Over the past few months, I worked with several of our largest customers to move them to packaged offerings. Here is how I prefer to approach packaging so that it works best for both service provider and its clients.
What is packaging?
First of all, I like to use the word “packaging” and not “bundling.” To me, packaging is the coherent and consistent grouping of various features and services. Bundling, on the other hand, is often based on commercial considerations and complementary products or services, but it is not methodological. Imagine a shopping basket: bundling would be placing an apple, chicken, chocolate and paper plates together, perhaps with a discount off the total purchase price as an incentive. While these products are all related, they do not create one, cohesive package. However, if you fill your shopping basket with items that make up a first course, a main course and dessert, then you have packaged together an entire meal.
I think our industry is still mostly either at an a-la-carte, or bundling, stage. In this scenario, the sales process begin with a sales rep selling a website to an SMB client and then offering other services as add-ons. The problems here are:
1. Selling each module separately makes the process more complex - each and every item has to be pitched and explained.
2. Led by the price, an SMB client may end up with a combination that won’t bring him tangible results, so obviously next year they will not continue the contract.
Offering bundles makes sales process easier, but due to integration issues and costs, bundles do not necessarily contain all the features needed to get the actual results for an SMB, leading to a high churn rate. Selling a-la-carte may lead to selling an SMB a set of offerings that may be priced attractively, but may not drive real value, which will, ultimately, reduce the chances of renewal (which, in my opinion, is where the focus of sales should be).
How we approach packaging
What happens if a service provider has thousands or tens of thousands of SMB clients? How can you offer packages to suit individual needs of businesses that vary in size and character? Our answer is segmentation. Packages should be build to suit different segment requirements.
Several criteria that we use include:
- Selling products or services (online store VS pure service business)
- Having a permanent, physical location (a law firm) or being on the road (electricians)
- Marketing spend, business strategy and/or experience with digital marketing
"We can think of a package as a minimum viable marketing and business management product."
For example, the smallest package offered should include the key elements of online presence with a website and social media management, lead generation and customer interaction mechanisms, such as appointment scheduler or call-me-back module, customer relationship management tools and a basic services component. I believe that, in general, the level of service offered to SMBs by an agency is a key differentiator in the crowded digital marketplace. For example, even the smallest package could include a call with a marketing consultant or account manager on a regular basis to see what is working and how can they help the SMB grow even further. An additional service could include performance monitoring and review, which is critical to social media and PPC campaigns.
The next package level can be built by adding features or services or increasing the limits. Instead of an allocation of 300 marketing emails and text messages sent by the SMB to prospective or existing clients per month, it could be 1500 emails and text messages. Or more service calls can be added. The goal is to create a clear and smooth way to upgrade packages so that SMBs understand where they will be growing.
The important thing is, again, that all packages contain, at the very least, all basic elements that create presence, drive traffic, convert users and help retain customers over time, coupled with a well-defined level of service.
"Leaving out a single element can result in poor performance and questionable value to the SMB, something that will negatively impact renewal rates."
Who is involved in the process
When defining packages, I usually work with marketing teams where we build the system to suit company’s needs. We work on defining packages, which include Camilyo features, third party solutions, home grown services and other offerings that the service provider may already have. We really look at a total offering, not just based on our own platform. We build the basics and then invite the sales team to review and give their feedback. This way we know that we are building something they would be happy to sell plus they get engaged in the process. Ultimately, this is a new sales concept that revolutionizes how they were selling before, and they need to be part of the preparation.
How to price packages
Pricing will probably become a post on its own, but the bottom line is that it can be done in one of two ways: we can start with the desired profit margin a service provider would like to get and add the costs to that (operational costs, sales commissions, IT costs, etc.) in order to generate a baseline price for the package. Alternatively, we can start with an assumption of what price the market can bear and calculate the various cost components to see if the margins are acceptable. With the second approach, profitability per SMB may be lower, but ultimately that would be opening a company up to a larger client base with smaller budgets.
At Camilyo, Eitan and his team are responsible for helping our customers grow their business while reducing costs and improving customer satisfaction. Eitan’s extensive career includes Vice President of Marketing and Strategy at Amdocs Advertising and Media and Outsourcing divisions as well as serving as a consultant to startups in the online media and energy sectors.
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