Managed Service Providers (MSPs) that treat clients like members have a distinct competitive advantage over those who don’t. As the old advertising slogan for American Express goes, “Membership has its privileges.” In this case the privileges are for both the client and the service provider. Are you treating your clients like customers, subscribers, or members?
Many MSPs I know are adamant about calling their customers clients instead. I did the same thing. Things change however, in the early days it was all break/fix customers, then came the recurring revenue revolution and you could classify clients and subscribers. Today, the predominate service delivery model is managed services. In its simplest form, you could still call it a subscriber model but best in class managed service providers are realizing the benefits of turning subscribers into members. For the purposes of this article, I am going to give three simple definitions for the three types of clients:
- Customers – Are transactional, they call you with a need, you deliver a product or service to fill that need and then they are gone until they need you again. Think “one and done”.
- Subscribers – Purchase a product or service on an ongoing basis but there is little, if any interaction unless some type of “event” occurs to trigger an interaction. Think “set it and forget it”.
- Members – Are perpetually engaged with, not just beneficiaries of, the product or service. They are invested because of the value, satisfaction, and sense of belonging that they derive from the product or service combined with the constant nurturing of the provider.
Memberships are based on relationship, not on the product or service. Robbie Kellman Baxter, in her book “The Membership Economy," states, “Organizations that build their businesses around people’s needs to belong, to be connected, and to be admired, that are focused on relationships over products, are winning in today’s economy.”
She goes on to say, “I define membership as the state of being formally engaged with an organization or group on an ongoing basis.” I think the key word there is “formally”. The organization must be specifically designed to consistently cultivate that formal engagement. To sum up the difference between membership and subscription, one is a feeling of belonging the other is a financial arrangement. Which would you rather belong to?
By now, I hope you are beginning to see the nuances of members versus subscribers and how you might leverage those differences to create opportunity for your business. Members attract other members, they promote the organization to other like-minded potential members (ideal customer profile), they are less likely to “move” their membership, and they are more likely to adopt new “benefits” of membership.
From the beginning, referrals have been the mainstay of attracting new clients to IT services providers. Unfortunately, as the MSP space has matured it discovered other forms of marketing tactics that have resulted in less effective referral marketing. Membership has the potential for creating a referral process on steroids. The first reason is that members are passionate about the organizations to which they belong. This means that they want to share their feeling of membership with others. The second reason is an interesting dynamic. They are more likely to share this with someone who meets your ideal customer profile because they typically see other people with the same needs as potential members. The bottom line here is that you can make referrals great again by treating your clients like members.
Another great thing about members is that they churn less often. When they are at risk for churn, you know about it much sooner. This comes from the factors of transparency and ownership that your members feel. Because they feel like members of something, more internal to the organization than external, they are not afraid to speak up when something is not working right. It is the responsibility of the organization to make sure it gives its members every opportunity to express themselves so that dissatisfaction can be discovered quickly and resolved even quicker. Members belong, they are invested. Because of that they feel an obligation to improve the situation rather than walk away. They will only walk away from that belonging as a last resort.
Lastly, members are more willing to adopt new offerings or “benefits” of membership. Members, because of their relationship with the organization, trust the research, expertise, and advice of the provider. You must first be careful to actually do the research and have the right expertise in order to provide sound advice. If you put in the effort to bring the best solutions to your clients and provide them with member training rather than sales meetings you can have a dramatic effect on new service adoption.
The key takeaway here is that in MSP relationships, the organization needs to do more to make their clients want to stay. That means creating engagements and incentives that build a relationship with customers and encourage them to keep coming back. It also means finding new and relevant ways to communicate with clients through email and social media campaigns, so they feel like part of a community. And as we’ve seen, community and belonging are really what make for better relationships and allows for long-term success. Long-term success that translates into increased lifetime value of the client.