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  1. #1
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    You get what you pay for - Do we believe this a little too much?

    I am hoping I chose the right forum, I feel like this is relevant to all of web hosting.

    While we are all running around trying to compete with our competitors on pricing, promotions, services, etc does it seem to ever occur to us (providers) that clients and customers simple see it as the more the service costs, the better the service is?

    For example, you walk into Walmart and go to buy something specific. When browsing this item you must subconsciously think that the more expensive one is better, right? I feel like this must apply equally to the hosting industry as well.

  2. #2
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    If something is too cheap -- as in, there's no way in hell I could it myself with raw materials, even in bulk -- then something is fubar. With hosting, this is too common. This is why I don't get anywhere near something like Digital Ocean ($5), or the kiddie hosts promising everything for $1. Yes, it could be the best service ever (unlikely), but I'm not willing to gamble on that. Because that's what it is -- a pure gamble.

    I need something I can rely on. I have work to do, and don't want to spend all day farting around with a cheap host or server. It's why I think "best bang for the buck" is stupid talk, and instead prefer to look for a good value for a good budget.

    I'm not rich, but I'm also not a miser.

    It's why I use hosts like EuroVPS, Namecheap, Stablehost, etc. I can rely on them.
    Last edited by kpmedia; 01-10-2014 at 04:03 AM.

  3. #3
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    I do sometimes worry about that - as a consumer I partially use that kind of thinking as well, for example I pay decent prices on setups because I believe my research showed me what I could get, and in a market where many providers are on dead hardware/networks its nice to know that paying more is proving to get me more (mostly).

    There are certain well-known dedicated server providers who are seriously expensive, yet they are some of the best providers spoken off. That premium certainly seems to pay off and another main benefit is the lack of attraction to high prices from spammers and abusers (mostly).

    For servers, colo and hardware at least, in my experience paying those low low discounted budget prices gets you a sore head, one way or the other. Many dedicated server providers (unless they're EIG) who are fairly early in their business life, may not have the cash to buy all the equipment needed to fill demand, and may end up charging extremely low prices to get clients in quickly - but if it doesn't look sustainable, it probably isn't.

  4. #4
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    I think some people believe it whilst others don't, others just want a cheap service that's reliable.

    We sell Minecraft and we're selling it at around half the price of what our competitors are, whilst our competitors run SSD and we run HDD, our services are still high performance, but obviously, not as good for the huge servers like our competitors, but the majority of them go with Dedicated Servers now anyway.

    Unlike our competitors, we attract a lot of small customers. Customers who're running small private servers, in comparison to our competitors who're attracting the bigger customers. The reason simply, that the smaller customers want an affordable, reliable service, we offer them that, whilst the bigger clients are willing to pay more for the SSD and just as good service.

    I guess it depends what type of client you're wanting to attract, I personally see it as there's those who're willing to spend small amounts for a reliable service, and those who're willing to spend large amounts, but I think the people wanting to pay larger amounts is slightly more limited, unless you're offering VPS and Dedicated Servers, of course.

    There are lots of cheap hosts who're just as good as the more expensive ones, again it just depends what type of clients you're wanting to mainly attract in my opinion.

  5. #5
    In my opinion, there are two types of customers.

    [1] Some clients are looking for cheaper server regardless the service uptime and support.

    [2] Some clients are looking for better services, support, uptime and they are ready to more to keep their services up.

    This all depend on their requirements.

  6. #6
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    There's a difference between having lower prices and having disruptive pricing. Everyone remembers what we paid with Verizon and AT&T in the last decade before Alltel and MetroPCS started driving prices down. Part of the reason Verizon bought Alltel was to stop their antics. Now T-Mobile after a failed merger has to be disruptive to bring market share to themselves.

    Sure hosts have a 40 dollar a month service with free backup and managed, but strip out those two things, 10 and 20 respectively and you are left with a 10 dollar vps elsewhere where you might be able to add those two things or go without. I think those who give customers choices in their service levels are doing the industry a favor and opening up the market to groups that could not previously afford much more than shared hosting.

    DO's 5.00/mo plan is entry level, you go up to 1-2 Gigs of ram and you're in VPS.net and Linode territory and they are good providers as well. Even Vps.net occasionally offers a 5 or 6 dollar entry point cloud product to get new customers in the door. Many of which upgrade later as their resource needs change.

    Summer and Kid hosts are the ones doing the damage to the industry, while those of us who have the economies of scale to price things where we want get lumped in with them is not exactly fair.

  7. #7
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    It all depends on the customers income in my opinion.

    Some people would rather spend money on webhosting and get the quality providers, one which charges a fair price and you know if they carry on, won't go out of business.

