Currently viewing the tag: "msp"
It seems that pricing remains a mystery for a large number of managed service providers. A large percentage of the questions we get from partners are focused on how they should price their services in general, and specifically how to position themselves to be able to charge higher prices.
So what is the secret to being able to charge higher prices than your competitors?
The reality is that there is no silver bullet, but rather a number of things that add up to you having a premium position in the mind of your prospects and customers. I’m going to cover the most important of these factors in a series of posts.
I’m going to start with the most important factor, which is:
Being known.
Being known? What does that mean, you may ask?
It’s really quite simple: research studies show that the best known service providers in a market command prices 20-50% higher than their competitors. This is true across professional services providers of all types – lawyers, accountants, consultants, etc. – according to a benchmark study from RainToday.com titled “The One Piece of Advice You Need to Get the Fees You Deserve.”
The good news is that you don’t have to run incredibly expensive mass-market branding campaigns like something from Coca Cola to accomplish this, you just need to be known by the people that our ideal prospects in your target market – a much smaller and more manageable target audience.
How do you get to be better known?
Consistent marketing over time that uses “power messaging” that is on target for your audience.
In other words, say the right things to the right people consistently over time.
Most managed service providers are really struggling with this. My experience is that their biggest problem is the “consistently over time” part of the equation – they tend to do a little marketing then give up because it didn’t produce immediate results.
Getting immediate results from every bit of marketing you do is one of the biggest fallacies and false expectations that has been set upon our industry. People don’t jump out of their seat to buy managed services the first time they get a clever campaign from you – it just doesn’t work that way.
It’s such a problem that I considered titling this post “Why expecting immediate ROI from your marketing campaigns is killing your business!”.
Would you jump out of your seat to buy legal services from a lawyer the first time you received a well-worded letter of introduction from them?
Of course not.
But when it came time to buy legal services, would you be more likely to buy from the lawyer that had been consistently in front of you over time, that published interesting research for you to digest, and that had relevant experience with other in your industry and situation? And would you likely be willing to pay more for this lawyer than for another that you’d never heard from.
Of course you would.
If you want to get more business, and command higher prices, you must Be Known.
In order to Be Known, you must keep your marketing efforts running continuously over time. There are other factors, of course, and I will cover them in my next posts. But if you don’t get this lesson, I’m afraid that the rest won’t matter.
Mike
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Many managed service providers think that social media is for “other” businesses – that businesses like theirs don’t need to waste time on Facebook, Twitter, and LinkedIn.
Uh huh…and the Internet is a passing fad, too.
There are two realities that managed service providers – and just about every other business owner – needs to come to grips with:
- People and businesses do research on the Internet before they decide who to work with.
- Social media is playing an increasingly important role in determining what will be found when researching on the Internet.
Clues about the importance of social media in search have started to be more visible as Google has experimented with including social media posts in their search results and attempting to steal the Facebook “Like” button’s thunder with its +1 button.
But if there was any doubt left about the direction of this trend, the recent developments by Bing, covered in this article, leave little to doubt.
“Bing is no Google,” you may say. “Who cares?”
Don’t bury your head in the sand. If you and your business are not embracing social media, you will fall further behind in the search engines over time and miss out on opportunities.
I’ve pasted the article in its entirety below.
Mike
Bing laces search results with Facebook connections
By Edward C. Baig, USA TODAY
Starting today, folks who use Bing search will receive personalized results based on what their trusted Facebook friends like.
Microsoft research found that 90% of people surveyed seek advice from friends and family before making a decision. And 80% will delay such a decision until their pals give their stamp of approval. So Microsoft, via a partnership with Facebook, is hoping to leverage such relationships through its Bing search engine.
If you’re signed into Facebook at the time you conduct a search — for example, locating wineries in Napa, choosing a digital camera or merely looking for interesting articles on a given topic — you’ll see the names (and in some cases) faces of Facebook friends who happened to click on the “Like” button next to an item inside Facebook. You’ll received personalized search results based on who your friends are and what they like. Microsoft says “sponsored” search results will also show up where they’ve always been.
“All this data coming from Likes is potentially very valuable,” says analyst Greg Sterling, a principal at Sterling Market Intelligence, who points out that there may be incentives offered by companies — a $2 coupon off latte, for example — for Facebook members who click on Like.
Of course, friends may not always provide the expertise you need about a subject, so Bing also taps into the collective Likes of members of the Facebook community to help clue you in on top trends and articles.
Bing has slowly but surely been gaining market share, but it still trails Google by a wide margin. According to April ComScore rankings, Bing has a 14.1% market share in the U.S., compared with 65.4% for Google and 15.9% for Yahoo. While no one expects Bing to overtake Google overnight, Sterling says, “Over the long term there might be some shift.”
Analyst Charlene Li of Altimeter Group agrees. And she believes Google, which has made its own attempts at social search, has to be concerned. “How much sleep are they losing over this?” she asks. “A lot.”
For Bing director Lisa Gurry, the way to compete with Google is to change the game. “This is an example of how we think we can change that game. We think we’re kind of scratching the surface of what we can offer in this realm.”
If you’re looking to travel to a city, you can see which of your Facebook friends live in the vicinity. You can do expanded Facebook profile searches through Bing. And the search engine will display deals posted on Facebook for various companies and brands — when you’re renting a car, say. You can also share shopping lists through Bing and Facebook.
Microsoft points out that vast amounts of content are shared on Facebook each month. Microsoft says privacy won’t be an issue and people who click Like inside Facebook are effectively willing to share. But Li says there’s a “delicate line” between something that’s creepy and something that’s genuinely useful. “Likes have social currency. Think twice about Liking something.”
