Does your MSP keep losing business on price?

Does your MSP keep losing business on price?
cheap photo
Photo by cdsessums

Does your MSP keep losing business on price?

I was recently speaking to the owner of a Managed Service Provider (MSP) business who shared with me that they were becoming frustrated with the amount of business they were losing to cheaper competitors and wondered how they might tackle this situation.

“We are already keenly priced, but the post-sales feedback we get from prospective clients is that they’ve chosen to give their business to someone cheaper”.

My advice to that MSP owner? Raise your prices and then watch as you win more business.

What type of client is your pricing attracting?

While it might seem counter-intuitive to raise prices when the prospects you’re meeting with are telling you that you’re losing their business because they’ve found somebody cheaper, there is method to this apparent madness.

By pricing your MSP service too low, you’re attracting the type of client who will shop on price, not value. No matter how good your service offering may appear, the client will always go with the cheapest offering – and I’ve some bone-chilling news for you, there is always somebody out there who will offer to do the work cheaper.

You could lower your prices further, but take a guess what your competitors next move will then be? That’s right, lower their prices again!

So how does raising your prices help you win more business?

The perception of price versus value

value photoAre you familiar with the old adage “If it’s too good to be true, it probably is?”. When you price your services too low, you’re sending a message that you’re competing in the cheap end of the market – one where people shop on price alone, not value.

If you raise your prices to where you know they should be – which is probably well above those of your cheap competitors – then you’ll start attracting clients who listen to the the message you send about the value you provide (rather than blindly look at the cost). What’s more, those clients will believe you provide that value you speak about – because you charge a reasonable price for it accordingly.

Conclusion

If your MSP or IT Solution Provider keeps losing business to competitors and the post-sales feedback you’re getting from clients is that they’re working with somebody cheaper – then your instinct may be to lower your prices accordingly.

But if you’re talking to prospective clients about providing great value and the price of your service seems too good to be true, then please understand that many of clients who are looking for great service may themselves believe you are unable to actually provide it!

So rather than blindly competing on price – a race to the bottom that you’ll never win – consider raising your prices. Doing so will help you attract the type of client who shop based on value, the type of client your high quality service is suited for.

Comments

  • Richard Tubb2019-10-15 06:54:20

    Great question, Jack. In terms of finding clients, social proof (such as testimonials and videos from your existing clients) goes a long way towards establishing credibility. It's one thing for you to say how great you are, it's another for someone else to sing your praises! In terms of prospects who shop on price alone -- I'd avoid them, but absolutely stay in touch with them. Make it clear you're not the cheapest. Let them work with the cheapest. Stay in touch with them as they work with the cheapest. Then, when they want to move to a more mature, sustainable MSP, they'll be in touch with you.

  • Jack G2019-10-14 11:01:26

    Good article Richard. How do you fight the value add proposition though, when your competitors are all probably saying the same thing about their value ie. better SLA's and promising great uptime etc too. I guess the prospective client isn't going to know or experience the competitions value until they sign up and experience first hand and then realise that it wasn't what they thought it was going to be ie. failing SLA's, taking a long time to fix issues, poor responses o support tickets etc. Some competitors even give their new client all the love and even get some initial project work out of the new client for the first month or two and then let things slide after that. The client is then burnt, decides top leave if they can escape the contract terms and then potential comes back you. Do you take that client who initially went for someone else based on cost alone? Lucky enough we haven't experienced this situation as the majority our clients come from WOM and we are able to keep the costs consistent in most cases, but we have had the odd competitor try on some clients, but because they prefer our service they are happy to stay and pay our prices. The ones that don't want to pay, we just let them go because as you say they are never going to appreciate the value we offer to them.

  • Richard Tubb2019-10-11 06:16:31

    Jonathan -- thanks for the feedback. This isn't at all unusual. The old adage "You get what you pay for" often rings true! I'd recommend any MSP stays in touch with prospects they lose to on price. Stay proud of the value you offer, even if you're more expensive!

  • Jonathan Edwards2019-10-08 10:00:33

    Interesting topic. Six months ago we quoted to support a local business and lost out to a lower-priced competitor. The client has since called us and has arranged to move to us once their contract expires. They went through the Cyber Essentials process and found out patching wasn’t getting done. They were also up sold lots of technology after signing the agreement. Sometimes these customers will come back to you.

  • Richard Tubb2015-01-08 17:22:24

    As a follow-up, my friend Mark Williams at Pensar IT shared a great blog post on the "Common Law of Business of Business Balance" (http://www.pensar.co.uk/clbb/) that says:- “There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person’s lawful prey. It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Send this to a friend