Don’t Commoditize Your Managed Services Offering, Why?

istock_000012879352xsmall21The most common advice that is given to most managed service providers is that you never want to commoditize your pricing.  Of course, this sounds very appealing because most IT business don’t want to compete on price and have all their marketing hinge around pricing. What does turning your offer into a commodity really mean and why are we advised to avoid this at all cost?  Essentially it means that you turn your offer into a plain brown cardboard box that you can’t tell apart from any other IT services offering.  In other words it becomes similar to an actual commodity like gas, oil, milk, fruit etc…  Generally speaking one vendor selling bananas can’t say his are any better than the banana vendor across the street.  Therefore they must both compete on price alone.  The main concern is that you can’t extract the most money from your prospect if you’re competing just on price. 

I agree with the spirit of the concept of not becoming a commodity but I don’t sure I can concur with trying to extract the most money possible from every prospect.  This idea is laid our clearly in economic thought where it predicts that people value the same services very differently.  One example is given where different people who attend a baseball game value the benefit differently so that some are willing to pay the lowest fee while others are willing to buy box seats at the highest possible cost to ‘see’ the exact same game.  So yes some companies are willing to pay more for technology and while they might not realize it, it might be the exact same service all the competitors are offering.  Much like when you spend more to buy the branded cereal but don’t realize the unbranded cereal is the exact same product.

The question is really what is the best path to selling more deals and making the most money with your IT services marketing.  One thing that keeps concerning me when it comes to IT lead generation is that no matter how hard computer consultants might resit, many times prospect main concern still comes down to price.  It’s primarily argued that this happens because prospects weren’t  properly convinced of their opportunity cost or loss productivity.  While this cold be the case I believe many companies are now faced with limited budgets and no matter how we fight against it the decision to switch is made based on price.

I say if you have leveraged great outsourcing partners and are essentially selling their time for example if your using GMS Live Expert to managed your NOC and help desk.  Why not get more competitive on your prices and at the same time innovate your offering?  This way you can offer more value added services than the stuffy managed services providers that are trying to charge the most and extract all the prospect money.  You would also be beating the one price as well…  this way you could began to sell on volume.


John Black is the Marketing Director at MSP Telemarketing and has over 10 years experience marketing for IT providers and VAR marketing to help them get more IT leads that turn into IT sales.