Why are so many hosts now offering per year payments??

With the rate of web hosts coming and going does any one really trust this option of payment?

I expect its because then they can offer a *discount* and get as much $ off people straight away rather than guess if people will stay or leave.

I personally will only sign up for 3 months at a time contracts, though I hope my customers sign for longer periods ;)

Here's the scoop!

It all depends on the credit card processor.

Most credit card processors don't look out for the customers and let business charge for yearly service fee.

What if business goes under?

Not their fault, customers lose their money.

Some won't let you charge more then 3 months worth of service.

It just depends on your merchant provider.

POSITIVE CASH FLOW.

Most of our accounts allow clients to pay either monthly or yearly. If they choose the yearly option, we'll give a discount.

WHY?

Two reasons:
1. Monies received today are worth more than monies received in the future because of interest and inflation (albeit small).
2. Receiving funds sooner rather than later will help increase positive cash flow and help in funding such things as more advertising, etc.

WHY AREN'T ALL OUR PLANS OFFERED MONTHLY?
We do not offer our cheapest plan on a monthly basis because our credit card processing fees would be too large (on a percentage basis). It simply wouldn't be worth it. Therefore, you may see some companies offering only Annual payments if their pricing is on the lower end.

Hope that helps!

Cheers!
Rob M
CrazyHostGuy.com

A couple of years ago our ex-sales guy instituted a promotional discount for annual payment to see if it would help him close sales. It turned out to be more trouble than it was worth, we found:

Once the prepayment funds ran out and we sent the customers an invoice letting them know that it was time to either pay another annual fee, or resume paying on a monthly basis. They almost universally ignored the invoice, as well as the follow-up mailings, and a number of them ended up being shut off for non-payment and then arguing with us because we hadn't notified them that their prepayment had been used up.

Customers who paid a year's monthly recurring fees in advance and then used additional web space or bandwidth ended up using up their prepayment funds before the year was out, and then wanted to argue with us about it because they didn't feel they should have to pay anything more than their monthly recurring fees for that year, regardless of how much extra usage they had.

Once we discontinued the prepayment discount promotion, many customers who had taken advantage of it wanted to argue with us and force us to continue giving them their services at the discounted rate, even though it was clearly stated that it was a promotion, not a standard part of our terms of service.

It was definitely an idea that was not a good fit for us.

I think with annual payment plans a host is more likely to get customers who will stay with you than month-to-month payers. That's definately not in stone, but there is a trend.

Also, as mentioned previously, most hosts that offer annual payments also offer a discount for paying annually or provide an extra or freebie in the service.

Though we provide an annual option, it is only because some people prefer to pay annually. WE actually don't run them through our merchant account at all. They have to pay the first month on the merchant account and then mail us a check for the remainder of the year. We try to make paying annually as difficult as possible. :-)

We also don't want chargebacks from customers down the road. Not allowing an annual option on our merchant account helps with this greatly...

Kwim... Echo-Inc huh? You found a good solution since they don't allow you to charge anything on more then a monthly basis besides domains. I wouldn't say you're making it hard... just doing it the easiest way with your CC processor. (If your not using Echo... disregard what I said)

We chose not to go with them because of this limitation.
Having customers pay yearly is a great thing, including an investment to help you grow and improve your services.

I think it's better to offer monthly payment to customers.
Most are not likely to pay in advance for the year. That gives them options and security. What if they don't like it and don't think the support is good? They know that they have the option to leave at any time. I think giving customer that feeling actually brings loyal customers.

we let our local clients pay yearly because they are easy to contact should a problem arise, plus they are more understanding since we've designed their webpages for them, they know us personally. we only allow 6 month contracts online and that has worked out pretty good so far, although I know of a few hosts who absolutely will not do anything past 2 months

Most hosts find that almost a majority sign up for yearly accounts, so it is used quite often. Also... knowing they offer a yearly plan means they plan to be around, and hopefully helps you trust them. If a host only offers monthly payments, that could mean they aren't very stable. Can be turned around too, and pay yearly while getting ripped off, but that rarely happens when the account specs aren't like TacidHost or 9kd.

Edit: Ofcourse we don't limit payment terms to yearly, but offer monthly payments too.

Also... knowing they offer a yearly plan means they plan to be around, and hopefully helps you trust them I have to disagree with this statement. All too often the annual payment is a simple way to make more money faster especially if you are not planning to stick around.

