Did you know that the top 25% of MSPs command 20-30 percent higher subscription rates than their competitors? While there are many factors that contribute to an MSP’s profitability, pricing often plays a role. Here are the most common MSP pricing models.
- Basic: Flat rate cost per seat for managing up to 25 tasks.
- Medium Maturity: Match market pricing. See what competitors are charging and align with them.
- Highest Maturity: Determine the value you provide to your client and charge based on that value, even if it’s higher than competitors.
It’s easy to see the flaws in the basic and medium maturity models. The basic model equates price with tasks and in doing so commoditizes the service. In this model, there is nothing to differentiate competitors besides the lowest price. Although this might work for a while, it’s usually unsustainable as new low-cost competitors are always entering the marketplace. It can also be difficult to exit this model, as it can devalue the brand over time.
The medium maturity model allows MSPs to find equilibrium among competitors. As a cohort, they aren’t fighting to be the lowest priced, but rather all stay within the same price range. Although this strategy generally allows for higher subscription rates than the basic model, it limits growth potential by focusing solely on aligning costs with competitor pricing.
The highest maturity model allows the top 25 percent of MSPs to charge higher subscription rates than competitors because their pricing strategy is based on value. In this scenario, MSPs create a value proposition that aligns with a unique target audience. Instead of low price or competitive price strategies, this model positions an MSP as a value-added partner who can demand rates based on worth.
Defining Your Ideal Customer Profile
Transitioning to a high maturity pricing model requires planning and focus.
Best in class MSPs consistently target an ideal customer profile and build an infrastructure to serve them efficiently and effectively. In contrast, those who chase every sale are forced to reinvent the wheel with each new account, sacrificing ROI.
If you define your ideal customer profile and understand their unique priorities, you can add value based on those priorities to create a competitive advantage. On the flip side, you will also know when you come across a customer profile that is not ideal. In this circumstance, it is wise to walk away, as chasing a suboptimal opportunity only serves as a distraction.
When thinking about an ideal customer, consider the following seven questions:
- How many managed devices do they have?
- What are users doing on their devices?
- What SaaS apps do they use most?
- Where are the users located: remote, in-office, on the road?
- Does their office have cloud-based or physical servers?
- What industry are they in?
- Do they need a higher level of security based on industry (e.g., financial firms, health care companies)?
Once you’ve determined what your ideal customer needs, you can develop a service offering to fulfill it. For example, you can define the tech tools that your ideal customer uses and standardize your services upon that tech stack to increase efficiency. This win-win scenario allows you to deliver exactly what your customer wants in a way that is most profitable to your business.
If you align your services to an ideal customer profile, you will be able to demonstrate higher value and develop a mature pricing strategy that doesn’t rely on low prices or competitors.
Opportunities Managing Apple Devices
It’s important to clearly define the devices you will support and allocate the resources and tools to do so properly. It is likely your clients will have multiple types of devices and you need to account for managing all of them to the same standard.
If you are thinking about excluding Apple devices, there are a few reasons to reconsider. Apple is targeting enterprise and SMB customers with innovations that are driving increased adoption. Macs are incredibly popular among corporate leaders and business owners, and in attractive target industries like technology. In fact, you will find Apple products in most growth-oriented organizations that value IT. If you wish to appeal to these profitable targets, you’ll need to ensure you support Apple devices. Otherwise, expect to miss out.
Final Word
If your customers think of your service as a commodity, your opportunities will always be limited. On the other hand, if you focus on selling your unique value to an ideal customer profile, you will be able to maximize opportunities and build deeper customer relationships that last.
Author Jason Dettbarn is founder and CEO at Addigy. Read more Addigy guest blogs here. Regularly contributed guest blogs are part of ChannelE2E’s sponsorship program.
