Paul Green's MSP Marketing Podcast

Episode 49: Why MSPs should never offer discounts

Paul Green's MSP Marketing Podcast
Episode 49: Why MSPs should never offer discounts
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In this week's episode

  • How would you want a client to describe your business in just 3 words? Hopefully 'cheap' wouldn't be one of those words! This week on the show Paul explains how discounting your services can affect your business in good, but (mostly) bad ways
  • Plus, what's on your wall? MSP legend and author Karl Palachuk joins Paul to list some of the unbreakable rules he used to put up around the office, designed to focus him and his staff on growth
  • Also how to win some incredible prizes to celebrate the podcast's first birthday. And some great tips on how to change your daily habits to make you more productive

Show notes

Episode transcription

Voiceover: Fresh every Tuesday for MSPs around the world. This is Paul Green's MSP Marketing Podcast. Paul Green: Hello, and welcome back to episode 49 of the show. Here's what we've got coming up for you this week. Karl Palachuk: A lot of people at the beginning of the recession started saying, "Well, times are hard and Karl doesn't understand, and you can't get prepaid for everything." Paul Green: We've also got plenty of book suggestions for you this week. A great suggestion from an MSP, that's coming up towards the end of the show. And I've got a book suggestion for you in about five minutes time that could literally change your life by changing the way that you act every single day. I'm also going to be reminding you about our fantastic competition that we're running throughout October with a chance for you to win a one-to-one marketing consult with me, plus loads of other valuable prizes. Voiceover: Paul Green's MSP marketing podcast. Paul Green: Should you offer discounts to clients? My gut reaction on this one is no. And I think the majority of the time, you shouldn't be doing that for a number of reasons I'll tell you about in a second, but there are moments where actually offering a financial incentive, such as a discount can be a very valuable thing to do either to retain a client that's currently having some issues or just to get a new client on board, but it does come with some dangers. Let's go through all of these things. On the whole, when an MSP that I'm working with says, "Should we offer a discount?" My reaction is no. No, I don't believe you should. For a number of different reasons. Firstly, I think it can completely change the relationship that you have with your client. Depending when you offer the discount, it can do some fairly substantial damage to the way that they think about you. Paul Green: For example, if you say to a client, "Hey, look to work with us. It's a thousand pounds a month, but I'll give you a discount for life down to 800 pounds a month." Now that can be a very damaging thing to do at the start of the relationship you have with the client. It's a wholly different thing to offer a discount to someone before they've ever become a client to you compared to offering a discount to an ongoing client. Someone you've already got a relationship with in return for them taking on an extra service. When someone's thinking of using you for the first time, if one of their primary motivations for choosing you is because you've got that financial deal, that discount they're almost picking you for the wrong reasons. We've said before on this podcast, the very best clients use price as one of the deciding factors, but not the deciding factor. Paul Green: If price is the deciding factor, they're picking you for the wrong reasons and the chances are they won't be a great client going forward. People that you take on board, whether they're a good fit or not, but you need the cashflow it rarely works at well in the long-term. It just becomes a burden that you wish you'd never taken on when the relationship starts to fail. Now, I think when you first start working with the clients, you shouldn't discount cash. You should absolutely stick to your guns. This is how much we cost. This is why it costs that much. If you want to do business with us, if you want to partner with us, Mr. or Mrs. Client, then this is the price that you should pay. Paul Green: I think there are only really a couple of times where you would offer a discount. So one of them is if your client is struggling. Now we saw this a lot during March, April and May, where people were really impacted by the lockdown. And I think we're going to see it again, as we go from this point forward where your clients start to struggle, perhaps because their business has been reduced or because they've lost a whole number of their staff, not through really any choice of theirs, other than the need to reduce the numbers. That's where you absolutely would step in and you would help them and you would potentially offer them a discount. And what you're playing here is almost a bit of a game. You're playing a game of giving them a discount now or making it financially easier for them now. And essentially you taking the financial impact of that in the hope that if your client survives