In my humble opinion a site owner should not make an annual payment until after they have gotten to know the host and established a positive relationship/trust for that host.

If I were planning to be a fly-by-night operation, in an effort to make a quick buck, then I would push, and push hard, for the annual payments. Simple logic dictates that the annual payment is a bigger check then the monthly so I can bail out faster.....

With that said I would not use the annual payment option as a way of determining the hosts longevity .. and if I were to do that then I would consider the monthly options a stronger sign of the hosts plan to stick around than the annual.

As far as the original question, I do agree that the annual payments are what help to fund the host overall, the hardware et al tends to get expensive, and having the annual payments to help pad those funds helps out a lot. In addition to this, many site owners enjoy 'hassle-free' payments by only having to make one payment per year so it can be a good thing for both.

Deb
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Originally posted by Get-Hosted.com
Most hosts find that almost a majority sign up for yearly accounts, so it is used quite often. Also... knowing they offer a yearly plan means they plan to be around, and hopefully helps you trust them. If a host only offers monthly payments, that could mean they aren't very stable. Can be turned around too, and pay yearly while getting ripped off, but that rarely happens when the account specs aren't like TacidHost or 9kd.

Edit: Ofcourse we don't limit payment terms to yearly, but offer monthly payments too.

Uh, no. Almost any host would find, were they to examine their sales, that the vast majority of people pay monthly, not annually. The fact that a host offers a yearly plan says nothing about their viability, just as offering only monthly payments has zero to do with their stability. Ask the people who paid GX Hosting an annual fee if they felt ripped off when GX folded up - the specs on those plans was nothing like Tacid or (insert the most recent tent folder here). Your logic is flawed.

Alright... good input. Just gotta remember I said rarely... ofcourse it Does happen but not as often. Legit businesses close down, and they would be responsible for the remainder of the product they sold that isn't going to be provided. If you offer yearly and close down... you're looking for a lot of chargebacks. Which would mean they get free hosting for the time they were there.

I agree with you on the hassle free hosting. I have a couple people who signed up a long time ago(paid yearly), and haven't said a word since their account was setup.

Didn't realize I'd set off such an alarm. :eek:

Uhh, his logic is not flawed. Our silver plan is yearly pay only, and we host thousands. Soon we will release the other account plans which have options for both monthly and yearly.

And anyone who wants to talk of hosts charging yearly and then shutting down, our company has been around longer than most here.

I think it depends on the actual cost also. Our silver plans are $48 per year. Having them pay yearly for that is a bit different than having them pay yearly for an account that equals out to $20 per month. I think before anyone even considers paying yearly, they should always fully check out the company before releasing a card number, us included. Too often, people jump before looking....and end up getting screwed.

To give you an idea of what you should do, we are opening a new location at another NOC. With the probs we have had with OLM and VDI, we are going all out to check these guys out. References, credit, clients, Dun&Bradstreet(dnb.com), BBB, etc, before we even consider them. I have absolutely no problem with someone running the same checks on us.

The logic in your world must operate on a different standard. Do you understand that you have just agreed that any host who offers monthly only payment options is by definition unstable? That he was talking in generalities so broad (and so wrong) that you could do a poll right here in this forum, and find that for almost all hosts (as I wrote, and which you skipped right over) that annual payments are not the majority? That you have just agreed that a host who offers yearly payment options must by definition be planning to "be around", when one could so easily point to GX, True Hosing, Tacid, or (fill in the blank)? The whole thing is ridiculous. How about providing some statistics to back up those claims, if you're so sure of them? Show us, please, any correlation between the types of payment plans that a host offers and the viability of the company. You can't, because it doesn't even pass Logic 101.

Tell you what, how about you go back and re-read what he said. Let me explain it to you since you don't quite understand it.

As a host offering yearly plans, then to the customer that can insinuate you are a stable company. Then if the client pays yearly, it can help you trust that client more. Do you get it now? Or do you need more explaining?

I did not however, agree to that, though it can be true. I simply agreed with him that you can do well by simply offering yearly plans, which you seem to disagree with. For us, that hasnt even slowed down the amount of signups each day. As long as you have a good price, support, and services...it doesnt really matter if you charge monthly or only yearly, you will do well either way....especially on lower cost plans. Although it's granted that on higher cost plans, you would do better monthly.

However, if you do your homework when considering hosts, then this thread is kinda useless.

