How to Compete with 'Free?' Create Your Own Channel Value

July 16, 2019 | By Robert Baugh

It takes a lot to develop a solution, price it, market it, and continually refine and improve it before you might see any revenue and profits. So, what happens when a competitor gives away something similar for free? How do you respond? How do you keep your customers happy?

Those and other questions were the topics of an excellent discussion between vendors and solution providers at the recent CompTIA UK Channel Community Meeting, held June 25-26 in Bristol.

The discussion occurred during the “Unconference” breakout session, a "Chatham House Rules" session that’s always a highlight of the UK meeting. Tim Mears, managing director of Axon-IT (@timmears), superbly hosted Unconference and helped guide a very interactive discussion on value and the related topic of "free." We deliberated over three very important questions that MSPs and solution providers may face in such situations, looking to provide guidance for anyone stuck in the value vs. free debate themselves.

1. How to compete with free?

It’s very hard to charge for services when there’s a competitive service available for free (perhaps provided by a VC-backed start-up). That free service may or may not respect customers and their data, or be as transparent, as you are. But customers like free! How do you compete?

VC-backed companies may be able to run losses to build business in the short term, but it’s probably not worth hoping that the first free service will disappear, and no others will come along. Because VCs only invest in areas where they expect to see strong customer demand, consensus among the UK meeting attendees was to accept that the free service exists, identify the premium aspects of your own service or related services that customers will pay for, and focus there.

Also, consider whether you have your own intellectual property (IP) that is also valued by customers. That could be a full product or perhaps an interface that customers can use to access third party services. Although, more likely, it could be the onboarding, reporting and “refreshing” methodologies and tools that you’ve developed as part of your core offering. Whichever it is, you need to identify why someone would buy your service rather use than a free service, as well as some good reasons why prospects should buy from you and not another non-free competitor. This closely relates to the third question below.

2. How do you prove value when customers may not recognise it?

During the Bristol event, the UK Channel Community had already heard about doing research, or due diligence, from the viewpoint of what customers value — not what we’ve got to sell, and about the need to package our services to speak to those needs, and why the customer should buy from you instead of your many competitors.

However, for bleeding-edge and leading-edge services, it may need educational activity, with specific content that can take the customers on an awareness journey to learn about their business problem and how your solution solves it, discovery or recognition of pain from suboptimal solutions, and finally acknowledging the value in your solution.

This led to discussion about the nature of MSP services and the future of the support desk: were MSPs becoming much less technical, and more sales & marketing and customer relationships? Will support desks be there in 5 years?

Some predicted the demise of the support desk while others noted that the number of support calls has stayed constant or increased, but the calls are different in nature: more “How do I do X?’ instead of “Y is broken.”

This, in turn, tied in with questions on “the future” and observations that MSPs are in a good position to help knit together the various SaaS services their customers use. That could happen, for example, through using simple integration and automation tools such as Zapier to drive savings (perhaps even in reduced headcount) through automating repetitive tasks for the customer and/or creating custom apps to do this or to solve particular issues.

My view is that this last insight is one indicator for how the MSP industry might move in future. As relevant stats from Blissfully point out, the average 51-to-100-person company uses 79 SaaS apps and the typical mid-sized company saw 39% of their SaaS stack change last year. Is that an opportunity for greater SaaS integration and management services by MSPs?

3. How do you charge for what customers now expect for free?

This was heartfelt. Customers expect to be able to call and ask questions without being charged. As well as the points raised above, some were very practical and robust in their responses that:

They made it clear to clients where the line was between “included” and “chargeable”
The line had to be drawn early-on in the relationship
Unprofitable customers may need to be managed out

And?

I’m sure many thoughts and discussions were set in motion by Unconference. For my part, I’m convinced that “virtual-role” offerings provide a framework for MSPs to deliver value and to charge for what customers may otherwise think should be free.

MSPs know they have a relationship advantage — they know their customers and their customers trust them — and a clear technical advantage. Many MSPs have become MSSPs as security breaches, privacy failures, and fines take up more and more media space. In that context, as well as charging per user for key business services, one can see MSPs adding virtual Chief Information Security Officer (or vCISO) and virtual Chief Privacy Officer (or vCPO) to their service range.

Both vCISO and vCPO play to MSPs’ existing strengths: both are based in technology, require knowledge of tools, knowledge of the market, and both require creation and maintenance of governance systems ranging from technology updates, through training and awareness, to implementing and maintaining policies and procedures. Given their constant communication, levels of system knowledge and access, and periodic meetings, MSPs are well-placed to deliver these services, managing security and privacy governance with customers. Both services also lend themselves to one-, two- or three-year contract terms and providing support on an unlimited basis (with fair use policies) or with a number of hours each month or quarter on a ‘use-it or lose-it’ basis. Many MSPs are already offering security and broader compliance consulting services that can easily morph into vCISO/vCPO.

All in all, a very challenging and enlightening Unconference and another welcoming, collaborative, networking and respectful CompTIA Community Meeting – see you at the next one!

For more information or to join CompTIA's UK Channel Community, click here.