    The other people would rather pay less on webhosting and more on their living costs for example, they pay $1 on hosting, and $23.96 on Starbucks coffee, others would pay $5 on hosting, and only $6.68 Maxwell coffee.

  8. #8
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    Some of us pay $0 for coffee.

  9. #9
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    Quote Originally Posted by kpmedia View Post
    Some of us pay $0 for coffee.
    Is that for unlimited coffee haha.

  10. #10
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    This is an interesting point. Many people don't understand that there is a difference in the quality of hosting -- so they just go with the cheapest.

    But there are always the people who appreciate quality.

    Oh and by the way, Starbucks coffee sucks. They burn their beans. I prefer local coffee shops

  11. #11
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    It all depends.

    Some people don't like cheap stuff and have the common thinking of cheaper worst, expensive = quality.

    But in reality this doesn't exactly apply for Hosting. In the field of electronics it all depends on resources, how the provider got the hardware, maybe they got lots of money and bought bulks of servers, which is always cheaper.

    DO is an example. From what I've seen they are doing good. The only complains I've seen so far are software/control panel related.

    If a company has a good plan, good investors or maybe good money on their own, and do every move careful, well yeah they can be a hell of competitor.

    How do you start getting customers? Usually with cheap prices and good PR. Now it doesn't mean that in a near future they won't raise their prices. If they do, well that was some hell of a good marketing plan. Why? Usually when a customer has been using a product or service for a long time without problem, they start to feel like some kind of attachment with their service provider. So we can say that as an example if DO raise the prices for 2015 after so many VPS deployed and so many happy customers, probably it will be a success.

    Linode for example is expensive compare to whats in the market, but they have a long customer base that just love the company. That's a perfect example. They don't even use SSD,which is the new trend, aka they don't compete. Probably when they started, they were cheaper. I said probably...(50/50)

    So is curious that the op mentioned Walmart. We can include Walgreens here too. Walmart and Walgreens tend to create a cheaper trademark of their most popular products also, sometimes they produce them. When you compare the product ingredients, they are the same, when you tasted it can also be the same, so why would you pay 5 , 10, 20 dollars more for the original (aka quality recognized) product, if it taste the same, have the same ingredients and apparently quality?

    Is the same with Hosting, if I can get cheaper prices in electricity and bandwidth, cheaper prices for the same hardware that premium recognized companies use, why would I put my prices equal or more expensive than my competitor , since my margin of gain is bigger? Hell no, lets put it lower and make a hell of PR campaign.

  12. #12
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    It all comes down to how important the website is to the client. I have seen customers wanting to pay $10/month for a VPS that costs $30. They don't mind the occasional downtime simply because their website is not that mission critical.

    - Daniel

  13. #13
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    Quote Originally Posted by CW Mike View Post
    Is that for unlimited coffee haha.
    Wonder if Godaddy ever opens a coffee shop, what will the prices be like ....

    2$ for unlimited* cups of coffee with complimentary donuts.


    * Unlimited cups, with each cup having capacity of 5 ml, sugar packets chargeable 50c per packet, Donuts complimentary if you pay for 10 days of coffee at once.

  14. #14
    Imagine a well known bran will run a promo of $0.01/mo will you stick on $1/mo for years.

    Who is really killing the market?

    Some people offer hosting as a value added service and not really as a line of business. So they are not so bothered about prices.

    There are even free hosts that have existed for long.

  15. #15
    Well i have seen a trend here,

    People have slowly kind of started turning down too-cheap-to-be-true offers.

    They have now shifted focus to over quality due to all these discussions.

    I still remember when everyone wanted to buy the "Unlimited" Package,
    now they are aware of their needs and go with reviews more than the prices.

  16. #16
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    Quote Originally Posted by ryus View Post
    Wonder if Godaddy ever opens a coffee shop, what will the prices be like ....

    2$ for unlimited* cups of coffee with complimentary donuts.


    * Unlimited cups, with each cup having capacity of 5 ml, sugar packets chargeable 50c per packet, Donuts complimentary if you pay for 10 days of coffee at once.
    ^^ epic ^^

  17. #17
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    For me personally it comes down to the usage. If I have a project that I think would be best hosted on a dedicated server but that doesn't require high-end hardware or the fastest available network, I won't hesitate to pickup an older Xeon server from DataShack or WholeSaleInternet. While they are very cheap, I know what level of service I can expect to receive from them (why I tend to always stay with brands I'm familiar with for anything more than testing).

    I think a lot of hosting buyers are like that, not necessarily looking for the cheapest, but willing to take a good deal as long as the account performs predictably. Although, this same logic has burned many a HostGator customer at this point.

