How to Use a Loss Leader to Get More MSP Sales

Posted on Mar 07, 2016 · No Comments

Retail companies frequently offer a loss leader to bring in customers. A loss leader is a product offered below its actual cost. Their strategy is that if the loss leader can bring people into the store they will buy more than that one product, and it frequently works. MSPs can use this same tactic in a different way to grow their IT business.

Benefits of Loss Leaders

For an IT consultant, a loss leader usually takes the form of an advising session or small project that will only take an hour or so. There are several benefits to doing this. The most obvious is that it attracts new MSP customers who might not have considered your business otherwise. It may also give that hesitant prospect the nudge they need to commit to your services. In addition, you get a chance to prove your worth and show the value you would bring to their company. You will also have an opportunity to gauge what working with this particular IT client would be like. In this exchange you can both form a clear idea of the kind of working relationship that you would have.

When to Avoid Loss Leaders

Loss leaders aren’t good for everyone, however. Using one is essentially placing a bet that your customers will spend enough on other services to offset the lost profit. For this reason, make sure that you only give a preview of what you can do for free. One popular option among MSPs is to conduct an assessment. This is a good choice of loss leader because it isn’t giving away too much, and by doing problem discovery you can tailor your pitch to your prospect’s needs.

Offering a Discount

If offering a completely free consulting session or other service isn’t feasible, it may be tempting to offer a discount instead. Resist the urge to do so. When you set your price you also set your value. You want your value to be your knowledge, not your discount. Offer a discounted service and you will likely bring in new customers, but they will probably hesitate to pay full price for their next service. With a free sample of your services, people discover the value of what you offer and aren’t just there for the deal.

There are both benefits and disadvantages to using a loss leader for selling your MSP services. Weigh your options carefully when deciding whether to use this method. If you decide to use one, make sure that it is just a taste of what you can do and you offer it for free. This will help you maximize the benefits of a loss leader and expand your IT client base.