As an MSP, customer loyalty can be a challenge – but first, there is the need to turn a prospect into a customer. These two areas can be inextricably linked: if an MSP operates as a completely open entity where customers can leave as they see fit, then loyalty must be earned on a day-by-day basis, with some customers placing cost before quality and moving to a cheaper, not necessarily better, option.
It is earned wisdom that the cost of gaining a customer is high and must be recouped over time via the ongoing contract. As such, most MSPs do not allow for month-by-month customer subscriptions, instead pushing for longer term yearly or multi-year agreements.
Although this makes sense for the MSP, it can also become a barrier to the prospect becoming a customer. Rather than seeing a relatively low per-month fee, they are presented with a much larger overall fee that they must get past the business. So, back to square one and cost becoming a bigger issue.
How can an MSP face down the two issues and make it easier for prospects to become customers, while making customers more ‘sticky’?
First, remove the up-front cost barrier. Special deals can make it much easier for a prospect to decide that trying out an MSP’s service is worthwhile – particularly with the understanding that they can leave at the end of that special offer. The key then is to make it a ‘puppy dog’ deal.
What’s a ‘puppy dog’ deal, I hear you say? Imagine a family, where the children want a dog. The parents know that they will be saddled with looking after the dog if they cave in and get one. However, eventually, they get a puppy, on the understanding that if it doesn’t work out, then the dog can be returned. After a period of time, the previous owner goes to see if the new owners wish to return the puppy. The new owners grab the puppy and say “Never – he/she is just so adorable” – even if there have been wet patches on the carpet and the odd shoe chewed here and there.
So – an MSP has to offer into something where the new customer will then look at it after a period of time, weigh the pros and cons, and land on the side of the pros. This may take a bit of time – so a one-month special deal is not likely long enough to persuade them to stick with it. Instead, make the special deal, say, three months. Provide lots of support during that three months to help them through any rough times. Maybe event throw in a few extras on top of the basic deal to impress them with what else you offer.
Then, after the special deal period is over, see how they feel: it will be likely that they have several reservations over moving to becoming a full-time customer. However, they will, by this time, have sunk a fair amount of time and money into learning the system and creating a lot of data within it. This sunken investment is a heavy drag on change – starting afresh with a different MSP offering nominally the same service can be a heavy cost that many organisations are unwilling to countenance.
Obviously, if your services are really poor, no amount of special deal/sunken investment will save you from either a lost customer or an extremely unhappy one – one who could then spread messages through the rest of the prospect community about how bad your services are. As such, it is still incumbent on your as a service provider to ensure that what you provide is fit for purpose – and to use these special offer periods not only to teach the new customer on how to maximise their opportunities through usage, but also for you to learn where problems are and to address them effectively.
Once a special offer customer has been turned into a full-price one, the costs of the special offer will need to be recouped. This requires careful planning, as the longer the special offer is, the more that needs recouping over the period of the longer-term deal. However, the longer a customer remains a customer, the more effective the sunken investment becomes. As such, try to sign them up for a long-term deal – but do include review points along the way where any significant poor performance on your part can be used as a break point for the contract. Assuming you have sufficient faith in your own services, then such ‘significant’ poor performance should not occur.
Being able to spread the cost of the special deal over a longer period makes the additional cost per month so much less – to a point where it should become almost unnoticeable to the customer.
So, a prospect is first presented with a low cost, short-term deal that is easy to get past the business. Then, after the short-term deal expires, they are faced with a cost of extraction that could be difficult to get past the business, while users have become relatively used to the system. Now, faced with such extraction or a continuation where they have options for extraction further down the line, it is likely to be easier to stick than twist.
None of this is immoral, by the way – if it done from a position of strength. You must have strong services and you must be effective in how these are provided, supported, and maintained. Sure, a ‘bad actor’ MSP can also use such an approach to lock in customers and make money from them even though their services don’t meet needs – but such MSPs are few and far between out there.
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