4 Tips For Pricing Cloud Services From An MSP
In addition to his advice in the BSM article “Find Your Cloud Services Niche,” managed services provider (MSP) Jason Etheridge, president and CEO of Logic Speak, offers advice for pricing cloud services:
- Be Competitive, But Don’t Be Cheap
The tendency is to feel pressure to compete with the big guys on price: “If Company X can offer hosted Exchange for $5 per month, then I had better be able to as well.” Nope! First, you'll never be able to approach the economies of scale that the big guys can. They can buy hundreds (or thousands) of servers that are cheaper than yours. They have cheaper and faster Internet access. They can build a support organization for their services more inexpensively than you can. Sounds bleak, right? Not at all. They might win on price, but they don't have what you have … you! You are the value add to your cloud services. There is no substitute for your clients being able to talk to an expert that is close by, who understands their business problems, and can make sure they have the right cloud solutions for their circumstances. While that might not qualify you to charge three times the cheapest available offering, it is certainly worth more than the cheapest available offering.
- Your Pricing Model Wasn’t Handed Down On Stone Tablets
You can spend hours trying to come up with the perfect pricing for all of your cloud services. All the while, your competitors are actually selling their services and making money. Yes, do your research. Figure out what the market is for your particular service, and go for it. Your clients will help you determine if you’re too expensive, and your net profit will tell you if you’re too cheap. Don’t be afraid to raise your prices, and even better — don't be afraid to lower them. Some of the nicest comments we’ve ever gotten were from a discount that we were able to pass along to our clients because we changed backup vendors. Give them even a nickel back per GB and they will love you for it.
- Evaluate Your Prices Yearly
Get in the habit of evaluating and setting your prices for the upcoming year in November. This gives you a month to use your price increase to sell your holdout clients on a locked-in price for the following year. They’ll feel like they “got in under the wire” and you got them off the fence! Change your price any more often than that and you'll create confusion and frustration (and more pain for whoever does your accounting).
- Offer Discounts (Just Not Forever)
Your client loves your cloud service. They are really excited about implementing it as quickly as possible. There’s just one thing. It is just a little too expensive. If only it were a little cheaper, they’d be ready to go! Sound familiar? Discounts are a part of sales. Don’t be offended or discouraged — go ahead and offer that discount. But, here’s the trick: Expire the discount after a fixed amount of time. “Sure Mr. Valued Client, because of our great relationship over the past several years, I’m happy to give you that cloud service for 15 percent off for a year!” They will get all warm and fuzzy over having gotten a discount and you get the satisfaction of signing up another client. After the discount expires, you’ll have them hooked.