Another one of my, "How do you explain..." threads.

Explaining overselling to a potential or current customer isn't something I do much and it certainly isn't as hard as explaining the overall concept of Web hosting, but it has cropped up in the past.

So, how do you go about explaining it? Have you found a way of explaining it in 'dummy form'? Do you need to, or do they usually understand first time?

Jaime why are you trying to explain it to them? To show the client why overselling can be bad? Or just the concept of what it is?

A bit of both Nick, I know, I'm awkward. ;)

To be honest, I haven't had to do it for a long time, it's more of a, 'How do *you* do it?' thread, as we all have our own ways, and some are better than others, so we get a chance to learn, rather than me specifically needing to explain it to somebody.

I know last time, when I asked how everybody explained the general concept of Web hosting, Aussie Bob shared his apartment theory, where the server is the apartment, and Websites need a room etc, I thought that was a really good way of describing it, and I have used it ever since.

If you want to make it sound bad: Hosts that oversell put themselves in a bad situation. If users actually did use what they paid for, the host's entire business would come to a crumble. This business model is used by hosts that don't have the financial backing, or correct planning, to provision enough resources for their users.

If you want to make it sound good: We have a surplus of resources which allows us to undercut our actual costs and pass this savings on to the end user.

The good one is very well put ;)

Maybe use the "airplane" method to explain.

Most airlines oversell (overbook) their seats, with the expectation that some people will cancel or not bother to show up.

But... sometimes everyone actually DOES show up and then they have a few people who aren't allowed on the plane since there's not enough seats.

Those customers are usually... well.... unhappy. ;)

Most airlines oversell (overbook) their seats, with the expectation that some people will cancel or not bother to show up.

But... sometimes everyone actually DOES show up and then they have a few people who aren't allowed on the plane since there's not enough seats.

Bingo, that's what I was looking for 'zippy, thanks. Of course though, in my case, I'll add the... "sounds stupid doesn't it? That's why we don't do it." phrase on the end.

the sad fact that marketing pricing these days started to harm businesses that dont oversell.

i haven't started yet, but i think we might for personal hosting since we have 2 type of hosting brands personal and corporate with some sort of different setup.

the sad fact that marketing pricing these days started to harm businesses that dont oversell.

I haven't found this to be the case....

Originally posted by Mark_TVI
I haven't found this to be the case....

When your main selling point is price...I think it is the case..however if your company can shine in other aspects (support, combined services, etc) then price might not be such a big factor...

profitable margin + good planning = sucessful business

if you are selling cheap hosting. i can guarantee that you will have a higher chance of failure than someone who is charging a bit more for better support.

Imagine a restaurant overselling their tables 4:1 - Between mouthfulls you'd be forced off the tables so other people could sit and eat !

Or a supermarket overselling tins of beans 10:1 - for every 10 paying clients who want benas, 1 random person gets to go home with them

Or a taxi-firm overselling the seats 20:1 - instead of a simple trip to the theatre for you and your partner, 38 other people are crammed in the same space all going different ways, *ALL* paying the full fare ...

I've seen "hosts" for sale oversold over 60:1 baed on their already overcontended and oversold 1Tb of monthly data-transfer - and they wondered why clients moaned about downtime and poor performance !

A nice easy explanation of overselling for your clients...
we can actually provide what we sold you

I talk about banks, if everyone wanted to come withdraw all their money it just wouldn't work at all. Look up the stats of how much money the banks actually keep on hand to use as another point in the explanation, post it here if you don't mind, I haven't looked it up in a while.

Also, it's quite common in many industries. I have a buddy would sold lots of mulch, he bought it by the weight and knew he could sell more than he got because he sold it by the yard and not weight. When he gave quotes he told them more than they needed and so he oversold in two ways, not exactly something I would point out like the bank scenario, but something to think about nonetheless.

I would personally come up with a little schpeel on overselling using the banking scenario, it directly relates to everyone, not just those who purchase/sell mulch or something.

Edit: Also, explain to them what you will do if every customer for some reason uses all they space they bought. In my case I keep things setup so that in the future, somewhat near future, I will not need to oversell at all in order to turn a desired profit.

Originally posted by Bashar
the sad fact that marketing pricing these days started to harm businesses that dont oversell.

i haven't started yet, but i think we might for personal hosting since we have 2 type of hosting brands personal and corporate with some sort of different setup.

The sad fact is that... everybody oversell.
The Tier1 providers oversell, DCs oversell and so on.

There is nothing wrong with overselling as long as you can manage it
and to have enough resources to increase the capacity. I agree that
these super low deals like get 3GB space and 300GB traffic for $7.99
(won't even go into the unlimited traffic deals) indeed make me wonder
how they are planning to pull this off if everybody will actually use what
they had been promissed.