Annette... you have me wrong. I did not say that makes them unstable, I said if someone has yearly plans, it most likely means they plan to be around in one year. Now remember people who offer yearly hosting still go down. It's just my Opinion. You do realize I accept monthly payments, correct? You put it as if I meant: "If you offer monthly hosting, you will close down!" I personally think this should be dropped. By your words, you seem as if I offended you by what I said.

I would have to disagree with you Annette.

My biggest client who make up about 170 domains.

Pays annually for every account. He has said many times that he would rather get a account paid for then have these monthly fees. And all of his clients pay him annually as well.

After reviewing our stats, our 300 or so clients at least 60-70% pay annually. Since we are a finacially stable company, cash flow positive, are companies have enough faith in us to take advantage of some savings and pay us.

I think if you do your due diligence about a company, as you should with any you go into to business with, you will find out whether not there good or bad.

Regardless of monthly, quarterly, annual or what ever, if you do your job supporting your clients, they wont leave regardless of how they pay.

When they leave is when you fail to do your job. This is not a hard business, if you maintain good relations with your customers, most are just excited to get a website going....

In regards to companies going under, you never know, i personally like getting annual payments. Its easier with billing, and acutally as I said earlier for a basic site, plans range between 30-200$, where not talking about a 20k car here, in the essence of it, hosting a site is cheap...

I'm just adding there was a poll awhile ago that asked what term most of your customres paid in, and I believe the outcome was yearly. Not positive but am trying to find the poll right now to make sure.

Astonishing.

Logic, according to the original post that started this, and because some people just insist on ignoring the point, an explanation:

"Most hosts find that almost a majority sign up for yearly accounts, so it is used quite often."

Most hosts I know would not find this to be the case. Anecdotal evidence, in this forum, is a waste. On what is this claim based? Nothing.

"Also... knowing they offer a yearly plan means they plan to be around, and hopefully helps you trust them. "

The fact that a host offers an annual payment option means nothing. Zero. Zilch. Nada. It simply means they offer one. I am of the belief that very few people go into the hosting business with the intent to rip off people and then jump out. There are, of course, notable exceptions to this, but I believe (although this is simply an opinion) that the majority of hosts plan to be around for awhile. It simply doesn't always work out that way at times, and payment stuff has nothing to do with this.

"If a host only offers monthly payments, that could mean they aren't very stable."

It could mean they don't like clients paying annually. It could mean that they like dealing with the accounting that monthly payments bring. Or, it could mean the same as the above. Nothing at all.

"Can be turned around too, and pay yearly while getting ripped off, but that rarely happens when the account specs aren't like TacidHost or 9kd. "

Again, I say tell that to the people who paid any number of hosts who then vanished with that money. The forums and newsgroups are filled with people who got ripped off by companies that appeared to be a lot more realistic than the two you've named.

"Edit: Ofcourse we don't limit payment terms to yearly, but offer monthly payments too. "

No problem here. Most hosts do. We do. But can you see that the type of payment plans a host offers has nothing to do with the supposed viability of the company? There is no correlation between the two, and now three of you have completely missed this point. By focusing on the first line of my original post, you completely missed the boat on the rest.

Get-Hosted, I am not offended by you. I am offended by people who continually miss the point because they focus on a single line (and have to prove themselves the exception) instead of focusing on the main objections that are made to those claims. As you say, however, this little tangent can certainly be dropped. I know I won't be addressing it any longer, since yelling into canyons just to hear myself talk is not my favorite pastime.

Most hosts I know would not find this to be the case. Anecdotal evidence, in this forum, is a waste. On what is this claim based? Nothing.

I would say a poll asking hosts, "Which payment term do the majority of your customers use" to be decent evidence on what most hosts customers use.

No problem here. Most hosts do. We do. But can you see that the type of payment plans a host offers has nothing to do with the supposed viability of the company? There is no correlation between the two, and now three of you have completely missed this point. By focusing on the first line of my original post, you completely missed the boat on the rest.

Well... Here's one instance where it will have something to do with the supposed viability of the company: A new startup host, that is just entering the venture of being a webhost and doesn't know how business will go and if he will be there in a year... He might not offer a yearly plan, because he isn't positive if he will be there in one year.

"If a host only offers monthly payments, that could mean they aren't very stable."

It could mean they don't like clients paying annually. It could mean that they like dealing with the accounting that monthly payments bring. Or, it could mean the same as the above. Nothing at all.

