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The #1 Managed Services Pricing Mistake Most MSPs Make

The #1 Managed Services Pricing Mistake Most MSPs MakeIf you own, operate, or manage an MSP firm that caters to small- and medium-sized businesses, you’ve likely given at least some thought to your managed services pricing strategy.

The problem, however, is that most company CEOs simply copy their competitors across town and assume that their competitors got their pricing right.

And you know what they say about the word “assume” and that whole ass-out-of-you-and-me thing, right?

We discussed this very issue, pricing for managed services, at the recent Inbound Revenue Acceleration Webinar for Managed Services & IT Consulting. You’ll find an excerpt from the recording of the live event in this post.

What Managed Services Pricing Strategies Should We Use?

The first thing to recognize is that a lot of the ideal clients that you want aren’t up at 2 o’clock in the morning, in a cold sweat, worrying about managed services.

They may be worried that,

  • “Oh, crap! Our network is down again.”
  • “Why does this system keep crashing?”
  • “Our competitor had a major security breach. Are we next?”

Those things they may actually be legitimately worrying about.

But it’s not likely that they’re searching for that particular keyword phrase on search engines.

And again, your buyer persona research will tell you that (the keywords that they’re searching for) one way or the other.

Pay Attention to Product/Market Fit

However if you’re just focused on your pricing…

Obviously, the pricing that you use has to be profitable.

And a lot of managed service providers that don’t scale get stuck at the whole idea of product/market fit.

What is product/market fit?

It’s that you’ve identified the right services, the right features, basically, the right product and bundling that appeals to the market that you’re going after.

And in larger MSPs, technology companies, and software companies, this is an entire, separate discipline called product management.

If you really want to scale your business substantially, and you’re selling packages of managed services, it’s critical that – even if you don’t have a full-time product manager on your payroll—that you start to learn enough about how all of this works.

But along the same lines, you should not be leading with pricing.

If pricing is on your website’s home page, or if pricing is the first thing that strangers see about your company, something is wrong.

Educate and Build Trust before Dealing with Pricing Questions

You can talk about pricing. That’s a valuable way to attract people to your website. Yet that shouldn’t be the only trick in your playbook.

Why? Because early on, people don’t really care about your features and your pricing. They care about the problems that you can solve for them. “What in it for me?”

Early on, until you’ve built up trusted advisor status -- until you’ve been seen as an educational resource, you really don’t want to go to a pricing conversation.

So a lot of what this comes down to is:

If you’re just focused on pricing sure that’s a product management issue. That’s an operations issue including tracking time and tracking profitability. It’s definitely something to be considered, but if that’s your primary go to market strategy – if that’s what your marketing funnel and your sales funnel is all about – you’re missing most of the opportunity to be able to capture the true value about what it is that you do.

And How Should We Structure Service Level Agreements?

In terms of structuring your service level agreements (SLAs), it’s largely the same thing.

If you want to get insight into what’s going on in the minds of your ideal buyers that you’re trying to attract, most of these types of questions will come up when you’re doing thorough buyer persona research.

Persona research, for the most part, informs what you’re doing with your

Along the same lines, you should be asking:

  • What do you look for in a company like this?
  • How do you evaluate a managed services company?
  • What’s the buyer’s journey experience that you’re looking for?

That approach will definitely give you ideas as to how to handle pricing, and whether pricing is really at the top of their list -- or whether pricing is really a second, third, or fourth priority. And it’s the same issue with SLAs.

 

How did you arrive at the managed services pricing that you present to your prospects and clients? Share your thoughts in the Comments below.

 

And to make sure that you plan out how your pricing impacts your sales funnel and revenue acceleration, be sure to watch the on-demand recording from the “Inbound Revenue Acceleration Webinar for Managed Services & IT Consulting.”

Register to Watch the "Inbound Revenue Acceleration Webinar for Managed Services & IT Consulting" (Recording)

Topics: managed services