and gets through this, you're going to double down their retention because they will remember who looked after them when times were tough. Paul Green: So that's a reason you do that. I think you can also offer a discount for a client when they buy extra stuff from you. An existing client where you've got an existing value relationship, they value you, they see you as a partner and you are offering them extra services. That's the point at which you would absolutely say to them, "Look, we retail this out to everyone else for 200. We'll give it to you for 175 as a thank you for our existing relationship. And as a thank you to you for being a client." Or, you might say to them, "Look, we've got service one, service two, service three. These are the prices. If you were to take all three of these in a bundle, then obviously we can offer a discount because we get some economies of scale with that." I think if you're going to offer a discount to them, a financial discount, you've always got to give them a reason why. Why are you able to offer them this financial incentive? Paul Green: Another reason that you might offer a discount is just to get the business in. As I said, just a few minutes ago, we've all done it, where we've taken on a client purely for cashflow reasons. And even though we all regret it, do you know what? Every single one of us would do it again and again, and again, if it means that the business survives. And actually if you're in a place right now where cash is tight and you really could just do with some extra pounds or dollars or whatever your currency is coming through your bank account, then using a discount just to get those clients on board is the right thing to do. You just need to remember with that, the right mindset for those kinds of clients. You've got to remember that they're not going to be long-term ongoing clients. In fact, if anything, they're going to be pain clients, they're going to be the kind of clients that really do make you and your staff miserable down the line. Paul Green: They're the bottom 20% clients possibly even the bottom 20% of the bottom 20% clients. So long as you remember that, and you know that they're the first ones who have to go when times get better and you no longer need their hassle that goes with their cash then I think that's okay. Because we're all going to do that really to keep our businesses going and make sure the cash comes in. So as long as we do that knowingly and very aware of what we're doing and why we're doing it, that's not such a bad thing. Yet, still, as I said, right at the beginning of this piece, I still don't think you should offer discounts routinely. And certainly not to new clients, it has a major impact on relationship has a major impact on the way that they think about your business and just using a discount to when a client is not necessarily the right thing to do. Paul Green: So, what would you do? Because people do respond to offers. Everyone loves a deal and an offer and feeling like they're getting something extra. I think the answer here is to offer value add rather than a discount. So instead of giving someone a cash discount, you would give them extra value. This happened to me the last time I bought my car, I didn't get a cash discount from the salesman, even though we were playing that game of come on, I'll ask for a discount and you decline it. But what he did give me was extra stuff. I got the protection on the seats that stops the liquid soaking in and I got floor mats. And I can't remember what else I got, but I got some value add stuff. The cash impact to him was probably minimal, but the perceived value to me was a lot higher certainly than the cash outlay that the car dealership had to lay out. Paul Green: And I think that's the answer. You've got to look at this and say, "What extra could I give to my clients? Be they new clients or existing clients. So they see that we're adding value, that there's extra stuff for them, but the actual cash cost to us is minimal." And we're certainly not risking skewed client expectations. We're not risking damaging the relationship or them thinking that they can always get a deal. That's the other downside of giving deals to people. They will always hold out for a deal and actually we don't want them to do that. We want them to see that the price is the price is the price. So to summarise then I think you need to keep the possibility of cash discounting in your back pocket as a tool either when you're desperate for the money or when you're very keen to get this particular client to buy extra stuff from you but it's something they should only be used sparingly. It's not something that your salespeople should routinely be able to use, value add is a much better way to gain new clients than discounting will ever be. Voiceover: Here's this week's clever idea. Paul Green: I'm trying out new business and marketing books all the time. I do love finding a new book. Earlier on this year, I think it was around about February, March when the lockdown first happened. I got hold of a book called Atomic Habits. Paul Green: One of my clients recommended to me and I got hold of the paperback and I loved it. It's