I could have worded it a bit better, but it still gets the point across. I gave One possibility why they only offer monthly hosting. I said it "could mean" because it could mean that, just like your possibilities could. It was a generalized statement, and it seems you take it as if I see that as the only possibility, and if they only offer monthly payments then they are unstable, which is untrue.

Uhh, his logic is not flawed. Our silver plan is yearly pay only, and we host thousands. Soon we will release the other account plans which have options for both monthly and yearly.


I'm guessing that's because you're yearly plans are $12.

Logic 101 - Your example does not hold water. But let's examine it anyway. The fact that the host might not think they will be around in a year and decides to offer monthly only means nothing, except that they probably won't be around in a year - but not because of however they choose to accept payment ranges, but because that attitude alone will kill them.

Economics 101 - The viability of a host, or any company, for that matter, resides in many, many other factors above and beyond whatever payment options they offer: business plan. Sound financial planning. Economically reasonable pricing of goods. Expanding revenue stream. Support levels to clients. And so on. I used to be a stockbroker, back in the day, and I looked at the financials of any number of companies. In a direct sale (no interest), paying for something a year in advance and paying for it month by month - such as electricity on a fixed rate, for example - has nothing on its own to do with the ability of the business to stay in business. The other factors mentioned above are the critical functions.

Debate 101 - Let me sum this up for you: you cannot prove a correlation between the types of payment options a host offers and the viability of that host. It cannot be done. However, since you are making the positive claim, feel free to provide any evidence that would bolster it.

Annette, i definetly agree with you.

Most people would think 'logic 101' but it isnt usually the case
Originally posted by Annette
Logic 101 - Your example does not hold water. But let's examine it anyway. The fact that the host might not think they will be around in a year and decides to offer monthly only means nothing, except that they probably won't be around in a year - but not because of however they choose to accept payment ranges, because that attitude alone will kill them.

Economics 101 - The viability of a host, or any company, for that matter, resides in many, many other factors above and beyond whatever payment options they offer: business plan. Sound financial planning. Economically reasonable pricing of goods. Expanding revenue stream. Support levels to clients. And so on. I used to be a stockbroker, back in the day, and I looked at the financials of any number of companies. In a direct sale (no interest), paying for something a year in advance and paying for it month by month - such as electricity on a fixed rate, for example - has nothing on its own to do with the ability of the business to stay in business. The other factors mentioned above are the critical functions.

Debate 101 - Let me sum this up for you: you cannot prove a correlation between the types of payment options a host offers and the viability of that host. It cannot be done. However, since you are making the positive claim, feel free to provide any evidence that would bolster it. :eek:

Originally posted by vSector
Why are so many hosts now offering per year payments??

With the rate of web hosts coming and going does any one really trust this option of payment?

And returning to the initial question:

Good question. For as long as I've been on the 'Net, hosts of one sort or another have always offered annual payments. Most of the hosts I know and associate with offer annual payment plans because clients request them. That's why we do it. It's a convenience thing more than anything else, perhaps.

For the second part: I never paid annually for hosting, ever. Not sure why, really - just a personal preference, I guess, and now with all the hosts folding up and going home, probably a wise idea. I think that had I stayed with ValueWeb as my host, I might have opted for their annual payment instead of monthly. I liked them enough at the time to pay for a year, but wound up getting in to the business anyway, so I guess I'll never know. :)

An attitude of: "We're opening a new business... let's not sell what we aren't positive we can provide" will not 'alone' kill a business.

Hello
Here are a few of the reasons we offer annual plans:


1. Corporate customers won't pay monthly, they want a one off payment.

2. Every day we have 3 or 4 failed credit cards for monthly payments - chasing them up costs a lot of time and money. We offer a 30% discount on annual plans to encourage people to sign up annually and help avoid this. Cards failing is more common with UK debit cards which require a positive bank balance.

3. Combination of 1 and 2 above. If someone is paying monthly and their card fails, and we can't contact them their site will be suspended. What if they are jsut on holiday? Its more secore for people to sign up annually.



However, we have a policy of month to month contract which means if someone leaves after three months they get 9 months refunded.
We introduced this to try and reduce the number of failed cards on monthly hosting and to some extent it is working.

Companies pushing annual hosting plans are not necessarily disreputable or fly by night. There are many cases where this is better for the customer, or with companies the only way you are going to get their order.

