If you’ve been reselling Office 365 for a while, you know that profit margins for this popular product are far from lucrative. You may have many clients who want to get their hands on Office 365, but because many resellers are offering it at such competitive prices, it has become a low-priced commodity with paltry margins.
What if we told you that that there’s a new way to pitch Office 365 that would increase your revenue and profit margins, boost your productivity and put you well ahead of your competitors?
It’s called bundling. It’s not a new concept – just look at what’s happening in the cellphone market – but bundling Office 365 with extra services can pave the way to higher profits for MSPs who seize the opportunity.
How do Bundles Work?
Bundling is a sales and marketing tactic used to demonstrate added value to customers. If a customer purchases just one product, they’ll pay a specific price. However, they’ll get a better deal by purchasing a bundle with several products because the overall cost would be lower than buying each product separately. In fact, a study by fusebill has shown that customers who purchase bundles can save up to 15%. You can create bundles yourself by combining your own services (like consulting, product training or technical support) with Office 365. On the other hand, if you’re not comfortable building your own bundles, you can resell ready-made packages offered by cloud providers like SherWeb. More about that later.
Whether you’re a seasoned reseller or you just entered the market for Office 365, you can’t afford to ignore this opportunity. Here are 3 ways you can use bundling to increase your profits.
1. Present Your Bundle Like a New Product
The great thing about bundles is that you can add a new product to your portfolio without developing anything new. For MSPs who operate on a Monthly Recurring Revenue model (MRR), higher-priced bundles will have a cumulative effect because they’ll get more money each month for the life of the client’s contract. Here’s an example. If a bundle adds $15 per user to your Office 365 fee every month, you’ll earn $180 more per user over a 12-month period! Bundling offers MSPs an easy way to sell more products to the same customers. And since many of your small business clients have grown accustomed to paying a monthly fee for their IT services, making the pitch is a lot easier than you think. A recent survey by Clutch showed that 59% of SMBs surveyed have changed their IT services from a break/fix model to subscription-managed services.
2. Use Your Expertise
As we mentioned earlier, you won’t get rich just by selling Office 365. Evan Hamilton, a Business Development Manager at SherWeb, said the key to success is to change your approach. “You want to take the conversation away from a product like Office 365 that’s available everywhere and focus on the value of the total solution and your expertise.”
In other words, you have to focus on value. Wondering how to do it? Here are a couple of examples.
- Become an Office 365 trainer. While many business owners see the value in Office 365, they find it too complex and fear their employees will shy away from it, especially when Microsoft keeps updating its apps and features. In a recent blog, Silverbug showed that many users are only accessing 20% of all the functions available with Office 365.
- Offer technical support. We don’t have to tell you that support is a key component of any IT business. It’s also the easiest way to add value to your portfolio, for a fee. If your customer is hesitant to get onboard, sell them a bank of hours instead. When they reach the limit, call them to discuss a flat fee for continuing support.
There are many other ways to promote your services in a bundle, but one thing is certain. You won’t be successful reselling Office 365 if you can’t increase your margins.
Did you know?
A 2018 benchmark survey carried out by software company Kaseya showed that profit margins for 36% of MSPs surveyed ranged from 1-10%. Fifteen percent of respondents, who ran MSP firms in 40 countries, reported no profit at all.
Source: Kaseya 2018 MSP Benchmark Survey Results Report
3. Build Customer Loyalty
Satisfied customers mean repeat business. Research has shown that existing customers are 50% more likely to try new products and spend 31% more compared with new customers. By providing your customers with a complete solution in a bundle, you’re also building a stronger relationship. As Hamilton points out, “When you and the customer have made a greater investment in one another in terms of the number of products and services, it’s more complicated and logistically difficult to break the relationship.” A study by VComp Inc. has shown that a customer who opts for a bundle will not switch to a competitor even if he is offered a better deal on a single item in the bundle. So, contact your Office 365 customers from time to time to see if you can pinpoint any opportunities to upsell and cross-sell other products and services. It’s a great way to increase your revenue and make sure your customers are getting the most from the current technology. One more thing. Increasing customer retention by as little as 5% can increase a reseller’s profits by up to 95%. That’s good to know.
SherWeb’s New Offer for Office 365
As we mentioned earlier, you can build your own bundles for Office 365, or you can resell packages offered by some cloud providers. SherWeb has restructured its Office 365 plans to include a new offer that is unique to the market. It includes security, backup and eLearning solutions at no extra cost.
Learn more about SherWeb’s new Office 365 offer and how you can use it to boost your margins.
Office Protect is a security solution that was designed by SherWeb to monitor your clients’ Office 365 environment. Office Protect includes 24/7 Monitoring and Alerts, Threat Protection and Reporting functions.
Online Backup is a simple disaster recovery strategy that will back up and store your clients’ data (email, contacts and attachments) to guarantee their business will continue to operate if a disaster occurs. Online Backup also includes advanced reporting and monitoring, including notifications and alerts for critical events.
QuickHelp is an eLearning platform designed to help your clients’ staff get the most out of Office 365. Users can tap into a personalized learning path that is based on the company’s goals, job roles, work habits and employee skill levels.
No matter which sales strategy you use, It’s important that you convince your customers that bundled products and services is the best deal for their business.
Want to know more about using bundles to double your margins? Take a look at our Bundles Cookbook.