Bundling: How to build your offer
Bundling includes combining services into various bundles so they can be offered at a single price. It enables businesses to choose a package that’s within their budget and meets their requirements; bundles also give clients an option to scale up or down as needed.
Like everything, bundling has its own pros and cons as well. While bundling has a lot of pros, sometimes it can be a bit confusing to compare a large number of bundles—and not only for first-time customers, but also for existing ones that are looking to upgrade to another package.
From an MSP's point of view, having many different types of bundles can make it difficult to track the various service levels for each customer, especially when an MSP provides services to a large number of clients.
However, there are more pros than cons when it comes to bundling services. Karl Palachuk, writer of Managed Services in a Month, the four-volume Managed Services Operations Manual, and over a dozen other books, has said that “he doesn’t recommend offering services à la carte, and instead suggested focusing on the development of tiered packages.”
The “platinum” bundle should include everything a client will need, such as antivirus, a spam filter, storage, backup, email, and network security. Palachuk also stressed that “[an MSP's] platinum package should include what differentiates [them]—what [they] excel at —whether it’s voice, signage, wireless networks, etc.”
Benefits of bundling:
- Simplified offers: Bundling makes the selection process easy for clients, as they usually don't like getting into the technicalities of services offered, leading to easy client conversion.
- Streamlined IT operations: Since multiple services are grouped in a bundle, it's easier for MSPs to streamline their clients' entire business operation framework.
- Increased customer interaction: Bundling a range of services helps increase an MSP’s interactions with its clients, enabling the MSP to proactively resolve any issues with the service and thereby increase the retention rate.
Now, a question arises here: What do I include in bundles?
In order to get the right mix of services, there are a few factors to consider.
Are you a new business or an established one?
If you're a new MSP, you need to analyze what your competitors are offering and design your bundles accordingly.
What are your technical strengths?
For example, if you provide cloud-based infrastructure services, you may include cloud-based applications and remote asset monitoring in the same bundle to offer seamless cloud services.
What are the current and emerging industry trends?
For example, an MSP planning to position itself as an extensive network security provider can consider adding mobile endpoint security for clients that are increasingly integrating mobile devices into their networks, provided the MSP has the requisite mobile systems expertise.
Some common services offered by MSPs, according to research, include:
- Data backup.
- Business application management.
- Mobile device management.
- Management of productivity applications (like Office 365).
- Network monitoring and management.
- Cloud-based infrastructure (IaaS).
- On-premises server management.
- Endpoint security.
- Management of cloud-based applications (SaaS).
- Network security.
Tiers (Bronze, Silver, Gold, Platinum, etc.)
The flexibility of a tiered model is what attracts most clients. A customer has the choice and flexibility to choose a service model based on their budget and scale up as their business needs increase. Here's what a basic tiered pricing model may look like:
|Silver||Basic starter pack, with basic services||Basic adware and virus removal and patch management, plus phone and remote support services||$100/month/PC|
|Gold||Intermediate pack, with standard services||Services offered in Silver + additional on-site customer support||$120/month/PC|
|Platinum||Advanced pack, with premium services||Silver + Gold + 24x7 customer support services||$180/month/PC|
*This is just a sample of tiered pricing; prices and services may differ in reality.
While a basic service bundle such as Bronze or Silver attracts entry-level clients, the intermediate-level packages work wonders for customer retention as clients gradually grow and opt for advanced bundles like Gold or Platinum.
Irrespective of the all-you-can-eat or tiered pricing model that you offer, it's imperative to establish apt bundle pricing.
Here are the things you need to keep in mind while deciding the prices of bundles:
- Competitors' pricing: Don’t get swayed by a competitor’s pricing and lower your rates just to counter theirs. Instead, analyze your expected delivery expenses for each service, including the corresponding costs for your technicians.
- Break-even cost: Once you get the cumulative numbers from the above analysis, calculate service delivery cost by dividing the total delivery costs of each service by the number of clients you expect to provide services to. Your service delivery cost is equivalent to what you need to charge your clients to break even.
- Profit margin: Find out the cost difference between the MSP bundle your client has opted for versus how much it would cost the company to provide the same services in-house. This should give you a pretty clear picture on how much clients save by opting for your services and, therefore, how much profit you can gain by pricing the bundle accordingly.
- Standardizing: Finally, standardize the price for each service bundle based on factors such as the average market price, specific user subscription periods, and your market share.
These factors will help you decide the ideal bundle pricing, creating a win-win situation for both your business and your clients.
Note: MSPs that are shifting from a traditional break-fix model to managed services should review the prices paid by their clients along with the service delivery time efforts required to successfully deliver the services. This can act as the basis for a managed services package price that’s on par with what you charged them the previous year.