When was the last time a client told you that price is no object? Chances are the answer is never. SMBs have to be tight with a dollar, and they know that your MSP competitors are reaching out, offering to undercut your prices.
Hence, competing purely on price is a dangerous game, one that can quickly spiral downward, out of control, if that is your only differentiator.
Paul Farr, EVP Marketing and Business Development at Kaseya, has been in the software business for some three decades and has a few ideas to help you avoid being dragged into the price competition mud. At the recent Kaseya Connect 2018 he took to the stage with COO, Taylor Business Group (TBG) Michael France, who counsels MSPs on protecting value-based pricing and adopting metrics to measure the results.
With the growth of the MSP space, there are more service providers than ever knocking on doors. Farr refers to this landscape as an “IT Bazaar” because there is so much noise and confusion in the market with which clients must grapple. This means that almost all MSP deals are competitive, and there is no standard pricing – every deal is custom.
Buyers can use the fact that there are multiple sellers to grind down prices. “Whatever you charge – someone else will represent that they can do it better and for less,” Farr argued. Unfortunately, most clients fixate on price and do not understand “real” value. Meanwhile Farr sees an erosion in the endpoint management business, long the MSP’s bread and butter, making that segment particularly price sensitive.
Overcome Objection with a Highly Tuned Sales Engine
The good news is that smart MSPs can increase their monthly recurring revenue (MRR) even in this brutal pricing environment. First, you must decide which pricing model is optimal for you and compelling for your clients. Unfortunately, however, these sales models, whether per-device, per-user, or a hybrid, are also sowing confusion in the market as SMBs are confronted with multiple choices.
Smaller MSPs tend to promote per-device pricing, and midrange and larger service providers tend to charge per-user or a hybrid of per-device and per-user pricing.
No matter your pricing model, price objections manifest themselves as a single problem – “your cost is too high.” Customers have all kinds of reasons to feel this way, after all, it is natural to want to save money. As a service provider, however, you should dig deeper to understand the root cause. Only then can you attempt to create an answer to price objections.
Avoiding Service Commoditization
Service commoditization is where the buyer can’t differentiate between what you are selling and what your lower-priced competitor is selling. To them, it is all the same, unless you clearly and compellingly explain the difference. Some MSPs fall into the “Buyers Trap” where, desperate to get the deal, they charge less than they should, and offer more.
This could be either a product management problem, meaning your service does not really have any differentiation, or a sales training problem, where your reps cannot articulate the distinction and value of your solution.
The Three Stages of a Successful Sale
When working with MSPs on sales enablement, tracking metrics, and other core business functions, TBG’s France recommends dividing sales into three stages.
Identify, with the client, their pain points. These are the discomforts you aim to solve. Once the client sees where the pain is, you want buy-in that something has to change. You also want to confirm that the client has a clear decision process and responsibility, a meaningful budget, and they are committed to putting their own time and access to making the right deal, and ensuring the relationship works.
- Solution Design
Once you have a level of client commitment of interest, move on to the solution design. This includes the following steps according to France:
- Affirm or amplify the pain process
- Know the decision process (i.e., the who, how and when)
- Talk to all decision makers or their proxies
- Agree to the business case
- Discus competitors, their Bids and how you can win
Finally, there is closure. Full contract closure is best done face to face, and you should get a yes or no answer. If it is a yes, you can agree on next steps and begin to schedule out your new relationship.
Want to Learn More?
Learn more about pricing, MSP solutions, and tips for success at Kaseya Connect 2019, which is returning to Caesar’s Palace in Las Vegas from May 7-9, 2019. Register now and get the Early Bird rate.