I would be interested to hear all the main points and arguments of charging a setup fee and not charging a setup fee.

Well put it this way, 90% of hosts don't - if you were looking for a hosting account and you could easily get an account without a setup fee why would you pay it ?

TBH if you can't set up a new customer in a few minutes you need to look at your systems, I don't see how you can charge a setup fee for a few minutes work.

That said, if I was offering dedicated server I would definitely charge a setup fee just to stop the timewasters.

For dedicated servers sure it makes sense

For virtual , well the ones that do just advantage of the customer and there are enough out there that dont

As said before

Joe

Don't most companies(virtual account hosting) have this automated by now???

If a host is charging for a setup fee when their system is fully automated I think thats wrong... Only a setup fee should occur when a real person has to actually do something manually...

Although there is the exception of when its part of a business plan to offer cheaper monthly rates knowing each customer has signed up and paid for the setup fee which is 100% profit.

How about if the host is using a control panel like the hsphere one where the host has to pay $4.50 one time fee per user?

I think that most virtual hosting places will waive the setup fee if you ask.

I've said before that WE charge a setup fee to pay for our affiliate program and to reward our long term customers. Now that we're done with Commission Junction, we'll probably be lowering our setup fees.

I think the setup fee is a grey area....

My thoughts:
If you are going to charge a setup fee, I woule recommend making it very clear what the fee is for. If you give a good reason why somebody should pay a setup fee, they will probably be ok doing that.

http://www.webhostingtalk.com/showthread.php?threadid=25056&highlight=setup+fee
That thread may be helpful

We maintain a setup fee for customers that need some handholding in the beginning. That just offsets some of the cost. however if someone has a problem with it, we will credit them the setup fee. Then again for hosting ours is only $10.

i would never charge a setup fee. there's simply no point.

Setup fees is just another way to loose your customers

true true. i suppose if there's a lot of manual work involved then a setup fee might be justified.

We used to not charge a set up fee, but now we do.


Starting out, it probably makes sense to not charge a set up fee. Generally newer businesses can't compete with well-established ones in terms of higher quality service or marketing, so frequently they need to make their inroads in price. Since they probably have lower costs than their large rivals, it makes sense to start out going for cheap, and one easy way to go cheap is by having FREE setup!

After a while though, you realize you're really going to have to raise prices, and then you take a hard look at your free setup fee policy and may well decide to end it. There are a number of good reasons for having a setup fee as a webhost:

1. People who worry about the setup fee generally aren't the kind of people who end up spending a lot on webhosting anyway, and are always looking to jump ship at the first sign of a cheaper host.. quality be damned. Now that you're bigger you can afford to be slightly more discriminating in the sort of customers you look for.

2. Most people don't really "count" a setup fee towards the price of their plan. If it's $19.95/month with a $49 set up fee, they see it as "$19.95/month", because everybody assumes that they'll keep their web site long enough to amortize the set up fee to nothing. The reality is, a lot of people end up leaving their web site in a year or less. So really that set up fee turned the $20 hosting plan for a year into $24/month for a year.. it really IS a significant amount of extra revenue for the host.

3. It's a barrier to switching. If somebody's already paid the set up fee with you, they feel like they've already invested something in your service, that they'd then lose if they switched to another host. Whereas if there was no set up fee, they'd have no *financial* incentive at all to stick with you when the amount of time they'd pre-paid for expired.

4. It really DOES cost you something everytime you get a new customer. There's always a lot more tech support from a customer early on in their relationship with you as they learn the ins and outs of web hosting, or your specific set up, or try and transfer their domains to you, of configure their email client or configure their ftp client.. etc. Also there's the cost of approving new clients.. you don't just automatically set up everybody who enters credit card info at your site do you? There's a lot of fraud out there!

5. When you have a set up fee you can waive it as a special promotion or as a "special" incentive to a customer who emails sales and seems halfway interested in hosting with you.. never be afraid to waive the set up fee to get a legitimate customer!

Anyway those are my thoughts..

if you're in the same market as interland, hostway, pair, affinity, etc.. go ahead and charge a set up fee!

If you're in the same market as aletia, addr, venturesonline, etc.. then you probably better not charge a set up fee.

