Referrals vs. marketing: what’s better for attracting more MSP clients?

As an MSP, finding new clients can be challenging. How do you stand out and attract more business? 

Referrals and marketing are two popular strategies for gaining new clients in the MSP industry. Each approach has unique benefits and drawbacks. Let’s look at the challenges of finding new clients and explore the pros and cons of referral and marketing strategies.

The challenges of finding new clients

One of the main obstacles Managed Service Providers (MSPs) face when attracting new clients is the saturated market. With the rapid growth of the IT industry, the number of MSPs has skyrocketed, resulting in fierce competition for the same pool of customers. In such a crowded landscape, differentiating your services and getting noticed can be difficult. Let’s look at these challenges in more detail.

Differentiation

Standing out from the crowd requires more than just offering the standard range of IT services. MSPs must develop unique value propositions highlighting their expertise, innovation, and commitment to customer satisfaction. By showcasing specialized skills and industry-specific knowledge, MSPs can position themselves as trusted advisors who can address the unique challenges faced by their target clients.

Related: Why Digital Maturity Is Making MSPs More Competitive [ScalePad Link]

Establishing trust

Another significant challenge that MSPs often encounter is building credibility and trust with potential clients. Establishing a solid track record is essential in an industry where reputation is everything. This can be particularly challenging for new or emerging MSPs who don’t have a long history of successful client engagements. 

Related: New to the MSP Game? Here’s Your Must-Have Sales Ops Tech Stack

Building relationships

MSPs must build solid relationships with existing clients and leverage their positive experiences as testimonials. By providing exceptional service and exceeding client needs, MSPs can cultivate a loyal customer base that will vouch for their expertise and reliability.

Related: Unlock revenue growth with 5 questions for existing MSP customers

Connecting with partners

Furthermore, MSPs can enhance their credibility by obtaining industry certifications and partnerships with reputable technology vendors. These credentials not only demonstrate a commitment to excellence but also provide clients with the assurance that they are working with a trusted and knowledgeable provider.

While finding new clients may seem daunting, they also present opportunities for MSPs to innovate and differentiate themselves in the market. By adopting effective strategies for client acquisition, MSPs can overcome these obstacles and position themselves as the go-to solution for businesses seeking reliable and comprehensive IT services.

Referrals for MSPs

Referrals have long been a tried and true method for growing businesses, and MSPs (Managed Service Providers) are no exception. By leveraging the power of word-of-mouth, referrals can help you tap into your existing network and attract new clients through the recommendations of satisfied customers.

One of the primary advantages of a referral strategy is the trust factor. When clients refer your services, they are vouching for you and your business. This endorsement can go a long way in establishing credibility and overcoming potential objections from prospects.

Another benefit of referrals is the targeted nature of the leads. When someone refers your services, they likely have a good understanding of the needs and pain points of the potential client. This means the prospects you reach through referrals are often highly qualified and more likely to convert into paying customers.

Additionally, referrals are often more cost-effective than other marketing strategies, as they rely on existing relationships rather than paid advertising, which is especially beneficial for MSPs with limited marketing budgets.

However, relying solely on referrals does have its drawbacks. For one, the number of referrals you receive may be limited by the size of your network. You may miss out on potential business opportunities if you don’t have a large client base or a robust referral system.

Additionally, referrals can be inconsistent and unpredictable. While some clients may enthusiastically refer your services, others may not think to do so or may have different priorities. This variability can make building a consistent pipeline of new clients through referrals challenging.

How to generate more referrals

To overcome these challenges, MSPs can actively cultivate and nurture their referral network. This can be done through various strategies, such as implementing a formal referral program, offering referral incentives, and regularly engaging with clients to remind them of your value.

Furthermore, expanding your network beyond just existing clients can also help increase the number of referrals you receive. You can connect with others by attending industry events, joining professional organizations, and actively participating in online communities where potential clients and influencers gather.

Another approach to enhance your referral strategy is to provide exceptional customer service and consistently deliver high-quality results. When clients are delighted with your services, they are more likely to recommend you to others without any prompting. This organic referral form can be compelling and lead to a steady stream of new clients.