The issue however is that most users never use that much, and I guess
that they just get rid of these who use even close to the allotments. It's the
same as with dedicated servers - and there are plenty of ways to get rid of
these unprofitable clients. Here are just two examples:

- in the dedicated market the DC may claim that the server used way too
much bandwith, a lot over allotment. The client will most certainly leave.
(Just for an example ThePlanet's website says on Bandwidth that they bill
by 95%, so it's enough to create a few bursts or "DDoS attacks" to bill for
up to 60,000 GB - full duplex 100Mbit, their allocation is just 2,000GB and
each additional GB is 0.75$. What will do a client that normally uses only
1500-1900 GB when he receives a 40,000+ or even just 2,000-3,000 USD
overage bill when he normally pays only a few hundreed $/month for a
server?)

As an offtopic note it seems that these DDoS attacks have a potential to
provide quite a good income for DCs - after all if you check the graphs the
incomming traffic compared to the outgoing is very low and the bandwidth
is wasted - but if they charge clients for the huge amounts of incoming
traffic due to DDoS attack they can make a lot of money out of traffic which
is basically free for the DC. Another option is to force everybody to buy
some sort of DDoS mitigation protection - or else threaten the client that
in case of the DDoS attack they will be charged for the bandwidth used.
I never seen any one of the companies to offer some sort of SLA on these
DDoS mitigation services, and their firewall should have done the work to
mitigate it in the first place, but sure it provides some additional income from
nowhere and from nothing.

- The second example is a classic. One word - spam. As these days you
don't have to be caught sending the message itself - it's enough that
anybody complained that they received a message they don't liked with
a link to your site to cut an entire server where the site sits. So it's surelly
a good enough reason to kick that bandwidth hogging client.

And my guess is that's exactly what most do. The collect data on every
client and then get rid of these who use too much.

Originally posted by Equentity - Jamie
. . . So, how do you go about explaining it? Have you found a way of explaining it in 'dummy form'? Do you need to, or do they usually understand first time?
Hmmmm, *puts thinking cap on* :)

You could explain overselling like someone who owns an apartment building of 50 units. He then accepts 65 tenants, for those 50 units. He's counting on 15 of those tenants not to show up. If all the tenants show up, at the same time, then the building is oversold.

I could go into much more detail, but that's the most "dummy form" I can come up with. :)

Originally posted by Equentity - Jamie
. . . I know last time, when I asked how everybody explained the general concept of Web hosting, Aussie Bob shared his apartment theory, where the server is the apartment, and Websites need a room etc, I thought that was a really good way of describing it, and I have used it ever since.
No worries. :gthumb:

Most of these analogies don't work.

An airplane would crash if you put too many people in it.

Supermarkets/chain stores don't "oversell", and will usually cease rainchecks on items if they know they wont be able to actually meet the demand for supply.

Apartment building owners don't oversell. Unless they're renting, in which case they might overbook, but they still can only put x amount of tenants in there (likewise with taxi's and the number of passengers they're licensed to carry).

Web hosts who oversell, and those who buy up far more space/bandwidth than they require, will generally balance themselves out. Web hosts who don't, will have higher ticket prices but not always higher revenues.

There are pros and cons to both. The cheaper (overselling) host will generally attract more clients and with proper planning and procedures in place, can make it work quite easily. The more expensive host might find themselves answering questions like "what is overselling" more often. :)

ML

Originally posted by MeatLoaf
Apartment building owners don't oversell.
We'll change that to Time Share holiday apartments then. They can oversell. ;)

More folks turn up, than what the Time Share apartment complex is able to handle. They overbooked, and you have 60 families trying to get into a 50 unit complex. There's going to be issues. That's the same as a server not being able to serve clients, due to too many clients wanting resources from the server.

The basics are still there. A server only has X amount of resources that it can deliver, and if the supply is outstripped by the demand, then you have problems. :eek3:

The cheaper (overselling) host will generally attract more clients and with proper planning and procedures in place, can make it work quite easily. The more expensive host might find themselves answering questions like "what is overselling" more often. :)
How can anyone in this day and age not oversell?

Correct me if I am wrong but there are three types of overselling which have distinctly different consequences if you are caught out....

1) Getting caught out on bandwidth is something you will pay for in punitive bandwidth overage charges but it should not affect your customers.

2) Overselling CPU/Memory means customers get slow response time but is not going to prevent you from providing service. You should be able to react quickly enough to manage this one and the consequences are not fatal.

3) Overselling disk space has serious consequences but you get a lot of advance warning. As long as you are not in a position where a handful of clients could suddenly use 100% of their allocation and drown you this can be managed.

So if you manage well and can honestly say that you have the ability to increase resources as needed to stay ahead of demand you just need to find the right way to communicate this. When speaking to customers I would think the important point to convey is that you are well versed in managing the art of resource utilization and that your customers have never been disadvantaged by your resource allocation policy. In fact, as MeatLoaf implies, your customers actually benefit from the fact that you oversell and pass the savings on to them

Originally posted by Aussie Bob
We'll change that to Time Share holiday apartments then. They can oversell.

It's nothing like timeshare either. Timeshare is "an arrangement under which a purchaser receives an interest in real estate and the right to use an accommodation or amenities, or both, for a specified period and on a recurring basis.". You'd have to rotating client sites on and off a server for that to be the case.

Overselling in web hosting is not overbooking (http://www.nolo.com/definition.cfm/Term/F4798B77-A3F6-4071-B9FBA4CC59AA5363/alpha/O/).

ML