written by an author called James Clear, and actually I've joined his email list as well. He sends out a once a week email with loads of productivity ideas. And the core idea behind Atomic Habits is that if you want to achieve your goals, the big things that really inspire you in life, that you're really working towards. It's a lot more about what you do day to day than it is about writing that goal down and being clear what it is that you want to achieve. An Atomic Habit is a daily habit, a regular practice or routine that's small, that's easy to do, but it is also the source of incredible power because you benefit from something called the compound effect. Paul Green: Now we all know about the compound effect because when we save money, for example, you put a pound or a dollar away every single month. And after let's say 36 months, you haven't just got $36. You've got maybe 37, $38. Well, if you can find a bank that will give you interest anyway, it's a bit hard these days, but you get the idea, you get a little bit of interest and then you earn interest on the interest and interest on that interest and so on and so on. And that's called compound growth. And it's exactly the same with your habits as well. Based off the back of that, when I do my daily weightlifting, just something just to keep my arms toned, nothing too serious, you understand? I used to do 80 repetitions a day, and now I do a hundred repetitions a day simply because the compound effects says those extra 20 repetitions every day, times five days, that's another hundred repetitions a week. It's the same reason why I stopped running three or four miles a day and started running five miles a day. Paul Green: That one extra mile has very little impact on me because I'm already out sweaty, dirty, wet if it's raining. But that one extra mile makes quite a difference to my fitness over a period of time. That's another 70 or 80 calories that I'm burning off every single day, that all adds up. And it's no surprise to me that my weight loss has gone hand in hand with that kind of way of thinking. This is what Atomic Habits are. They're tiny little changes that you can make to your routine that make a big difference when they add up over time. Now the book also addresses not just good habits, but bad habits as well and how bad habits repeat themselves again, and again and again, not because we don't want to change, but because we've got the wrong system for change. Change comes from good habits over a period of time, doing something once doesn't seem to make a big difference, but when you repeat it five or seven times a week and you repeat it 20 or 30 weeks of the year, that's where you get the big change. Paul Green: And it's exactly the same with the bad habits that when you're doing those bad habits repeatedly, be that biting your nails, having a glass of wine at the end of the day or not exercising or whatever it is, those bad habits become part of your system. And in order to eliminate them from your system, you've got to eliminate the bad habits. As James Clear says in his book, "Habits are the compound interest of self-improvement." So if you want better results, forget about setting goals and focus on your system instead. Focus on changing your habits, the tiny little things that you do day in, day out to make it easier for you to change your life in the longer term. What else I like about the book is how he has a simple set of rules that you can use to build better habits. And these rules really feed into the way that we actually work rather than the way that we think we should be working, because let's be honest, we've all listened to these kind of productivity things or read productivity books and thought, "Yes, I must change the way I work." Paul Green: And that lasts for like three days. And then after three days, you fall back into the old habits. So James Clear, the author of this book says, "Do you know what? If you make your habits obvious, if you make them attractive, if you make them easy and you make them satisfying your much more likely to actually stick to those habits. And conversely with bad habits, if you make them not obvious, make them unattractive, make them uneasy and not satisfying, then you're less likely to carry on with those bad habits and you can replace them with good habits." So whether you get these on Audible or you go and get the good old fashioned killer tree paper copy, and let's be honest, we all take in more from books. When we're reading physical print books, go and get this Atomic Habits by James Clear, read it, action it. It's a beautiful book and it genuinely could make a major impact on what you get done on a day-to-day basis. Voiceover: Paul's blatant plug. Paul Green: Question for you. Have you entered my competition yet? I've mentioned it a couple of times in the podcast. And if you're listening to this on the day of release, there's only 10 days left because it closes at the end of October. Now we're giving away a bunch of really cool stuff to celebrate a year of this MSP Marketing Podcast. And we've got three prizes on offer for you. The first prize is a one-to-one marketing consult with me. We'll jump on a Zoom. We'll explore