Communicating Price Increases
Rolling out price increases can be challenging for any MSP. In this video, our MSP Advisors discuss how they have approached communicating price increases across different types of projects and contracts.
November 05, 2018
Question: How do you handle the conversation around price increases?
Chris Taylor: A lot of times we've tried to add more value to our price increases so, although it is an increase we bolt on more advantages and other additional services. They're not only just getting a price update, but they're getting more value out of the services. It's always a difficult thing balancing those price changes and, if you could make the customer feel that they're getting more value out of that, then they take those price adjustments better.
Bruce Lach: There's a couple answers to that question. The first is with an existing client: In our world we tend to have three-year contracts, so we guarantee the price for the life of that contract. The increased price action happens at the renewal time, which of course scares everybody - especially the sales team. It makes sales nervous - they fear it'll open the opportunity to look elsewhere, but you have a fact-based, matter-of-fact conversation. "You haven't had a price increase for three years. All our people want raises just like your people." You just set the stage, and make sure it's a reasonable price increase, lock it in for the renewal term of the next three years. and usually it's a pretty good outcome. Now in terms of point solutions - like project opportunities or an upgrade to say, a piece of equipment - that's somewhat similar, but prices change all the time and I would just stand up, and just be honest. This is the price now, and this is what happens tomorrow. It's going to be more expensive or potentially it's less expensive. To me, that's the harder price action. What do you do when you're actually more efficient or the cost actually drops? Do you pass that along to your clients or do you just use it as an entry point into new prospects or new opportunities? So, I think the opposite is the more challenging.
Fred Alonzi: We don't raise our prices very often, so if you look at the Par3 logo, we advertised: technology, people, value. Because we are going to nonprofits and not for profit financial institutions, it's very important to add value or products if we ever have to raise prices. And generally, it would be the labor because obviously the staff wants more money. We always try to add more value from the technology side, so adding more features to our managed services that we can provide at an easy level for us. So, we've added security services over the last few years, and a few other items. We may increase prices, but we always try to increase value along with it. I think it's really important that our clients always understand the value you're getting from working with Par3.
Question: How do you handle conversations about technology with non-technical people?
Chris Taylor: Sometimes we deal with the business owners, the c level, and we have to really find ways to deliver technology that they can understand. Other times we're going to be dealing with an IT staff that's very tactical. So, we do a lot of team selling. We bring different people from our organization out to the customer site to talk at different levels about that technology. Sometimes it's a real focused technical person, sometimes it's more of a business operator, CFO, CEO type. I go out on a lot of our calls to talk to clients about technology in general, and the value-add more than just speeds, feeds and the technical side of what we do.
Bruce Lach: We start with the idea that we help them become good stewards of technology on behalf of their business. We actually use that language. Our job is to educate them. We don't teach them about the technology per se, but we teach them about what goodness looks like. We call them ‘guiding principles.’ So, for instance, take something as simple as backing up your data; we describe seven or eight key attributes that we'd say, “these are guiding principles to have good backup in an enterprise of any size.” We can then compare that to what they actually have. Maybe they can check two of the seven good attributes and we can then demonstrate a gap in what they’re doing against what goodness looks like and we don't sell them. We just teach them and they can then determine the value of filling those gaps at a point in time where it makes sense for their enterprise. We literally don't try and sell them anything. We just teach them about that technology stack. Describe the goodness on all levels of that stack compared against what they have. And then plan. Usually we have an 18-month rolling plan that accommodates filling those gaps and at the appropriate time -- based on their budget or their maturity level or just the ability to assimilate -- change.
Fred Alonzi: People laugh at me sometimes when I tell them that I'm actually in a people business. They kind of look at me like, “technology?” but it's very true. People are either scared of technology or just do not understand technology. And, if you look at my background, I was an English major in college and one of the three partners with Par3. We didn't come at it from the technology provider side. We came into this business as technology users and we felt we could do a better job of supporting it as being a user. So, it's really important that we communicate and stress that very much when I hire new staff. Communication skills is one of the top things on my list. And, so we can communicate with any level of person in any organization.