Avoid The Race To The Bottom

I recently learned an interesting phrase from my friends in the managed services profession — 'the race to the bottom.' That race is defined as a price war that usually ends badly for at least one of the companies involved. That race is particularly evident in the managed services profession. Successful MSPs (managed services providers) are constantly challenged by new entrants into the market who compete solely on price. Successful MSPs will tell you that you must not strive to win that race. Instead, you must avoid it altogether. This message isn't just for MSPs — traditional VARs can learn from MSPs' experience in battling the race to the bottom.

Greg Donovan is the CEO of Alpheon, a successful MSP located in North Carolina. "The race to the bottom is one that all companies — not just MSPs — must avoid," he told me. "Managed services customers can only be retained based on the value you are delivering to those customers. A big part of that value is what you bring to the table as a trusted advisor." That sounds great, but how are VARs to do that?
It all starts with embracing a consultative sales approach. Before you can sell a customer anything, you must get a full understanding of the customer's situation. Here are four sample questions to get you thinking:

n What is your prospect's biggest business challenge?
n What is your prospect's biggest business pain point (may be different than the challenge)?
n What is the biggest thing that could help your prospect defeat its competition?
n What are your prospect's goals for this year and beyond?

Can you mold your products and/or services to help your prospect solve even one of those four challenges? If so, you have taken step one to achieving trusted advisor status. Remember, it's up to you to uncover the opportunity and provide the value. It is not up to the prospect to shape its business around your offerings.

By asking open-ended, business-oriented questions, you are planting a seed that can grow into a relationship that is more valuable than your competitor's lower price. Developing a trusted advisor relationship with a customer will not happen overnight. However, it will have a much better chance of surviving over time and in hard times.

So, it seems that you're at a fork in the road. You can work long and hard learning as much as you can about your prospects and customers to build strong, lasting relationships. Or, you can race to the bottom by cutting prices and offering minimal value. The former is tough to do. The latter is easy. One more question. Can you name one thing you really value that was easy to achieve?