Why Is It So Hard To Sell On Value?

I was recently invited to speak at a channel conference where one of my sessions was centered around selling Managed Services on value. Utilizing the techniques and process we developed as an MSP, I demonstrated MSP University's Managed Services Pricing/ROI Calculator, and how to use it to evaluate a prospect's true cost of maintaining their infrastructure the way they currently do it today - managing their own vendors and performing internal "light-weight" IT maintenance themselves to try to address issues without calling in their existing IT provider, who will bill them for the service call.

I illustrated a typical scenario utilizing our Managed Services Pricing/ROI Calculator where I was able to monetize these internal costs, as well as the true cost of downtime for the prospect - both in lost productivity and in lost opportunity, and was able to show the attendees how they can price their services on the value of the cost savings the prospect may realize from retaining their services; rather than from a per-device, per-user or tiered pricing model, allowing them the ability to quote the prospect much higher than they would normally. In this scenario, we were able to achieve a savings of 50% to the prospect while increasing the flat monthly fee by nearly $1,500 over the attendee's average quote for a like environment.

This is the exact technique that allowed us to become so successful as an MSP before launching MSP University. Some of you might remember the original spreadsheet we utilized back then, which is included as a download in "The Guide to a Successful Managed Services Practice". We've taken that and created a lightweight Flash-based calculator from it, which is visually appealing and allows easy modification to the input data to achieve the results that will compel a prospect to engage with you for services.

After my presentation, I received an email from one of the attendees appreciating the session and especially my impersonation of a traditional IT provider and how they price services "let's see, you've got 20 pc's and one server, I can maintain your network for $3,000", and how that creates the perception that they are only concerned with their own bottom line. With the cost-savings analysis approach, it's immediately evident that we are concerned with the prospect's bottom line - which makes this sales approach so effective, as we are speaking to one of the 3 ways we can help our clients increase profits:

• Reduce costs
• Increase sales
• Raise prices or rates

In his email, the attendee went on to identify that they utilize the first approach, and had heard of our methodology for cost savings and selling on value before, but had been skeptical of this technique, as they did not believe it would "work" on them.

Why is it so hard for IT providers to sell on value? Here's what I think, and I'd like to hear your feedback:

1. Lack of dedicated sales training to understand the 7-step sales process - Preparation, Warm-Up, Qualification, Presentation, Overcoming Objections, Closing, Follow-Up
2. Lack of Unique Selling Proposition for every product and service sold
3. Lack of established Sales Process for every product and service sold
4. Lack of effective, supporting marketing tools - website, email templates, newsletters, postcards, white papers, case studies, win-wires, telemarketing scripts
5. Lack of effective marketing processes delivered through specific campaigns with multiple touches delivered via various vehicles
6. Lack of belief in the value of their own knowledge, experience, services and staff

Did I miss any?

The good news is that the attendee asked if MSP University had any resources that could help his organization in this specific area.

You bet we do - through our Boot Camps, Online Training Portal, Books, and Tools, to name a few...!

Attend MSP University's next Boot Camp for FREE!

Erick Simpson
MSP University
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Comments

[Erick Simpson]

Hi David;

Good to hear from you. I believe these additional reasons can all be easily addressed by an effective sales professional, assuming competent service delivery by the IT provider after the sale.

Erick Simpson

[David Schrag]

Here are some additional reasons I can think of:

7. Lack of general acceptance in the professional services market of a value-based pricing model.
8. Failure of value-based pricing models to consider alternatives to status quo. (I.E. proposed service model might save $50,000 compared to status quo but would not save nearly as much compared to status quo plus reaonably competent hourly fee or per-unit fee service).
9. Difficulty of actually delivering on the promises necessary to make value-based model work. (E.G. virtually impossible to eliminate all down-time or to completely divorce the customer from vendor management.)