For the most part, managed services is a local business. The majority of MSP’s operate with almost all of their business coming from within 30 miles or so of their office.
And for good reason.
Although service delivery can now be done anywhere fairly easily – given the availability of remote control tools and networks of contractors – the sales and marketing of managed services is still more easily done on a local basis. Getting referrals, meeting people in person, etc. – all easier locally.
Even though most MSP’s are focused on their local markets, many are still ignoring one of the most important factors in getting found locally – having a local domain name.
What do I mean by a local domain name?
Local domain names are domains that include some reference to your market, such as BostonITSupport or ITSupportBoston. Instead, most MSPs tend to buy domain names that stress some particularly technology or their brand name. I did this for years at Everon, without ever taking advantage of local domain names.
Big mistake.
Why such a big mistake? I’ll give you two reasons:
- Ease of getting ranked - it is far easier to get a local domain name ranked for a local business than it is to get a non-local domain name ranked. I’ve tested this and proved it over and over again, having achieved first page ranking in competitive markets in a week or two. This, of course, is not always the case – and is ultimately up to the search engines – but my experience is that generally it’s the rule.
- Rate of conversion from search to opportunity – this is the BIG reason. I was shocked to find in my analytics report how much higher “local” searches were converting to inbound leads versus “non-local” searches. I’ll provide some data to illustrate.
As you may know, I’ve spent a lot – well over half of a million dollars – marketing managed services online via Google AdWords and other platforms. I’ve also done a ton of optimization and content building for my sites to make sure they show up organically.
Thanks to the beauty of analytics, I’ve been able to run reports to see which keyword searches actually convert into good prospects and eventually paying customers. Here is what I found:
For my top performing non-local keyword searches – phrases like IT Support, IT Services, etc. – I had an average conversion rate of right about 2.7%
Now get this – for my top performing local keyword searches – phrases like IT Support Boston and IT Support Denver, etc. – I had an average conversion rate of about 53.77%
My local search terms convert at about 20 X the rate of my non-local search terms!!!
Talk about an eye-opener! It makes sense – people searching locally are clearly demonstrating the intent to find someone local to work with, so they take action when they find a good match in the search engine. Those using non-local terms are most likely much earlier in the buy cycle and not as focused on finding a short term solution.
If you aren’t using local domain names to get ranked for local search terms, you are missing a big opportunity.
Mike
PS – If you are a MSP that sells EHR services, or a physician shopping for EMR software for your practice, make sure you check out Electronic Medical Records Companies, a new informational site from Kutenda.
One of the conversations I have often with MPS’s is getting them to understand the cost of getting a new lead in the managed services business. Expectations vary across the board quite wildly:
Some believe a lead shouldn’t cost more than $25.
Others believe $2500 is ok, because they close 100% of the people they get in front of (oh yes…I hear this one. I also hear that you’ve NEVER lost a client).
Both of these expectations are way off. You WILL NOT acquire leads that cheaply in this industry, and you WILL NOT close 100% of the prospects you get in front of. This is an important thing for you to get your hands around, as you can’t possibly plan on building a scalable business without understanding what a normal sales and marketing pipeline looks like.
So what does it cost to acquire new leads and customers in the managed services business? My experience in the business – which includes having spent well into the seven figures on sales and marketing – has consistently resulted in the following:
New leads: $175-275 per lead
New customers: $1,500-2500 per customer
A report I read recently suggests that the average cost per lead for a broad swath of industries is $143-373 per lead, so I don’t think my experience is far off.
Keep in mind, that this is a measure of leads/customers per ACTIVE marketing dollar I am spending, as in money spent on actual campaigns, advertisements, direct mail, telesales reps, etc. This DOES NOT include the dollars that I spent on internal marketing personnel, tools, etc.
The good news for everyone is that these are perfectly fine numbers for building a great business in this industry! Customers in this industry are very valuable, so these numbers clearly work in your business model.
The problems comes when you believe that you should be acquiring leads and customers much more cheaply than this. If you fool yourself, you will not make the necessary investment in marketing and sales to acquire customers as quickly as your competition. Believe me when I tell you that there are now plenty of sophisticated operators in the managed services business that will gladly spend these amounts all day long, and are eating your market share for lunch.
Here are common ways I hear MSP’s fool themselves:
- I grow my business 100% from referrals, so leads don’t cost me anything. Actually, they are costing you a ton. You are not growing nearly as quickly as you could, and your “non-investment” model will put a cap on your total growth potential. Every business has a cost of acquiring new leads and customers – yours is not the exception.
- I got three leads and didn’t close a deal, the leads were bad. Perhaps they were “bad”, if there is such a thing. Statistically, you will probably only sell about 1 out of 10 leads you get. That’s not “bad”, that’s the normal sales pipeline. If your numbers are worse than 1 out of 10, it’s much more likely that you need sales training than it is that all of those leads are “bad”…FYI.
- I closed the customer, but they only did $700 in business with us this month, so it wasn’t worth it. Again, you probably need more sales training and a better plan to follow up with these customers. Not everyone signs a big recurring revenue contract the day they meet you – put a follow up plan in place and build trust over time!
In the direct marketing industry, they teach you that knowing your cost per lead and cost per customer are two of the fundamental numbers you must understand about your business and your industry. Otherwise, you will never really know whether you are on track or not versus the competition.
Same goes for the managed services industry – know your numbers if you want to compete!
Mike
