One of my recent posts led to a “comment conversation” about whether or not providing a really high level of service is necessary or the best way for a managed service provider to grow. See the post here.
Now, the obvious reaction to the question “Is providing a very high level of service better for your business?” is a resounding “Of course!”. In fact, I think most of you would choose a few expressions with a little bit more bite and possibly question my sanity for even asking the question!
The less obvious answer is “maybe”, and it makes the discussion of why a very important one.
The scenario that started this conversation in the first place is the following: while selling in the Denver area recently, we’ve been running into some small business packages offered by the big telecom companies that are competitive to some of our offerings. The packages are lower priced, but offer a much lower level of service, and they are selling like hotcakes!
Now, at Everon we pride ourselves on delivering remarkable service. It’s a part of our culture that people are allowed to do anything within reason to make a client happy, and we have a very high bar in terms of our minimum service expectations. So when I see the big telecoms selling what I would normally consider “junk” services so successfully, it makes a young CEO stop and say “hmmmmmmm”.
Now, the easy way out is for me to say “those big companies suck at service, which is why we are going to crush them”. But the reality is those big companies are big for a reason (many reasons actually), and their “junk” services have a lot do to with that.
Let me explain my theory here:
- In order to be big, you must be able to sell like crazy
- In order to sell like crazy, you must have very standardized offerings and delivery processes
- In order to have very standardized offerings and delivery processes, you very intentionally must avoid being all things to all people
- When you stop trying to be all things to all people, a lot of people start saying you “suck”
So, the reality is that in order to get big you must:
- Offer a very standardized offering to the masses at a low enough cost/value ratio that people will put up with it not being customized for them and largely ignore the things that “suck” (or at least not switch services)
- Offer a customized service at a cost/value ratio that gives you fat margins so you can afford to have non-standardized offerings and delivery systems
Examples of these scenarios in the marketplace are easy to find. Everyone in our industry loves to gripe about Dell’s support, but they have a model that works and has allowed them to grow an enormously successful company. On the other hand, Nordstrom is known for letting you return stuff you didn’t even buy at their store, but they have fantastic margins on what they sell and can afford this level of hand-holding. They are not nearly as big as Dell, but very successful with their model.
Now, I know that for many of you the objective isn’t necessarily to grow big. I get it, but the lessons here are still very important to understand.
I get asked fairly often by people in our industry to try to identify the secret to Everon’s success. I would have to put in the top three of that list the fact that we are very disciplined about sticking to our standardized offerings and standardized delivery processes. If someone wants something custom, we determine that they aren’t the “right” customer for us and we move on. That has made a world of difference in how we are able to sell and operate. It’s not easy, and sometimes not fun, but it works.
I can tell you one thing for sure. If you are a managed service provider in the SMB space, offering really customized services and a high level of hand-holding will not allow you to grow a big business. Why? Because SMB’s can’t pay enough to justify the extra operating expense you’ll have to deliver this level of service.
Don’t believe me?
Ask yourself why there are only a handful of companies in our space doing greater than $20 million in service sales. The truth is that most people in our industry bend over backwards for their clients, and don’t get paid enough in return to build a viable business. Needy customers will suck a person with a great service personality dry, leaving him with nothing to reinvest in his company.
So how do you get beyond this in your business? Very carefully!
I’m not suggesting that you start delivering a poor level of service to your clients! I am suggesting the following:
- Choose your clients VERY carefully. Look for clients that are willing to standardize and don’t need custom everything.
- Aggressively pursue the development of very “productized”, automated services such as hosting, SaaS delivery, back up services, etc.
If you do those two things very consciously, you will start to build up a client base that is made up of smaller revenue accounts that are much easier to deliver and have much higher margins.
I’m sure this idea will cause another round of debate - I look forward to your comments.
MRC
