The Single Biggest Pricing Mistake You Can Make for your MSP

I’m in the middle of planning a family celebration for my daughter’s upcoming Confirmation ceremony.  The invitations have gone out, I’ve booked the restaurant where we will have lunch afterwards, and I’m currently sourcing a local bakery for the cake and sweets table.

While scrolling through Facebook the other day, one of my friends “Liked” and tagged a new local bakery. Curious, I went to this individual’s Facebook page and started scrolling through her posts.  I was in awe of the amazing photos of the beautiful cakes, cupcakes, and cookies that populated her feed.  Her work was so creative and unique that I immediately reached out to see if she was available to make a cake for our family celebration.

Fortunately, she was and soon we began discussions on what I wanted. I told her that we were taking about 20 people out for lunch at a local restaurant (a restaurant that is known to be more upscale and formal) and that we were allowed to bring in our own dessert. After spending some more time scrolling through her Facebook posts, I saw an even larger variety of her stunning work and changed my mind from having just a cake to ordering four dozen cookies, two dozen cupcakes, and two dozen chocolate-covered strawberries.

I never once asked her about her prices. The Facebook pictures she posted of her desserts were gorgeous and there were many five-star reviews from clients praising her work. So, based on this breadth of “social proof”, I just knew that I wanted to hire her for my event.

The next day, she sent me an itemized invoice of what we had discussed, along with a total amount owing. In scanning the invoice, her prices were pretty much in line with what I had budgeted for my family celebration—given the quality of her work and the incredible talent that she possessed.   

She then made a serious mistake. A mistake that I’d say is the single biggest pricing mistake that a business owner can make, and one that can cost them hundreds or even thousands of dollars a year.   It’s a mistake that I have seen many MSPs make during my tenure in the MSP industry.

At the bottom of the invoice, she had made a notation: “Due to your order being so large, I will discount your total amount from $330 to $250 for everything listed above.”

That was a 24% discount she proactively offered that I didn’t ask for, nor was I expecting. And although appreciated, it struck me at how unnecessary that seemingly kind gesture was.

I was fully prepared to pay whatever her prices were. I did my research before contacting her. She had competently demonstrated via her social media presence that she was an incredibly talented baker. She had taken the time to meticulously stage her creations and had photographed them so elegantly. And it was apparent how much her clients loved her by all the rave reviews that appeared online. There was no need for her to offer me an $80 discount.  So, it got me thinking: Why would she do something like that?

Some of my initial thoughts:

1. She was obviously worried that I would question the overall total, so she thought by immediately offering a discount she could avoid that confrontation altogether. By having this sort of mindset, she is pre-objecting on behalf of her prospects and it is costing her small business dearly. She is thinking like this is her own money that she is spending, and that is not the mindset a successful business owner should have. This is not your money that you are spending and you do not need to feel compelled to help a prospect spend less with you when engaging with your business. She mistakenly assumed that I would balk at a price tag of this size and immediately wanted to offer a discount to help offset it.   

2. She is setting a very dangerous precedent that could have long-lasting consequences on her small business. If she offered this kind of discount to me on our very first encounter, she is likely doing this with many other first-time prospects as well; and therefore, it’s setting a very dangerous precedent. I may be the type of person who will always expect a discount now when placing future orders, and I may even tell my friends that she is a business that gives very generous discounts, which can set an unrealistic expectation on any referrals I send over to her. If she happens to not offer a discount to one of my friends that I refer, then they may be upset and confused why I received one and they didn’t, which can create a negative first impression.    

3. She failed to listen to cues given by her prospect when speaking to them. During our conversation, she was repeatedly telling me how busy she was, but she would be willing to fit me in. So, while she was busy talking to me, she failed to hear the cues I was giving her that would have told her that I wasn’t too concerned about overall costs of her product.

• I was gushing at how beautiful her cakes and cookies were
• I was complimenting her on the client reviews and posts I had seen on Facebook
• I was telling her that I was taking a large gathering out afterwards to a prominent and upscale restaurant
• And I was telling her how important this occasion was for my family and that I wanted to mark the day with a special dessert—as my daughter has an incredible sweet tooth

Again, had she been really listening to our conversation, she would have realized that there was no need to offer a discount.

Which brings me to my final thought about this.

4. She doesn’t know her target audience all that well and she feels that any business is good business. Her quick offering of such a steep discount reflects that she sadly does not have confidence in the quality of her own work and is afraid of saying “No” to a prospect and having them walk away. Given how busy she is, her work is obviously resonating with our local community, and she is in high demand. As a result, she could afford to be a bit more selective in who she accepts as clients and stop altogether with any and all discounting, as it is definitely not required. If someone does question her pricing or requests a discount, then they clearly do not appreciate her artistic talents and she should politely offer an alternative option from her dessert lineup that fits their budget, or she could suggest a different bakery altogether. I feel that she could be making the same amount of money servicing fewer clients, or she could be making more money with the amount of clients she currently has. Regardless, I feel from my experience that she is of the mentality that all business, even discounted business, is good business, which makes me wonder how profitable she really is.

Although I’m writing about desserts and bakeries, there is a lot MSPs can learn from this story. You deliver an exceptional service for your customers, and you should be proud and confident in your expertise and your abilities. Do not be afraid to charge what you are worth and do not be afraid to say “no” to a prospect and walk away if it isn’t a good fit. There will always be other customers that will be willing to pay what you are asking because they recognize quality and competency when they see it.   

There is no need to discount your services—especially when no one is asking for one.

If you are looking for guidance on how to address those difficult pricing objections that you are hearing from your customers and prospects, then be sure to check out my boot camp The Guide to Building and Selling Security Programs. Partners can access this through the On-Demand section of N‑able U. In this Boot Camp, I provide several types of pricing objections you are likely hearing from your prospects, and offer different responses you could give to help overcome those objections. 

Stefanie Hammond is Head Sales and Marketing Nerd at N‑able. You can follow her on LinkedIn and on Twitter at @sales_mktg_nerd.