All this talk of the commoditization of managed services has me thinking a lot about pricing and sales strategy lately.
On a recent member’s Q&A call for MSP Coach, one of the questions that was asked was:
“Wasn’t Everon largely responsible for the commoditization of managed services since they led the charge on putting pricing up on their site?”
Tough question! I guess our members don’t pull any punches.
My answer is NO.
While Everon was perhaps the first company to put our pricing up on our site like that, we did it because it clearly differentiated us in the marketplace, not because we wanted to come across as a cheap option. Everyone else was trying to position themselves as consultants, while we positioned Everon as a service. Big difference.
The fact that a lot of companies took our pricing and the exact features of our service plans and pasted them all over their own website did lead to some sort of pricing uniformity in the marketplace, but it didn’t cause commoditization.
So what did?
Well, first off, I don’t believe managed services are being commoditized. I think people complaining of commoditization are really just weaker competitors that aren’t doing anything creative to differentiate their services.
If the marketplace is being commoditized…and that’s a big if…it’s because most people don’t understand the variety of factors that influence a client to pay more for your services.
Clients are willing to pay more for your services.
How do I know? Because Everon is almost always the highest-priced proposal in any competitive situation that we enter. And we win a good deal of those opportunities.
So why will clients pay more? What are the factors that influence their decision? I believe that clients will pay more for managed services because:
- They believe you have specific knowledge or capabilities that will positively impact them. This could be experience in their vertical, knowledge of a specific application, or proprietary techniques and process. Either way, it makes it seem as if only you will do.
- They believe you are a safer choice. Nobody wants to be known as the screw-up that signed the contract that ended up bringing their network it its knees. If they think that by paying more they are getting less risk, they will do it almost every time.
- They believe you are easy to do business with. This has been one of our principles from day one. Let’s be easy to work with. That’s why we put our pricing on our site to begin with; it made us seem easy to understand and approachable when others were trying to be “consultative”. People put a lot of value on convenience.
- Other companies are working with you. This may seem like a repeat of #2, but it’s different. What I’m referring to is more of an issue of status. If other big players are working with you, many companies will choose to work with you just to be a part of the club – particularly if they are in the same industry.
- You have a better sales process. Let’s face it, most people in our industry are not that good at sales. If you bring a more professional process, delivery, and appearance to your sales game, many people will be won over regardless of the price. This is particularly true if you have a very likable salesperson; people like to do work with people they like.
If you focus on these factors, and constantly look for ways to incorporate them into your business, you will find that you are able to sell at higher prices and with greater ease.
MRC
