Commoditization: How To Overcome This Huge MSP Hurdle

If you were to go to an MSP conference as a potential customer, you could probably walk out the door with dozens of possible service providers. The MSP industry is experiencing an influx of new companies that do what you do.

With so many MSPs entering the industry, you face the challenge of commoditization. Learn what causes this issue as well as how to overcome it and transform your business into a top MSP.

What Is Commoditization?

Commoditizationhappens when there’s downward price pressure that causes lower profit margins. It comes from “me-too” scenarios, in which all managed service providers start to look the same. If a potential client says that your competition offers a particular service, is “me too” generally your answer?

When all MSPs offer the same tools and technologies, clients may not be able to determine the differences between your MSP and another. There are multiplying cloud features, and cloud prices are falling.

This is problematic for MSPs because it’s becoming more difficult to differentiate your company from others in an increasingly crowded market. There is perceived equality among all MSPs, regardless of your expertise and capabilities. Now, cost has become the biggest determining factor for clients, forcing the price for IT service providers to decline.

The more prices fall, the more trouble your company is in. You may feel the need to lower your prices to remain competitive, but that only leads to lower profit margins and less leverage.

The Top 10% And How To Get There

While average MSPs are fighting commoditization and the ensuing decreased profit margins, top MSPs are flourishing. They’re garnering more monthly recurring revenue and selling their services at a higher price. As a result, they see profit margins that amount to more than three times those of the average MSP.

How are they doing it?

They’re selling their services at the right price.

When you sell your services at a lower price, you’re not in a position to generate monthly recurring revenue at the level of a top MSP. You have to increase the price of your offering and provide the value to justify the expense.

They’re separating themselves with value.

Everyone is selling the same stuff: monitoring, security, helpdesk access, cloud management, etc. If you’re selling based on these features alone, you begin to look exactly like your competition. The key is to increase your value offering with features that your competition doesn’t offer. Maybe you employ a full-time Network Administrator – a role that not many MSPs have adopted. Maybe you’ve developed an innovative cloud dashboard, making it easier for clients to gain access. Regardless of what your competitive advantage is, you need to sell this benefit to your clients. This is your MSP Super Power.

If you want to become a top MSP, you must find a way to stand out and break through the commoditization challenge. Identify your Super Power and use it to sell your services at the right price. This is the only way to overcome the plight of average MSPs and realize greater monthly recurring revenue.

Want to find out more about unleashing your MSP Super Power? View the free webinar now.

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