Many MSPs grow by constantly acquiring new clients. But when these are one-off engagements based on a single service or break/fix contract, clients can leave as fast as they arrive. That’s the kind of churn that keeps MSP execs up at night.
A better way to go is selling sets of services, all managed by your firm. This is the whole idea behind service bundles. Often, MSPs package their services into two or three sets of bundled services.
But how do you increase the number of services a client outsources to you after a sale? There are two mains ways: cross selling and upselling.
These two techniques are distinctly difference but share essential common element.
Cross selling is where you engage with a client about one service and then promote other complimentary offerings.
Upselling is a bit more imprecise. For some, it can mean any additional new services – including cross selling, where you approach an existing client and try to sell other offerings. More often, upselling is offering a higher-level version of an existing service — such as a service desk — with more personal attention or longer hours of availability. This is similar to a car salesman who tries to sell you a higher-end version of the car model you are looking to buy.
But don’t get too distracted by all this nomenclature. Many people use the terms interchangeably.
What matters is that upselling works. Just look at JetBlue which sells more legroom through its “Even More Space” initiative. This alone brings in more than $200 million in extra revenue a year.
Cross selling also works, and Amazon and McDonald’s are prime examples. Amazon makes a third of its revenue through cross selling, and anyone who has bought anything from them is familiar with the “Customers Who Bought This Item Also Bought….” And “Frequently Bought Together “ pitches. McDonald’s used to ask if you “want fries with that?” and now just sell you a Value Meal which is really both cross- and up-selling.
It’s All about Good Client Relations
As long as you have good client relations, both approaches should work well in the MSP world. That’s because your clients know you, trust you, and have faith that you understand their business.
For you, as a business owner, it is an ideal situation. You should be having regular meetings with your clients where you review current service status and outcomes. These regular review sessions are times when you can naturally discuss your client’s longer term strategies or IT plans. For instance, you may be protecting your client’s network, but might discuss with them how they are interested in moving email and productivity applications to the cloud. In this instance, you could offer a solution to manage their new Office 365 system.
Taking it one step further, you could offer that client backup to more easily protect their data. And now that they are more dependent on the cloud, you could sell then a service to manage their network and minimize downtime and optimize performance. And so on.
Tips and Tricks
Create Service Bundles
By having pre-set service bundles, you can show that these offerings are fully supported and operational. At the same time, you’ll have pricing information that demonstrates the great value of the additional service or services. You can use these pre-defined offerings to both cross and upsell.
Focus on Larger More Loyal Clients First
To increase your chances of a successful sale ─ and one that maximizes revenue ─ target your largest and best customers first. They are the ones with the biggest budgets and the largest potential for requiring multiple services.
Once the new service(s) are working, that client may also be willing to serve as a reference.
Make Cross and Upselling Part of Customer Review Meetings
As referenced above, many pundits recommend MSPs hold quarterly reviews with clients, along with a more in-depth annual review. As the meetings are focused on strategy, they provide a perfect opportunity to learn more about your client – both their business plans as well as their larger IT operations environment. Talking about new services, or an upgrade to the services they already have, is a natural outgrowth of these conversations.
Make a Deal
One way to break the ice is to offer a trial. This may cost you time and money, but there could be long-term revenue to come.
Part of the deal is a good price. But you could offer other incentives such as the first three months free based upon a reasonable commitment, or added features for free. At the same, make sure you don’t underprice – then you’ll be stuck with it!
Don’t forget your sales team. There should be special incentives for sales selling additional or new services. This makes total sense since these deals increase MRR and profit margins, and dramatically reduce churn.
Sell Value Based on Clients Needs
The key to a successful cross or upsell is to anticipate true client needs and only promote solutions that meet them. This might take a bit of research in the case of an initial engagement. If it is an active client, you should already understand what new services would make their operations more successful. As mentioned earlier, a great time to promote new services to existing clients is during quarterly or annual business reviews.
The key part of this approach? Listen first to what the client says, and after fully absorbing these views express your own well-founded opinions leveraging your status as a trusted advisor.
Don’t Be Pushy
On a related note, no one likes a pushy salesperson – especially one who is blind to customer needs. Be sure to promote only solutions that provide true value and a positive ROI for your clients.
And time your pitch and frequency of pitching so that you’re not trying to sell every time you talk to the client. You want to match your efforts to when the client may want to buy in order to maximize the impact your message – and your reputation as a valued advisor – with your client. Make all your pitches, whatever form they take, completely user-centric. Sometimes less truly is more.
Cross and upselling should benefit both the MSP and the client. Here is how it can work out for both sides:
- Derive benefit from integrated, fully managed services
- Better value through economies of scale
- Leverage MSP relationship as a key client
- Single source of billing and support
- Less churn
- More MRR per client
- Higher margins
- Great references
- Closer relationship that leads to trusted advisor and hopefully vCIO engagements
To get more real-world information about service bundles, pricing and cross and upselling, download the 2016 Global MSP Pricing Survey.