your business. I'll set out a new marketing strategy for you with a whole load of tactics that you can use as well. And I will ask you at the beginning, how you feel about me recording it for the podcast. Paul Green: You absolutely can say no. I genuinely have no issue with that. If you're up for me recording it for the podcast, brilliant then your featured in a future episode, if that's your idea of hell, we don't have to do that. That's completely your choice if you win. So that's the first prize and I've put a value on that. I think being priceless. The second prize is access to my best selling video course. It's called the MSP Net Profit MasterClass, and it's a 21 week training program, which will help you generate more net profit and take more holidays at the same time. Now, if you were to buy this from my website, it would cost you 799 pounds or $999. And we've given that away as our second prize. And the third prize in this contest is a hundred pound or $127 Amazon gift card and my booklist. As I mentioned to you just then I read loads of books and I've put the very best of them together in a book list. Paul Green: However, if you'd rather put that money towards your drone fund or buying Christmas presents completely up to you. You can pretty much do exactly what you want with it, but it will be an Amazon gift card. Now we've made it very easy for you to enter this contest. If you go onto my website, paulgreensmspmarketing.com/win. You'll see all the details of the prizes and it will show you how to enter. All you have to do is from that page, you go onto a specific post on LinkedIn. You comment on the post. You can write pretty much anything. You can tag yourself. You can say, "Hey, I want to win." You could say, "I love the podcast." Whatever it is you want to put. Put anything. You just put a comment below and you are in the competition, simple as that. And when it closes in 10 days time, we will pick someone at random and it could be you and you could win one of those very cool prizes. paulgreensmspmarketing.com/win. Voiceover: The big interview. Karl Palachuk: Hi, this is Karl Palachuk. I'm the author of many, many books for IT service providers. And I used to own a couple of managed service businesses in Sacramento, California. My entire focus is helping IT consultants to be better at the business side of business. Paul Green: And if you don't mind me saying Karl, I think you're an absolute legend in our world. And I'm delighted to finally get you onto the podcast. Managed Services In A Month is a book I've recommended. I must've recommended it to 30 or 40 people I've spoken to over the years that have been Karl Palachuk: Thank you. Paul Green: Stuck in break-fix, and we want to try and get them over to MSP. So it's just a very elegant read to help them do that transition. Now, you all, as you say, a prolific author, and you've got a new book, which came out a couple of months ago. Tell us about the absolutely unbreakable rules of service delivery. Karl Palachuk: So this book started literally as a list of things that I wrote out and had my staff put on their bulletin board. So it was things like we work in real time. Meaning we put our notes into our tickets in real time. We don't do it in the evening. We get prepaid for everything. We only work with people we like. It started out with a handful of rules and then it grew over the years. Eventually I started making presentations about it. There's a lot of rules, but there's only a handful or a couple of hands full that are absolutely unbreakable. And a great example is that we get prepaid for everything. A lot of people at the beginning of the recession started saying, "Well, times are hard and Karl doesn't understand, and you can't get prepaid for everything." And I would turn around and say in a recession, the first thing that disappears is money. And everybody who is owed money will get prepaid less than 100% of what is owed to them. Everybody who gets paid in advance has already received a hundred percent of what is owed to them. Paul Green: So these rules aren't necessarily based around delighting your customer. These rules are actually based around protecting your business and making sure that you and your team are happy at the same time it's delighting your customer. Karl Palachuk: Right. We do like to delight our customers. That's certainly a requirement. One of the things that is not a rule here is that the customer is always right, because we all know that, that's not true. The customer is often right. And often we want to bend over backwards to help them. But that clearly, if that were a rule, it would be a very breakable rule. Paul Green: Give us an idea of some of the other rules in the book. Karl Palachuk: Probably the most important for both my personal and professional life is that we prioritize absolutely everything we do. So everybody should be working from highest to lowest priority. And a lot of things flow from that. This is why it's a book and not just a one-page, right? If everybody's working on the highest priority, then that means you're not going to be as open to interruption from the telephone or from teams or chat, or a Slack channel or all