Author: Gaidar Magdanurov, Chief Success Officer, Acronis

Avoiding the “race to the bottom” from pricing wars   

Commoditization is a dirty word in the business community. When prospective customers assume your offerings are equal in quality to competitors’, the discussion shifts to the lowest cost option. MSPs usually refer to this situation as the “race to the bottom.”

The best way to ensure the health of an IT services business is to grow sales based on the value of its solutions and support. Avoiding discounts and rate reductions whenever possible helps MSPs maximize MRR and cash flow and reinforces the quality of the company’s brand. A recent IDC research report noted that a switch to value selling at one tech company led to a 70% improvement in closing rates on new deals. How would that increase affect your revenue and profitability?

The best way to ensure the health of an IT services business is to grow sales based on the value of its solutions and support.

While price may not directly correlate with trust, people typically pay more to work with MSPs that instill confidence and provide real value to their businesses. Organizations are looking for productivity-enhancing solutions today, as well as cybersecurity support to meet regulatory compliance requirements and protect their data, people, and operations. Not every offering has a measurable ROI.

Suppose your company cannot clearly demonstrate its value to potential and existing clients. In that case, those relationships will depend to a greater extent on pricing, putting long-term revenue projections at risk. MSPs that deliver unique and business-critical solutions and support options tend not to encounter those issues as often as those with more ubiquitous offerings.

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A Client-Centered Approach

There is little need for incentivizing new contracts when your services are in demand. Successful IT professionals build their portfolios to address the current needs of their clients and provide valued insight on future operations. Their value comes from selling solutions, not ingredients.

MSPs can make that happen when they have a solid understanding of their target audience’s business needs. From workflow and vertical applications to common cybersecurity threats and compliance requirements, when your team knows more about their operations, your support becomes more valuable.

When the client-MSP connection is strong, retention and value increase, creating a symbiotic relationship. When both companies share critical information and openly discuss opportunities and challenges, it is in everyone’s best interest. Those conversations allow MSPs to optimize their solutions and support models, and develop more capable technology roadmaps.

Ensure that your clients cannot imagine a future without your team’s support. The best way to avoid pricing objections and competitive pressures is to deliver the solutions and support that your customers can’t work without. When you understand clients’ operations like no other MSP could, at least without a significant period of pain on their part, the relationship becomes more binding and valuable to everyone.

Developing relationships based on trust and performance also makes it easier for IT services firms to increase MRR, strengthen cash flow, and boost retention rates.

Create Ties that Bind

How easy would it be for your clients to leave?  Would another MSP be able to replace your solutions and services with minimal disruption? Many successful IT services companies virtually embed their companies with those they support, tailoring their offerings and integrations to ensure each client gets the most from their technology investments.

While MSPs gain critical efficiencies from employing a core set of tools, customizing solutions for individual customers ensures those businesses can address their own unique challenges and opportunities. Those “tweaks” can also block less capable competitors from moving in easily.

Consider Cybersecurity

Cybersecurity expertise is one of those areas of opportunity. Offering a comprehensive and customizable set of tools and protection measures gives your team the ability to meet a variety of compliance needs and address unique vulnerabilities for each client. For example, MSPs can leverage Acronis’ robust platform to deliver managed disaster recovery, patch management, ransomware prevention, and a host of other security services.

While other firms may propose a lower price to entice your clients to jump ship, creating custom “ties” that strengthen their defenses makes it more difficult for those pitches to succeed.  MSPs that can clearly differentiate their deliverables and emphasize their track record of success with that customer are harder to displace.

After all, your clients could care less about servers, networks, software, websites, and a myriad of tech options. Most business leaders want to know how an IT services partner can improve their capabilities, boost productivity and efficiency, and eliminate potential headaches. MSPs who can speak that language and prove their worth through actions and reporting are less likely to lose existing clients to a cheaper competitor.

Satisfaction is Key

With a recurring revenue model, managed services businesses must focus more on customer satisfaction to influence retention and upsell opportunities. Without a substantial focus on user needs and support, MSPs will quickly chase away new clients.

What solutions would be beneficial to your customers in the coming years? How can you best support their needs today and in the future? Delivering cost-effective solutions is still important, but a satisfied client is less likely to beat you up over a 5-10% price differential.

MSPs that clearly answer all their customers’ questions and properly satisfy their needs form closer relationships. Those are the “value-adds” that keep clients loyal and prevent price shopping. Developing relationships based on trust and performance also makes it easier for IT services firms to increase MRR, strengthen cash flow, and boost retention rates.

If you have something to say about this topic I’d love to hear from you over in the Modern MSP Facebook Group.