The message is clear, small and medium businesses are very interested in bundled services. The Kaseya 2014 Pricing Survey* results indicate that higher growth MSPs are offering a small set of bundled services or tiered services in preference to a la carte pricing and the recent newsletter from AMI-Partners, I-Signal** indicates that SMBs are 3 to 4 times more interested in bundled services than in single services. These results echo the experience of communications service providers (CSPs) in the consumer market. CSPs find that bundled services such as internet access, mobile phone service, email and other online services, when bundled, are far more “sticky” than individual services, allowing them to retain their customers far longer and to increase Customer Lifetime Value (CLV).
While some service elements may have become commoditized, e.g. remote monitoring, differentiation can be achieved through effective bundling, taking advantage of the fact that most SMB clients have a preference for bundled services. By bundling commodity services with other more advanced services you can differentiate based not only on the bundle composition but also on how you will be able to reliably and uniquely provide the various service elements, and how you will deliver the outcomes that your clients seek.
When choosing how to create a differentiated service bundle, consider the following:
- Do you need to add new service components to be competitive? How will you differentiate your bundled services? Hint: Clients are interested in results. How can you better guarantee or demonstrate the results, even if the nature of the service is similar to competitive offerings? Here’s where “your company way”, your processes and procedures, your skills and experience and the tools you use come into play.
- Can you add a new technology element or an advanced service so as to be ahead of the crowd? Currently there’s a lot of hype around new technology trends such as big data and mobile device management. The chances are that generalized demand for big data services will take quite a while to develop. If you have skills in this area consider taking a vertical approach to customer acquisition, focusing on those segments where demand is likely to take-off first. Mobile device or BYOD management demand will develop more quickly with larger businesses than in small companies and in those businesses that are reliant on mobile knowledge workers. Security services are another growth opportunity worth exploring: Multifactor authentication, single-sign-on, and password management can all be managed centrally on behalf of your clients. Make sure your new services match the needs of your target firms.
- What will the deployment of new service elements do for your business valuation? MSP business valuation is dependent on monthly recurring revenue stream and profitability. Some services may add more to revenue but less to profitability. Some may be more easily differentiated and sustainable than others. Typically, those requiring a higher level of investment and commitment, such as hosting services, will add more to your valuation than reselling SaaS-based capabilities, even though these can be lucrative in the short term.
- Strategize on how to replace clients’ on premise investments with cloud or hosted solutions that make it easier for you to add new and advanced service capabilities. This is important for two reasons: 1) controlling the service delivery point makes it easier to maintain and the more efficient to deliver; 2) hosted services are likely to prove far stickier – which is one reason they can improve your business valuation.
- How many of your existing clients will buy or use your newly configured offering? If only one or two, is it worth the investment in time to develop the service. Remember it’s easier to sell to existing customers but only if they have a need. The cost of attracting new customers can be five or six times the cost of selling to existing ones.
The right bundled service strategy can help you steadily increase sales to existing customers while also increasing the size of new contracts. At the same time your sales and marketing team will become more efficient because your overall solution is better differentiated and more valuable to customers and prospects alike.
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About the Author
Ray Wright has been a high tech industry and marketing exec for over 25 years’. His background includes senior marketing roles at Motorola, Cabletron and CA. His product responsibilities have included IT management solutions, security, tethered, wireless and mobile solutions, and software, hardware and services. Ray‘s current focus is on how to make Kaseya’s MSP and mid-sized enterprise customers more successful.