When it comes to pricing and packaging your managed service offering, you might question whether your SMB customers are getting a good deal—or if your offering is too good to be true. Managed services don’t need to be commoditized. In fact, your managed services pricing should reflect the value your offering provides to your customers.
To help you build your managed service profits, we read—Never Split the Difference: Negotiating as if Your Life Depended on it by Chris Voss, former FBI negotiator. This book explores personal and business tactics for negotiating effectively without giving up more than you need to.
How to use negotiation skills to overcome objections
As an MSP, you want to make sure your pricing is correct. You have to strike a balance between maintaining your margins and keeping things affordable for your SMB customers. Often, this can lead to pricing objections. That’s where negotiation skills can come in. Based on Chris Voss’ advice, we pulled out four negotiation tactics that can help you overcome these types of objections.
The power of ‘no.’ Often, the word no is seen as a rejection and the end of the conversation. But it’s actually the word that opens the door to negotiation. Think about the last time you received a telemarketing call. They probably asked a series of questions prompting you to say ‘yes.’ This method may work for getting small donations for a fundraiser, for example, but it’s often ineffective. When it comes to negotiations, though, no is one of the most powerful words, Chris Voss says. It allows the customer to reveal what factors are influencing their decision.
For example, if a prospective customer says no to your top tier offering, you should ask what part of the offering doesn’t work for them. This allows you to engage with them to find out what they’re really thinking.
Chris Voss explains: “‘No’ has a lot of skills. ‘No’ allows the real issues to be brought forth; ‘no’ protects people from making—and lets them correct—ineffective decisions; no slows things down so that people can freely embrace their decisions and the agreements that they enter into; ‘no’ helps people feel safe, secure, emotionally comfortable in their decisions; and ‘no’ moves everyone’s efforts forward.”
Getting a ‘no’ from a customer can help you uncover any potential barriers to a managed service contract, and it can help prevent them from changing their mind once a decision has been made.
The power of open-ended questions. Open-ended questions are an essential part of understanding the SMB’s position. During negotiations or conversations about business contracts, you need to learn what’s important to the other side. One way to do this is by asking open-ended questions about what they’re looking to achieve with your managed service offering. For example, they might want to eliminate their in-house IT staff and cut costs.
In the book, Chris Voss suggests avoiding “questions that can be answered with ‘yes’ or tiny pieces of information.” An open-ended question will get you more information and provide a more complete picture of what the customer wants.
The power of being fair. Whether you’re in a high-stress situation or trying to acquire a new customer, everyone wants to be treated fairly. This means both parties benefit from the transaction in some way.
Chris Voss suggests that to negotiate effectively, it’s usually best to address fairness early on by saying something like: “I want you to feel like you are being treated fairly at all times. So please stop me at any time if you feel I’m being unfair, and we’ll address it.” Framing fairness this way shows the perspective customer that you have respect for their company and that you don’t intend to pull the wool over their eyes.
If an SMBs says your managed service package is overpriced, it gives you an opportunity to highlight the value of your services and what you can provide for their company. If they still don’t budge, think about what extra services or products you can offer them without reducing your price. Can you throw in some swag, a few extra hours with technicians, or spam protection? These few extra bonuses should help move the negotiations in a positive direction without reducing your bottom line — reaffirming the value of your services.
The power of walking away. Some customers will never make up their mind, or they might go dark. Chris Voss suggests asking them, “Have you given up on this?” This ‘no’-invoking tactic can help interested customers reopen negotiations to talk about what has been getting in the way, and it can help uninterested individuals by giving them a way out.
Regardless of the customer’s answer, this last-ditch effort helps give them the benefit of the doubt, and it can help you avoid wasting additional time pursuing the opportunity. Don’t be afraid to ask this question, and if they’re not interested, don’t be afraid to walk away! There are many potential customers out there, and getting hung up on one that won’t make up their mind or goes dark isn’t worth your time.
Negotiation is a vital component to building an effective managed service agreement with your SMB customers. By using these tips from former FBI negotiator Chris Voss, you can stop discounting your offering, increase your profits—and never split the difference again.
Never Split the Difference
Negotiating as if Your Life Depended on It
By Chris Voss
274 pages. HarperCollins Publishers. $17.89.
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