this other stuff that we have in our lives. So lots of things flow from having a priority system. MSPs are lucky because if you've got a good tool for managing your tickets, you've already automatically got a place to list everything that needs to be done and to set a priority on it. So it's easy for your employees to prioritize the work that they have to do. Paul Green: But in your experience, do most MSPs do this, or do they get a little bit too hung up on which is the best PSA, what's the best software stack and all of that kind of stuff at the expense of actually setting out these systems and these priorities. Karl Palachuk: Well, I think many people go through a period of worrying about it and probably one of the most common questions you will ever see in a forum of new IT providers is what tools are you using? What PSA are you using? What are RMM you using? But at some point they pick one and they go with it and they might, whatever five years later change to a different tool. But if you've been using tools for 10, 15 years, which tool you use becomes one of the least important things in your business. It's just a matter of having a good quality professional tool. And then you move on to things that actually are much more important to doing daily service delivery. Paul Green: So if I'm right Karl, this book, isn't just a book. You've actually got a whole bunch of other stuff that you deliver as well, which can help MSPs to actually implement this stuff? Karl Palachuk: Oh yes. So outside of this book, obviously we have our community, the Small Biz Thoughts, technology community, which is at smallbizthoughts.org. I try to speak at conferences when there's not an international pandemic going on. So I'm always trying to engage people and with luck, I'll actually wander over to the UK next year, assuming they let me travel. Paul Green: That'd be amazing. You'll have to let me know when you're coming. In fact, you and I are both Doctor Who fans and I know a couple of months ago, you were quite disappointed to learn that the Doctor Who museum in Cardiff, where they film it has been shut down, but maybe we can go and do some kind of Doctor Who filming locations tour. And have a real anorak Karl Palachuk: I'd totally love to do that. Paul Green: Karl, tell us how we can find out more about you. Tell us about your community as well. Just give us that URL again. Karl Palachuk: So the URL is smallbizthoughts.org and the community is all about people being successful in managed services. So it includes every book I've ever written and early access to any new books. So when this book was in its early production, I actually posted up the proof copies and gave people early access to it. And then also all of my checklists, all of my audio programs, videos, trainings, and so forth, basically it's one place where you can pay one price and get every single thing I've ever done. The Small Biz Thoughts technology community is at smallbizthoughts.org. And the book site for finding out about this specific book is absolutelyunbreakablerules.com. Voiceover: Paul Green's MSP Marketing Podcast. This week's recommended book. Sam: Hi, Paul. It's Sam at Fresh Tech. The book I would recommend is The Pumpkin Plan by Mike Michalowicz. It's a bit of a tongue twister to say, but it's the first business-esq book that I've actually enjoyed listening to from front to back. Good mixture of humour, good advice. And it kind of hooks me on to the rest of his books. So that'd be my recommendation. Voiceover: How to contribute to the show. Paul Green: I adore getting feedback on the show. If you want to drop me an email and tell me what you love or what you'd like me to do differently, or even ideas or pitches for guests or a book suggestion you can do all just by dropping me a simple email. hello@paulgreensmspmarketing.com Voiceover: Coming up next week. Cody Butler: There's no shortage of businesses out there that want these types of services. They just don't know you are there and what you can do for them exactly. Paul Green: That's Cody Butler. And he's my special guest on next week's show. If you've ever sat down and thought to yourself, if only we had a really simple marketing plan, then his new book is exactly what you've been looking for because it's called, The 90 Day Marketing Plan. He's going to be here on the show next week, telling you how to create a plan to get more new clients, make some more sales and where you can automate much of your marketing. We're also going to be looking next week at the beauty and power of a multi touch point marketing campaign. Plus, we'll be looking at how you can compete against the really big players, the big boys in your marketplace, regardless of your size. Paul Green: And I've got a great book suggestion for you. It's a book which is a little bit crazy in parts, but the principles are pretty sound to free yourself from the day-to-day clutter in your life, work less and take more holidays. We'll have that book suggestion for you and everything else in next week's show. See you then. Voiceover: Made in the UK, for MSPs around the world. Paul Green's MSP Marketing Podcast.
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