  18. #18
    I think you are overthinking the average customer. For most people, $2 is about the same as $5, it's pocket change to them, even at a minimum wage job. So really it doesn't matter that much, compared with other aspects of your business, such as:

    - Do you have a way customers can try your service for free?
    - Do you offer a money-back guarantee?
    - How does your website make them feel?
    - What have they heard about your company in the past?
    - How easy is the signup process?

    Purchasing web hosting, like most services, is an emotional decision, and not a logical one, for most people! They choose the service that 'feels' the best...

  19. #19
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    Quote Originally Posted by azoundria View Post
    Purchasing web hosting, like most services, is an emotional decision, and not a logical one, for most people! They choose the service that 'feels' the best...
    Someone needs to put that into a sticky thread here, or a signature, or both! WELL SAID!

  20. #20
    Quote Originally Posted by azoundria View Post
    I think you are overthinking the average customer. For most people, $2 is about the same as $5, it's pocket change to them, even at a minimum wage job. So really it doesn't matter that much, compared with other aspects of your business, such as:

    - Do you have a way customers can try your service for free?
    - Do you offer a money-back guarantee?
    - How does your website make them feel?
    - What have they heard about your company in the past?
    - How easy is the signup process?

    Purchasing web hosting, like most services, is an emotional decision, and not a logical one, for most people! They choose the service that 'feels' the best...
    Last statement is indeed spot on and its valid for the whole purchase process of most goods - people buy emotionally (I know I do!).

    Now, while you are also correct that the difference between $2 and $5 per month is miniscule regardless of salary, I do believe it still may be a consideration point for some. In my observation there are certain geographical locations, where people are more inclined to look for the cheapest, negotiate to the last penny and seeking "more for less" in general. Accidentally (or not!) those particular locations are not so economically and financially developed and this makes the people see things in a different perspective. Such regions tend to seek for "deals" more, just because they do receive many services at a much cheaper price, to reflect their spending potential.

    With that said, again, this is just a viewpoint of the matter. I am delighted to see how slowly, but surely, customers are getting more and more educated about the hosting services and the more they understand, the more they see the value of a somewhat more expensive host that backs their prices with the quality of the products they sell

  21. #21
    I'm just talking about the majority of customers, not about everyone! Of course there are exceptions. I know because I'm one of them, as are a huge chunk of the people on this forum. The very fact you're talking the time to discuss a service as trivial (for most people) as web hosting places you in a select group of people. Either you own a hosting company (as most people here do) or your website is highly important to you. For most businesses, and most people, a website is something of limited importance, compared to the multitude of other ways to make sales/accomplish goals - storefront, in person, telephone, SMS, Facebook, IM, email, forums, sponsoring, volunteering, billboards. If their website is up 97% of the time, and has a basic page, it's good enough for them.

    I would say that while price may play a factor in some people's decisions, it's not nearly as important as being the first company they hear about, having their friends or family recommend you, or giving off a really good first impression/communicating the value of your service. That's what makes it tough - the companies that get the customers is almost always going to be one of the first ones they see. And most small companies have no control over that. But I definitely think as a small company you're better off thinking about how to build better value to your product, how to wow your customers and make them really excited to be your customer, and how to really improve your services to gain that competitive edge. Thinking about something like price is really not an effective use of your time.

  22. #22
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    Quote Originally Posted by SolaDrive - John View Post
    I am hoping I chose the right forum, I feel like this is relevant to all of web hosting.

    While we are all running around trying to compete with our competitors on pricing, promotions, services, etc does it seem to ever occur to us (providers) that clients and customers simple see it as the more the service costs, the better the service is?

    For example, you walk into Walmart and go to buy something specific. When browsing this item you must subconsciously think that the more expensive one is better, right? I feel like this must apply equally to the hosting industry as well.
    The intelligent consumer, probably yes but you make a good point. Why? Because hosting is a service and so its an intangible product, something you cannot touch and see.

    I think that most users do not understand what is behind it. They think it works in the air, this is why they cannot understand the perception that the more it costs the better it could be. It surely is, because this is usually how economics works. Its not possible to break some prices barriers, imagine if huge companies with millions of dollars canīt, why would someone else could offer something almost impossible? They canīt.

    But I donīt think people think this way. If they would, you would not even see all those 1$ unlimited plans. They would not exist, and they do. Why? Because I donīt think the consumers things this way regarding services. They see Google offering free email and Youtube hosting videos for free, so they obviously think that 1$ hosting is possible and is actually expensive.

    They donīt know how the services free work and that they actually do have costs they are paying indirectly. Hosting is a prostitute. The cheaper the better.