Gordon

Originally posted by Get-Hosted.com
An attitude of: "We're opening a new business... let's not sell what we aren't positive we can provide" will not 'alone' kill a business.

Actually, economically speaking, it can. And does. Quick Economics 101 lesson for you.

Let's use your example. Say you are the host just starting out. You decide that you're not sure you'll be around in a year, so you won't offer yearly (or any multi-month contracts, for that matter) payment options. You decide that it's in your best interest to offer monthly only, because you're deciding on a month to month basis whether you'll still be around. Strike one. No long term planning, and reducing your available client pool. In addition, it's not even a given that you'll be able to go month to month with no particular plan. Aimless wandering is not good business.

On you go for awhile, getting clients here and there. You're still in the fear mode of things, wondering if you'll be around in a year, and you've lasted six months so far. Your client base is growing, but not at a fantastic rate, because you've limited the client pool, and you haven't changed anything you offer thus far. Strike two. You've not done any trending, because of the overwhelming concern about being around for a year, and your focus has been on that instead of finding ways to increase your revenue stream. Business involves taking calculated risks.

So you make it a year. You have an okay client base, but not a great one. The difference between you and some other hypothetical host who is much larger after only a year is that they researched incredibly well before getting into the business, and they noted the options that other hosts offered - including multi-month payment options - and the geneal attitude with which other hosts treated their clients and addressed the public, and how confident they were of what they offered. That host paid attention to their business, focusing not on growth at any cost, but growth at a reasonable enough rate to withstand increased support issues and the continued expansion of their business. Because they did not start off with the attitude of possibly not being around in a year, and therefore did not limit their options, they were free to adapt to client needs. You, though, did not, because you did not want to offer something you might not be able to provide - and yet here it is, a year later, and you've successfully provided something you thought you might not be able to provide. Strike three. Business requires adaptation.

In all of this hypothetical, still using your example, what do you tell clients who want to pay annually? "Sorry, we don't do it because we're not sure we'll be here in a year"? If you don't think that type of attitude won't kill a business in a heartbeat, you're mistaken. In this instance, it is not the payment options, or the provision of an item that you think might not be possible (because it could be anything, not just payment options). It is the attitude of the business owner that has caused the damage. So yes, the type of attitude you describe is quite effective at ending a run at a business, of any type.

You dwelled on the fear of being around one year. I'm going to leave this post alone now because my words are getting twisted around and it's not worth the time to debate with this going on.

Sorry you're not getting it, but no one is twisting your words. They're all right here. The little lesson above combines two of your own examples, in fact. So, if you want a better lesson, choose better examples. It's been fun, but this thread will fall by the wayside for me, too.

Anyone can make up a story about starting up and not offering yearly plans. While 3-4 months later realizing you can offer that and you offer it with no consequence. You made it seem as if they would dwell on yearly payments until they rotted away. You twisted my words in early posts also. It's just not worth the time for me to argue when my words are repeatedly turned around to mean something totally different then I intended.

Do you understand that you have just agreed that any host who offers monthly only payment options is by definition unstable?
You told him I said any host who offers only monthly payment options is be definition unstable.

I mentioned there was a possibility that they could possibly not be around in one year to provide that service, and gave a perfectly good scenario where that could easily happen, and you made up a nice little story to about what Will happen in a long string of events just because you didn't want to provide a service that you weren't sure if you could provide.

Originally posted by Orpheus1539



I'm guessing that's because you're yearly plans are $12.

You didnt dig far enough. The silver plan on Pro is $48/year. The $12 that you saw is an ad-free option on Worldzone.net (Free Hosting) not WorldzonePro.net (Pay Hosting).

No, I would never attempt to offer that much for a mere $12 per year. The free hosting is pretty limited in what you can do there, so the price is effective there.

I was following this post, up until people starting writing doctorates to explain a simple issue.

Joe

Originally posted by Get-Hosted.com
I would say a poll asking hosts, "Which payment term do the majority of your customers use" to be decent evidence on what most hosts customers use. I would not, and anyone who really knows anything about statistics and polling would agree with me. A poll in this forum, which would get a dozen or two responses from a self-selected subsample of the already self-selected sample composed of the members of this forum (and could get responses even from people who are not hosts but think they still know the answer, and would get incorrect answers from people who think they know their numbers but are really wrong, etc. etc...), would have absolutely no validity.