I agree 100%

I like your points the only problem is we have automated setup. We can't justify the cost to our customers. If I could I wouldn't have a problem with it.

zhoujianfu, hmmm...chinese?

Anyway, I think you have some good points on this issue. The thing is, I also totally so so so much agree with this guy's - David Brown from Digisurge - opinion.

Here's what he said about setup fees:
Competition is so tight that new hosts offering setuping fees are at a disadvantage. Why sign up for a host that includes a set up fee when you can get the same service from a host with no set up fee? Some hosts that have a good repuation with support can offer setup fees. This is because people know this host is good and could be worth a little extra money for the good support. But a new host has no reputation.

So like zhoujianfu said, big companies should charge setup fees, and vice versa.

If you're in the same market as aletia, addr, venturesonline, etc.. then you probably better not charge a set up fee.

And why exactly is that?

I'd rather let you explain that tid-bit of your post than me going off and assume something.....

I strongley believe that if you charge a setup fee you must justify it.

Originally posted by netsolutions
I strongley believe that if you charge a setup fee you must justify it. Okay. I'll bite. Justify it.

Well personally I can't that's why I don't charge them

Oh I don't know, maybe to make more money?

Interesting thread..
I think zhoujianfu has some good points.
One consideration to keep in mind about this topic though, is every hosting business, large or small has their own expenses and those are ALL going to be different. It may be easy for one host to provide monthly accounts with or without a setup fee but diffucult for another..alot of that would depend on their billing/merchant setup.
We charge a 20.00 setup fee on MONTHLY accts. but zero if they choose 3-6-12 month plan.
We sell fewer monthly accts. than anything, and to my knowledge no one has ever complained about the fee.

Originally posted by Martie
Interesting thread..
I think zhoujianfu has some good points.
One consideration to keep in mind about this topic though, is every hosting business, large or small has their own expenses and those are ALL going to be different. It may be easy for one host to provide monthly accounts with or without a setup fee but diffucult for another..alot of that would depend on their billing/merchant setup.
We charge a 20.00 setup fee on MONTHLY accts. but zero if they choose 3-6-12 month plan.
We sell fewer monthly accts. than anything, and to my knowledge no one has ever complained about the fee.
That's actually a pretty good response and answer :)

Lots of companies charge setup fees to make _money_
That money can be put to really good use such as advertising (to make more money) and other stuff to run the company smoother.

Ya the only problem is that a lot of customers don't like setup fees.

Originally posted by netsolutions
Ya the only problem is that a lot of customers don't like setup fees.

I think you can safely say no customers will like setup fees, but some are more willing to pay them.

Quill: I think he is a chinese.

Martie: Maybe those who are not pleased don't even bother to complain to you as they can find another host without setup fee easily. :P

However, this is really a nice topic to discuss about. :)

Originally posted by Donovan
Maybe those who are not pleased don't even bother to complain to you as they can find another host without setup fee easily. Maybe. But so what? Some people are leaving without complaining because they think your prices are too high. Some are leaving without complaining because your plans aren't set up the way they like them... or whatever the reason. What's important is that the number of people who do sign up and pay the setup fee make that pricing structure pay off.

Put another way: you'd get more signups if you would cut your prices in half. Does that mean you should do it?

Yup, fully agree with you. :)

zhoujianfu

I agree with you 100%. On our resellers packages, we end up spending hours and hours a day helping customers with things that they can spend minutes reading to find the answers. Although the system is automated, we spend lots of time holding their hands. We don't mind this at all but after you've spent hours and hours of time with a customers, it hurts to see them jump ship to the first cheapest host they find. It's just not worth it at all.

We use H-sphere and we are struggling with how to handle the per client cost for the CP. Many times we've heard, your support is great and your system is great but I found a cheaper hosts. We don't charge setup fees for shared hosting because they generally don't take too much of our time but Resellers do.

You have to decide what works for you. After all this is a business and you're doing this to make money. Just because things are automated doesn't mean you still don't spend hours of time.

Personally, I think if a customer really had intentions to stay with you they will spend some time to understand your business and work with you so charging a little of setup fees won't deter them away.