    Now, this is the usual Joe. You will never see a company or someone that has a serious website looking for this because he probably did already and had bad experiences. But the market in particular Internet is so big that it seems allot of people are willing to lose some money to try a service, even when it feels like a completely scam.

    Or its that or the world is full of stupid people that actually think everything is free on the Internet. This is the assumption allot of people actually have. The same people donīt have a problem paying their ISP each month or spending in one weekend of party what would costs them a good hosting for one full year.

    In the end I donīt think this users value a good service at all. This is the reason why are willing to go with as low as they can.

    Walmart is full of people, they know its cheap and probably awful quality but they still buy there because if its break they get a second one. In services this is similar. If it breaks, they just wait until it works or get another one. You would be impressed on how many hosts some users change in a year. Some keep spending all their time just migrating websites all day. So its not free or cheap either. They are spending allot of time looking for new hosts and changing them once that 1$ unlimited breaks. Its the most ironical story in the world. They want to save a buck but they are wasting their time, and they are never going to get those minutes of their live back, like ever.

    From a company point its a terrible way to do business. You never have permanent customers, its just depressing to be a one night stand host.

    The first thing you should do, is raise your prices. Donīt be afraid of charging more. You are going to be impressed that the user paying 5$ is the same that can pay 15$, its just pocket change for them on the end, we are not talking here about 50$ or 150$. Most shared hosts compete at the pennies level while they would earn so much more and would be impressed that their customers are willing to pay more.

    Just look at Amazon and providers that charge per everything you use by unit. They pay allot more in those providers and they are doing just fine. Reason? People will pay what ever you charge them in technology. The problem is that the cheapest hosting years back was 20$, then 9$, now its 1$ for one year. The market is just a whore, so nobody is earning anything. Look what Verisign did, they increased domain prices, and people are still registering their domains just like when they where at 35$. If someone is not willing to pay that for a year for his domain name, then he does not need it in the first place.

    The drop in domain prices, hosting, etc, just did to the industry what it is today. Allot of companies are losing allot of money. Most big hosts are in huge debts. This for the ones that sell cheap servers for example. Most shared hostings where purchased by bigger companies, went bankrupt or consolidated. The reason is they where not charging enough to customers.
    Last edited by nibb; 01-11-2014 at 08:03 PM.

  23. #23
    What you describe is exactly how elementary human psychology works - people prioritize and act upon those priorities. Simple example - I love everything meat-related (being a carnivore, its just natural ), so when I make my budget for the day/week/month, I will tend to spend more on meat products and be much more critical of its looks, quality and taste, seeking only the best, regardless of price. At the same time, when I shop for fruits/vegetables, I am more inclined to buy just about anything that seems decent for as little as I can spend. Same thing goes with any service/product, including hosting, as you already depicted it

    That's why I might not like, but don't mind uber-cheap or free hosts. They serve a particular target audience and I, not being part of that audience, would browse through and forget them faster than I can make a cup of coffee. But other people seek exactly that kind of service, kudos to them, they have much lesser website needs so if this other service suits them - why not try it?

    Everyone has its place under the sun, the only potential buyers that need to worry are the ones that are not only unsure of what they NEED, but they don't even want to take the time and understand that before jumping into rash decisions

  24. #24
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    You have to choose your marketing audience. Some companies do amazingly well offering "expensive" managed servers, because there is a good market base for managed services. At the same time, other companies make a fortune on Unmanaged services. They market towards people who know what they are doing or have their own technicians, and want to save a bit of money.

    There is a strong market out there no matter what way you take, it just depends on the company's resources at hand, what they are comfortable offering, etc.

    But here's my criteria on an overall sense - your prices have to be sustainable. In my mind, paying $70 - $200 for a good Xeon E3 is perfectly acceptable. As with any company, just do some research. Make sure you know what you're buying and who you're buying it from. Different people have different experiences with every host.

    That's my two cents, take it or leave it.

  25. #25
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    Quote Originally Posted by TmzHosting View Post
    It all comes down to how important the website is to the client. I have seen customers wanting to pay $10/month for a VPS that costs $30. They don't mind the occasional downtime simply because their website is not that mission critical.

    - Daniel
    But when there is downtime, those same customers will start posting "my world is ending, my $8.89 hosting is down, I'm losing a few thousands an hour because of this".

  26. #26
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    I still don't really get this cheap vs expensive debate. I have been hearing this stuff from a lot of local hosters that in my opinion are way overpriced looking at their prices, their own website and in some cases the work they deliver as web designers. They use these words as cheap hosts for bigger hosting companies like Stablehost, Site5 and such. So at the moment I don't even understand anymore what a cheap host is.

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