In conclusion, while referrals can be a valuable source of new business for MSPs, it’s essential to recognize both the advantages and limitations of relying solely on referrals. By actively cultivating your referral network, expanding your reach, and providing exceptional service, you can maximize the potential of referrals and create a sustainable growth strategy for your MSP business.

Pros and Cons of Referrals

Referrals can significantly benefit businesses in various ways. By leveraging the power of word-of-mouth, companies can tap into a network of potential clients their existing customers have recommended. While there are several advantages to implementing a referral strategy, it is essential also to consider the potential drawbacks.

Let’s start by exploring the pros of prioritizing referrals: 

• Establishes trust and credibility with potential clients: When a potential client is referred to your business by someone they trust, it automatically launches a level of credibility and trust. This can significantly increase the chances of converting them into a paying customer.
• Targets highly qualified leads: Referrals often come from satisfied customers who have already experienced the value of your products or services. This means that the leads generated through referrals are typically highly qualified and more likely to convert into long-term customers.
• Cost-effective compared to other marketing strategies: Referral strategy can be cost-effective as it relies on the existing customer base to spread the word about your business. By incentivizing referrals, you can encourage your customers to become brand advocates without spending significantly on traditional advertising.

Despite its many advantages, referral strategy also has its share of cons:

• Dependent on the size and strength of your network: The success of a referral strategy heavily relies on your network’s size and strength. If your network is limited or lacks active participants, the number of referrals you receive may be limited, hindering the potential growth of your business.
• Inconsistent and unpredictable results: While referrals can bring in steady leads, the results can be unstable and unreliable. You may experience periods of high referral activity followed by lulls, making it challenging to rely solely on referrals for consistent business growth.

In conclusion, referrals can be a valuable addition to your marketing efforts, helping you establish trust, target qualified leads, and save on advertising costs. However, it is essential to consider the potential limitations, such as the dependency on network size and the unpredictable nature of referral results. You can determine if the referral strategy aligns with your business goals and objectives by carefully weighing the pros and cons.

Marketing for Managed Service Providers

Marketing, on the other hand, offers a more proactive approach to client acquisition. MSPs can increase their visibility and attract a larger audience by implementing various marketing tactics, such as content creation, social media advertising, and search engine optimization (SEO). Marketing allows you to reach out to potential clients outside your immediate network, expanding your reach and opening doors to new business opportunities.

One of the key advantages of a marketing strategy is the ability to showcase your expertise and differentiate yourself from competitors. By creating valuable content and establishing your thought leadership in the industry, you can position yourself as a trusted advisor and attract clients seeking knowledgeable MSPs. Marketing also allows for better scalability and control over your client acquisition efforts. With the proper marketing channels and strategies in place, you can generate a steady stream of leads and have more control over the growth of your business.

However, marketing is not without its challenges. Implementing successful marketing campaigns can be time-consuming and requires a certain level of expertise. If you don’t have the resources or knowledge to execute marketing strategies effectively, your efforts may fall flat. Additionally, marketing can be significantly expensive if you invest in paid advertising or outsource specific marketing tasks. Marketing efforts’ return on investment (ROI) can vary greatly depending on the tactics and target audience.

Pros and Cons of Marketing

Pros:

• Increases visibility and expands reach
• Allows for differentiation from competitors
• Scalable and controllable client acquisition

Cons:

• Requires time and expertise to execute effectively
• Can be expensive
• ROI can vary depending on tactics and target audience

As an MSP looking to attract more clients, it’s important to consider the pros and cons of referral and marketing strategies. While referrals can provide a valuable source of targeted leads and establish trust with potential clients, they may not be enough to generate a consistent stream of business. On the other hand, marketing can help you reach a wider audience, differentiate yourself from competitors, and have more control over your growth. However, marketing efforts come with their own set of challenges and require careful planning and execution. 

Ultimately, the right approach for attracting more MSP clients may lie in finding a balance between referrals and marketing, leveraging the strengths of each strategy to maximize your overall success.

So, when it comes to referrals vs. marketing for attracting more MSP clients, the answer may not be a simple either-or. It’s about finding the right mix of strategies that align with your business goals and resources. 

You’re in the driver’s seat when deciding how to go after MSP business growth. Ensure your quote-to-case process keeps pace. See a Quoter demo to learn more.