For the spring 2015 MSPWorld conference in Orlando Kaseya partnered with one of our very successful MSP customers, Artemis IT, to present findings from the latest Kaseya annual MSP pricing survey in a session entitled “Strategies for Profitable Growth”. A key finding from the survey is that higher-growth MSPs more frequently adopt value-based pricing strategies. A strong trend towards value-based pricing is very apparent when comparing the results of the latest survey with those from the prior year, but how should you go about determining the value of your services?
As the old adage goes, “beauty is in the eye of the beholder”. This phrase has often been modified to “value is in the eye of the beholder” and while you might not expect clients to fall in love with your pricing, it is true that the value perception of your services will vary depending on clients’ needs. Smaller clients with simpler IT systems are likely to be more concerned about price because of their budget limitations, although value for money is still very important. For those companies, an MSP might be the IT department and the value is in saving the client from having to hire and retain a, possibly part-time, IT person. At the other end of the spectrum, mid-sized fast growing companies with more complex or sophisticated IT needs may be more interested in system availability and lack of disruption to their very busy IT team. In fact, the more strategic the perception of IT, and by association your IT services, the more valuable will your services appear, assuming there’s trust in your ability to deliver.
Different customers perceive value based on their own circumstances, not in relation to your costs. For this reason, MSPs who use value-based pricing increasingly quote flat fee, custom pricing. Custom pricing allows you to include non-device/seat related value such as regular review meetings, report production and consulting hours, while at the same time giving the client a predictable monthly payment, even if additional devices/people are added to their networks during the contract period. Such value-based pricing approaches allow you to compare the price of your unique service solution to the benefits the client receives and differentiate you from competitive solutions. Custom pricing should, of course, take into account your total service delivery costs and the gross margin you’d like to make.
There are many ways that your managed services can deliver value. Here are 3 key areas to consider:
