Jeepers Creepers - Competing with Amazon Pricing is a Bad Strategy
Recently I was introduced to the concept of Amazon Creep – which is essentially Amazon’s race to the bottom from a pricing perspective for their cloud services. When I hear the Amazon Creep discussed among Solution Providers, they tend to be frustrated by the new lower priced competition and how to win their customers back.
Low price is an effective business model for mega companies like Amazon or Walmart, because they enjoy economies of scale. Amazon’s efficiencies lead to lower prices and they still maintain acceptable margins. So companies like Amazon and Walmart promote price to sell their products and services? It is their strategy.
The problem I see is some MSPs are marketing price the same way Walmart does. There is a very easy fix to that problem…STOP DOING IT! MSPs generally cannot create enough economies of scale to make price the focus of the sale, and still win. The caveat to that is standardization and the great efficiencies gained there. The interesting thing about companies who standardize is as they become more efficient, they tend to charge more for their services, not less!
So how should an MSP avoid price and focus on value? Whether you listen to Alex Rogers, Paul Dippell, Gary Pica or we look at our best partners we see one thing in common: no line item pricing. We see one monthly price given to the customer for everything. When I say everything I mean: hardware, software, installation, professional services, data migration, managed services, cloud service, etc.
Let the giants like Amazon creep their way to the bottom and let’s see even more MSP’s climb their way up the value pyramid and charge more.
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