MSPs Need to Wise Up and Consider Value Pricing Models: Part 1

value pricing for mspNew technologies such as mobile device management are creating growth opportunities for MSPs – and changing the way MSPs deliver services to their customers.  A holistic managed services approach that leverages some of the same IT procedures and policies as traditional IT systems management helps streamline service delivery and improves the quality and scope of the services provided.  So, educating your customers on the value of your managed services is critical to getting them to understand the implications of not addressing these new technology issues.  And having a flexible, yet consistent, pricing strategy provides the framework for a robust and profitable MSP offering.

But before you jump in and “pick a number” trying to meet your client’s value proposition by simply going with the “easy pricing button,” it’s important to cover some fundamentals.  Doing so will pay off handsomely for your MSP practice (and for your client, too).

To set your pricing strategy, you need three critical bits of data.  Gathering the data doesn’t need to be overly complicated, but it does need to focus on three important concepts.  Today we are going to talk about the first piece of data:

 

Know your client’s price-sensitivity (ie, how much are they willing to pay)

Tell me if you’ve heard this before.  “Mobile is good.  We need to be in mobile.  Let’s offer mobile as a service.  I’m sure all our clients want it.”  But do you assume all your customers will find value in the same way?  They don’t.  And won’t.

Understanding that most clients want to save some money, the real trick is gaining an understanding of what they actually do – and do not – value in a given piece of IT services work.  Some clients place a high value on experienced technicians and have, therefore, no issues with the higher rates of some MSPs.  Other clients prefer that their work be pushed down to lower cost resources whenever possible.   Fee expectations are different among clients based on the work performed.  Or to be performed.

The only effective way to understand a client’s value priorities is to have a direct conversation with them.  Are they in a cash flow situation?  Are they under pressure from the banks – or funding partners – about overall IT costs?  Are their business people pressuring them for budget certainty on certain work?  These and many other situations will drive both the type of pricing and the right value-to-price number.

What do you think?  Is value pricing overrated or just smoke and mirrors? Click here to read Part 2.