When Marketing IT Services Should You Raise or Cut Prices?

14437668_sAsking if MSPs should raise or lower their prices is a very controversial topic in the marketing IT services arena!

There are credible voices on both sides of the debate that passionately advocate for their belief on the subject.

What are the issues at stake for computer consultants that grapple with this pricing conundrum?

The Pros and Cons To Raising Prices

It’s important that we evaluate the benefits and risk associated with raising the price of IT services.  First and foremost you have the concept that some consumers naturally associate a higher price with quality.  This means certain buyers will gravitate to a higher price because they believe it will provide better security, uptime and support.  The other significant benefit that a computer consultant derives from marketing IT services at a much higher price, is a much smaller client base.  However, they will still make the same profit as volume based consultants that require more customers to be profitable.  This allows more expensive consultants to support their customers with a smaller workforce. Plus they won’t constantly face an on-boarding crisis like volume based technology providers; that will always have be recruiting more and more employees.

Of course, when we say that raising prices means you will have fewer clients this is because of economic principals.  Ultimately it means that it will be more difficult to sell a higher price but still possible.  In addition, having fewer clients can lead to a shrinking customers base cause by the difficulty of customer acquisition along with a greater likely hood some clients will cancel their contracts.  You see that there is always a possibility that the environment with in your customers business can change if they are bought out, merge with another company or go out of business.  Of course, when businesses experience a down turn they often go looking to cut back their most expensive vendors and having a higher price usually means your service will be on the chopping block.

Evaluating a Lower Price

Obviously it goes without saying that the single biggest advantage to lowering your price is dramatically increasing demand. This simply means that it will be much easier to sell your IT support plan at a lower price and with fewer marketing dollars.  Furthermore, your relatively inexpensive price won’t expose your service to the chopping bloc, when times are tough!  Also, a much larger customers base will afford your company the ability to withstand financial hardships along with the normal rate of attrition.  Another benefit derived from the greater volume of customers is that it empowers you to negotiate with vendors to lower cost and become more profitable.

Of course, a much lower price for delivering computer services can expose your company to sever loses if any one of your customers experiences major downtime.  In other words, when the number of hours required to support a customers exceeds your flat fee you are losing money.  Obviously, if you have a much lower price the likely hood of this happening is much greater than a company that charges a higher price for the same level of support.

What Should You Decide

After analysis of the pros and cons I believe the answer to the question depends more on which service deliver model you have chosen.  In other words, are you still a traditional managed services provider or have you adopted cloud computing.  The reason this matters is because managed services is at it’s core extremely labor intensive especially during the migration process.  Plus you still have to maintain on-premise services that require onsite labor.  Trying to lower the cost of this plan would place an enormous burden by constantly having to recruit and train an army of technicians.   This is why I believe the cost of managed services should be priced much higher.  Whereas, cloud provider don’t face the same challenges because they can rely on their data center partner for the majority of their support and don’t require emergency technicians to go onsite.  This means when marketing IT services the ultimate decision to raise or lower price depends on whether you’re selling the cloud or traditional managed services!

David Walter

David Walter is the Marketing Director at MSP SEO Factory, a company providing IT marketing to businesses in the United States. Their expertise is creating MSP marketing ideas and turning them into original, optimized blog posts. Their process involves in-depth brainstorming, thorough editing, and effective promotion of fresh and unique articles for their MSP Business clients. He has 17 years experience in marketing for the IT industry, as well as experience in direct MSP marketing, internet marketing, article writing. David speaks at trade shows, webinars and is a sales trainer for major IT companies. He is also a published author; his latest book is Stratospheric Lead Generation Secrets.