve the client’s goals, therefore they cannot calculate the cost of delivering Fractional CMO services.
We have all been surprised by a repair person’s invoice after a service call. Although an hourly fee is quoted, there are additional charges, such as drive time, supplies, materials, and more. Resulting in a total cost that can be significantly greater than the hourly fee quoted. Hence the difference between price and cost. When applied in consideration of retaining a Fractional CMO, there are significant factors that impact the overall cost. These factors are both direct and indirect, including opportunity cost.
Opportunity Cost of Poor Fractional CMO Service
The world of business moves at hyperspeed, that includes opportunities. If there is one thing history has taught us, it is that markets are cyclical, and economic downturns are inevitable. That is why identifying opportunities and making the most of them, while they last, is crucial.
When an organization is seeking a Fractional CMO, it is more than likely planning on making significant changes in its growth and marketing strategies. The wrong choice could go unnoticed, and the cost could be devistating. There are two scenarios in which a business owner may not realize the cost incurred by choosing a low price Fractional CMO:
1. Completely missing an opportunity
2. Failing to make the most of an opportunity
To help understand the true cost of each scenario, we will provide examples using the following hypothetical data,
- A company has annual revenues of $20 million
- The current annual growth rate for the industry is 8%
- The Fractional CMO chosen bills at $100 an hour for 40 hours a month
Example 1: The Fractional CMO fails to identify an opportunity to take existing products into a new market segment, that segment is estimated to generate 3% additional growth for the business. The result is a loss $600,000 in potential revenues. ($20MM x 3%).
Example 2: The Fractional CMO was able to achieve 3.5% growth for the year. At first sight, choosing the lower cost Fractional CMO looks like a good investment. That CMO cost $48,000 (40hrs x $100/hr x 12 months) annually and generated $700,000 ($20MM x 3.5%) in additional revenues. Resulting in a total net revenue increase $652,000.
However, given that the industry growth rate is 8%, the reality is that the CMO failed to capture $900,000 in new revenues by not achieving the industry growth rate. (8% – 3.5%) = 4.5% x $2oMM = $900,000.
Had the company hired a Fractional CMO with actual marketing executive experience, at a rate of $300/hr that CMO would cost the company $144,000 for the year. Lets assume that CMO was only able to achieve 6% growth for the year, not the 8% industry growth rate.
The experienced Fractional CMO would have generated $1.2MM in additional annual revenues. The total net revenue increase, including the higher hourly rate, would be $1,056,000.
The reality is that an experienced CMO will generate a significantly higher growth rate because they have the experience and expertise needed to develop comprehensive, multi channel marketing programs that yield greater results. An alleged Fractional CMO that is an expert at 2 or 3 tactics, may generate some revenue growth, while incurring a high opportunity cost.
Fractional CMO Fee Structure, Not Hourly Rate
Every organization is unique, each has its own goals, challenges, and resources. These factors directly impact the scope of the a Fractional CMO engagement and fee structure. The most common are a per project fee, and a recurring monthly fee. Rarely does a highly-experienced, executive-caliber Fractional CMO quote an hourly rate.
In most cases, experienced CMO’s will be able to gauge what is needed to complete a project and achieve the desired goal(s). An experienced Fractional CMO should be able to accurately asses their cost and provide a quote for the project, rather than charge hourly. This is advantageous to the client because it sets clear expectations and enables accurate budgeting. Paying an hourly rate for a service often leads to surprises.
There is not a set standard for a Fractional CMOs hourly rate. The rates vary by firm. This creates a challenge in determining the quality of service that firm will provide.
Below is a table that is intended ONLY to provide a general gauge for a Fractional CMOs Average Hourly Rate. The range for an actual Fractional CMOs hourly rate is between two hundred dollars an hour on the low end and up to six hundred dollars for a seasoned expert with years of experience in large or public corporations.
• Fractional CMO with experience leading a very large or public corporation approximately $400 to $600 per hour
• Fractional CMO with experience leading a SMB ($20 to $200 million) approximately $200 to $350 an hour
• Other service providers claiming to be Fractional CMOs, approximately $75 to $150 per hour
If you have any questions or would like further clarification on What a Fractional CMO costs or what exactly a Fractional CMO does?
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