In the halls of an industry event recently, I overheard a conversation that stopped me in my tracks. The discussion, between two longtime MSPs, caught my attention because of the use of the word “trunkslammers,” and oldtimey term leveled by many VARs towards their peers who don’t…
Add much value to the industry and tend to ‘swoop’ in on deals at the last second to win on price by accepting margins that even would even make distributors turn up their noses.
The contention of the conversation:
These veteran managed service providers are increasingly facing competition from those that they consider “trunkslammers,” and are justifiably concerned about their own business models going forward.
But how could this be? It was just a few short years ago when, in the hallways of the very same industry events, MSPs could be overheard comparing ways to drive those margins up, up, up and up. In fact, many VARs turned to managed services as a way of getting away from the low-margin rat race of hardware centricity that many felt were forced upon them by trunkslammer resellers.
Given the success (and the margins!) of managed services over the last five years, innumerous resellers, consultants and other IT professionals (and not-so-professionals) have been drawn to the concept. It was inevitable that eventually, some of them who could not compete on value would decide to compete on price.
But don’t despair. You’ve got a head start on them, and there are a number of ways to deal with customers or prospects that are being wooed by a competitor willing to accept ridiculously low profitability. Here are some of those ways:
Your first step is one that should always be ongoing. Without being over-the-top preachy, you’ve got to take every opportunity to make sure your clients understand what exactly your managed services outsourcing services are doing for them, and even more importantly, the value you’re providing for your monthly bill. Make sure your reporting highlights return on investment and agreed-upon key performance indicators, and that those KPIs really mean something to your clients.
Your clients understanding and buy into your value proposition will go a long way in reducing their willingness to be wooed by someone who is charging half as much as you are, but offering a small fraction of the total tangible and intangible value.
If you feel like your margins may be at risk, it’s time to get proactive and really look at your processes. Have they been recently optimized? How do they compare to industry-wide best practices?
Now’s the time shine your processes up until they glitter. Get in closer with your PSA and RMM partners and make sure their products are as fine-tuned for your business as possible.
If you can tighten up your processes, and automate everything you can, maybe you can reduce your costs of supporting your existing users, which can either boost your profitability or give you some flexibility to compete on price while still maintaining high value for customers and margins for your company.
You’ve already figured out how to boost your service, and your profitability, by using an hosted help desk service, right? Congratulations, you’re ahead of the pack!
There are literally hundreds of other vendors that are very anxious to work with successful managed service providers like yourself, offering tools, marketing dollars and products that allow you to offer everything from managed security to mobile device management to managed online backup.
What else is out there that makes sense for your offerings and your target audience, that can bolster your value proposition with prospects and increase your stickiness with customers?
Probe your customers on what’s got them considering a lower-price option. Perhaps, if your offerings are the BMW of managed services, they’d be perfectly happy with a Toyota or a Honda – something that’s reliable and provides great value, but maybe lacks some of the additional creature comforts of its luxury competitors.
Hey… there’s a good living to be made selling Hondas! Maybe there’s a way to strip some of the “luxury” features off your services plans and offer a “lite” plan that protects both the value you provide your customers and your profitability, but comes in at a price point that’s more attractive to cost-sensitive customers.
Ultimately, there are going to be some customers and prospects for whom there is no greater value than saving a few bucks a month. This one falls under the “be willing to fire unprofitable customers” category.
But whether you’re the one firing the customer or the one being fired, stay classy, stay professional, stay friendly.
You never know when a couple of months of bad service or some unplanned downtime may convince them going cheap can be very expensive for their business, and you want them to come running back to you when that happens.
They’ll just be doing so at your rates. And not their former longtime-customer grandfathered rates, either!
Without naming names – what other ‘trunkslammer’ situations have you come across and how have you dealt with them?