Establishing A Unique Value Proposition When Selling Managed Services
Contrary to a lot of the marketing “gurus” preying over the IT industry, I do not think it is necessary to differentiate yourself to successfully grow your IT company. If you can create a model that allows you to simply generate leads, compete on price and turn a profit, then there is no reason to get overly creative. With lack of creativity however, there is a need for capital. Selling a commodity requires volume. This means that you need to know the lifetime value of your customer and throw every penny you have at generating net new business with a positive net value. If you are selling a commodity and simply waiting around for referrals, then this model will likely fail.
Benefits of a Value Proposition
The biggest benefit of having a value proposition that differs from your competitors is sales conversion. When you require fewer leads, fewer quotes, and fewer follow-ups to net a new customer then you have a clear advantage in your market. You can move quicker and require less up-front capital to put into marketing and sales to grow.
Another benefit is your ability to charge more for your services. If you have a feature or process that solves a problem and removes risk, you can charge more. This is because the sales process is no longer an apples-to-apples comparison. You have something tangible that no one else has.
Creating a Unique Value Proposition
Creating a unique value proposition is not as simple as coming up with new sales copy to slap on your website. In order for it to be effective it has to be tangible. For example, providing “white glove” support is not a value proposition. Your customers will expect good support from you no matter what and the term “white glove” is simply a way to describe that.
A good value proposition is a major change in the way you sell, deliver, or support your services that is simple to understand and removes friction in doing business with you. Amazon created the ability to buy books without leaving your house. They have spent the last decade making it easier and easier to do business with them, which has created the behemoth they are today. This example is not to imply that you have to disrupt the entire Managed Services industry, however you should be thinking along the lines of customer experience.
Here are a few areas that you should look to differentiate yourself from your competition:
The sales process is not the first place that companies would typically look to differentiate themselves. However, where there is friction, there is an opportunity for improvement. My wife and I are currently shopping for furniture and we have decided to only shop at stores that offer free delivery and that sell online. This is because we both have a mutual distaste for furniture salespeople. In our experience, they hover over you as you walk around the store, constantly trying to pry into your conversations to insert corny sales jargon. We dislike the process so much that we are willing to limit our selection to only a few stores, even if they do not have the best prices, just to avoid this.
Most B2B sales processes are similar to each other in the way operate. The provider of the service follows up relentlessly until the prospect agrees to receive a quote. The quote gets delivered and then the provider follows up relentlessly again until the deal is closed or the prospect can’t take it anymore and tells them to “buzz off.” Business Decision Makers now assume that this process is to be expected and the annoyance that goes along with this will prevent them from ever engaging to begin with. That is unless your process is evidently different.
What if you changed this process entirely? What if you gave your customers the ability to create their own quote on your website and then the system itself did the following up for you through automation? Or what if you did the opposite and made the sales process so personal that the prospect truly believed that this was the service for them? Identifying where the friction lies in not only your sales process, but your competitors, will allow you to create a unique buying experience that can’t be compared.
When you sell yourself as a high value, low cost service you are not actually creating a unique value proposition. Sure, your pricing might be slightly less than your competitors, but they could just as easily offer a one-time discount to beat you on price whenever they needed to. What is a differentiating factor is your pricing model. This means how you price services, not necessarily how much.
The biggest problem with the current “per user” MRR pricing model that is commonplace today is that it breeds poor usage habits. Think about it in terms of a buffet-style restaurant. When you go to a buffet it is almost a guarantee that you are going to eat roughly 25% more food than if you ordered ‘a la carte.’ The same can be true in some cases with Managed Services customers. Users tend to lean on your Help Desk for tasks that they are fully capable of doing themselves. Why? Because they can.
This creates the perfect opportunity to create a unique value proposition with your pricing model that rewards fair usage. Offering the customer a discount when they have low Help Desk utilization or when they complete projects to adhere to your best practices (thus lowering tickets) will align the goals for both parties. It will also be a unique selling point that can be branded and marketed to prospects.
One of the biggest hurdles in the Managed Services sales process has always been the prospect’s fear of transition. Most prospects will voice this fear voluntarily. The ones who do not are likely to be thinking about it even if they do not admit it. The anxiety of making things worse by taking action most often leaves people to do nothing. After all, doing nothing is always the most comfortable thing to do. Without actively removing this fear, you will find it very difficult to close net new business that is already working with an existing IT Provider.
About a decade ago, the mobile phone industry faced a similar problem. Mobile Customers were more likely to retain their existing service, even if they absolutely hated it, simply because they feared transition. At this time, keeping your phone number was not a guarantee if you switched from one provider to another. Even if you could keep it, the act of cancelling and porting your service was an arduous process. Once mobile phone providers realized this, they began focusing on this pain point in their value proposition. It wasn’t long until “keep your phone number” and “we’ll cancel your existing service” were primary taglines on global media campaigns.
This same concept can be applied to a Managed Services company to create a unique value proposition. If the biggest fear of your prospect is downtime, why not offer a no downtime guarantee? You might even consider offering a refund of $x/minute for every minute of downtime during the cut-over. This ensures that your interests are aligned with theirs and you are putting your own resources on the table to help balance the risk the customer is taking. If the prospect is evaluating two proposals and your proposal costs slightly more but has substantially less risk, any good business person would choose the risk-free option.
The most frequent interaction your customers will have with your Managed Services company is through support tickets. For most endpoint users, this is really the face of your company. A lengthy form or clunky ticket intake process can be another source of friction for your customer. Yes, it is nice to have all the details all tied up in a nice package before the ticket even hits your service queue, but it is in no way necessary.
As an IT Provider, you have likely requested support on behalf of your customers a countless amount of times. This means that you understand what good support and bad support looks like. You also know that mediums or channels in which you request support make a big difference. I tend to always favor live chat, since that means I can multi-task whenever I do need help. The one thing I hate is stopping everything I am doing in the middle of a busy workday to fix a problem that I probably shouldn’t be having to begin with. As a matter of fact, I recently referred a friend to the online banking service I use, simply because of the support they offer. Any time their phone support wait time exceeds 1 minute, their live chat becomes available on their site. This means there is always a way to get ahold of them within 60 seconds, no matter what.
If you do not know every way that your competitors intake tickets, now is the time to find out and immediately differentiate yourself. If their primary source of intake is phone and email then you should look to add live chat. If they offer live chat too, consider building integrations for Facebook Messenger, Slack, Teams, etc. In the early stages of our MSP, we created an iOS app for ticket intake. It was simply the same web form we used on our website, but in the form of an app that could be downloaded from the app store. Nevertheless, a handful of customers found more value in the ability to pull out their phone and send a ticket and this became their sole means of requesting support. This innovation set us apart enough to change our users perspectives of our company creating a legitimate value proposition that could be used during our sales process.
Value Through Innovation
The truth is, if you do not know what your unique value proposition is, then you probably do not have one. Almost all differentiators should be well thought out and intentional. It is not something that can just be conjured up in a few hours of self reflection. It is also important to remember that when you do things differently you are ultimately taking a risk in order to offset the risk of your customer. If you are afraid to put your money, time, and resources into innovation and forward thinking (becoming different) then you are likely better off selling yourself as a commodity and joining the herd of MSPs competing on price.