Web Hosting Talk : Web Hosting Main Forums : Reseller Hosting : $2.95 Why The Price So Low? How To Make It In Reselling Business When Price So Low?

[koushibasaki]

I clicked on 2 advertisements on this forum. Forgot their company's names. They are selling 1GB diskspace 50GB bandwidth for only US$2.95 per month. I was with Hostway for many years paying US$13.95 per month and I only get 600MB (a recent upgrade from Hostway from 300 MB) 50GB bandwidth. They do not allow php (which is really horrible for a hosting company to deny such a basic necessity for this kind of price. That makes them the most expensive hosting company) and there is no database coming with this plan.

Here are my questions and ramblings:

(1) $2.95 per month? Cheaper than a burger? Is this the cheapest hosting plan you came across?

(2) Why are they selling so cheap? Are they big companies with their own data centers that can afford to spoil the market? Or are they small resellers who are so desperate for clients? I clicked on their billing and I found that they have merchant account with the capability of accepting credit cards. So, they are not that small ( I hope you get what I mean. I don't mean they are big) and they are not big either since big companies like Hostway and Interland are not interested in "stooping"(selling) so low.


(3) The competition is so stiff. Without becoming a web designer (that is having clients whom you designed or developed web sites for them) I don't think I can make it in reselling business. It is good for customers but not good for newbies like me who wanted to start a web hosting business. Unless VPS/reselling companies are giving bigger disk space and bandwidth, I think it is very hard to compete for clients.

If US$2.95 per month is what it takes to gain a client, it is better for me to make use of that 1GB disk space by putting content make about US$50 per month by putting Google Adsense (assuming the site's traffic is very low US$50 per month from Google is guaranteed income).

[Sohan]

Well if it's so low, why complain?

[demowolf]

If you plan on differentiating yourself from your competition on price alone, then yes, you're going to have a tough time. There are lots of very "cheap" hosting providers offering very low prices.

The trick is to market yourself differently than just on price. What are your strengths? What can you provide that others can't? Do you have a specific target market?

Answer those questions, and you'll be on your way to developing a customized marketing strategy.

There are lots of people who do NOT buy on price alone... particularly those who've been burned by cheap hosts in the past (and that in itself is a very large market ).

Rob.

[Martie]

Originally Posted by twobit

There are lots of people who do NOT buy on price alone... particularly those who've been burned by cheap hosts in the past (and that in itself is a very large market ).

Rob.

Thank god for that!! We have quite a few clients that have been burned by some of those lo-ball hosts.
Pricing these days is just crazy..beyond belief.

[nameslave]

To be honest, it doesn't really matter how much disk space and bandwidth they are offering, when a "hosting company" charges like a couple of dollars per month or less, it can't even write off the cost of 1 single support ticket every other month. Yes, both storage and bandwidth have become cheaper these days, but with such a thin profit margin, I don't see how they could survive and provide quality service in the longer run.

[pmabraham]

Greetings:

Please keep some of the following in mind:

* Advertising at a price does not mean the seller makes any money at that price.

* Advertising at a price does not mean the seller has any buyers at that price.

Thank you.

[Martie]

Originally Posted by dynamicnet

Greetings:

Please keep some of the following in mind:

* Advertising at a price does not mean the seller makes any money at that price.

* Advertising at a price does not mean the seller has any buyers at that price.

Thank you.

That is so true
The overall hosting market though has become SO oversaturated just with hosts (not quality hosts, mind you) but it now appears to just be that "monkey see, monkey do" attitude. I see it over many forums: "Oh, I can offer that for a buck" and the next one comes along to low ball the buck offer.
Its incredible that people fall for such things.

[WebArtist]

The Web Hosting market is so crowded. It is very expected to find these low-buck companies. I think that new hosts use this strategy to win customers then raise the price to afford monthly costs and maintenance, etc.

[Martie]

Originally Posted by WebArtist

The Web Hosting market is so crowded. It is very expected to find these low-buck companies. I think that new hosts use this strategy to win customers then raise the price to afford monthly costs and maintenance, etc.

Sure they do, but then half disappear within about 60 days so then you have clients complaining, and folks should really know better than to complain over a buck or two. It certainly hasnt helped either when you have co. that strictly cater to the reseller market and then they offer tons of space, BW, plus unlimited domains for one low price. That structure just isnt sustainable (at least for us) amd some pricing Ive seen is an absolute insult to the industry as a whole.

[Lpal-Patrick]

Christ! No one is giving a straight forward answer. The price is that low because the service and support is crap. And you don't acctually get that much they offer you, they just lie and tell you that because they know most people don't use that much. So they overload thier servers with a bunch of people.

If you want to compete don't compete with those kinda of people because they are just bull****ers. Compete on quality.

[demowolf]

- Starting a hosting company is very easy to do, and costs very little.
- Starting a GOOD hosting company is not so easy, and costs more.

So, do the math, then tell me if a $2.95/month hosting account is where someone who really cares about their business, is going to want to host their website. They may very well start with a plan as cheap as that, but more often than not, they'll end up switching hosts. This does 2 things:

1) Gives hosting companies in general a bad name
2) Provides a steady stream of new customers to existing hosting companies

The sad truth. But the truth, none the less.

[WireNine]

Prices are falling daily, the market is becoming heavily competitive and if it continues you will soon see plans for a penny per month ( I pray that day never comes ).

[Defcon|Rich]

Originally Posted by twobit

- Starting a hosting company is very easy to do, and costs very little.
- Starting a GOOD hosting company is not so easy, and costs more.

So, do the math, then tell me if a $2.95/month hosting account is where someone who really cares about their business, is going to want to host their website. They may very well start with a plan as cheap as that, but more often than not, they'll end up switching hosts. This does 2 things:

1) Gives hosting companies in general a bad name
2) Provides a steady stream of new customers to existing hosting companies

The sad truth. But the truth, none the less.

I agree 100%. It's gotten to the point where 9 out of 10 people that call for sales questions ask "Will you be in business in 2 months?" ..

Customers are getting burnt at an astounding rate by these fly by nights it's giving us honest hosters a bad name.. Add to that the $1 for unlimited hosters and it gets even worse since like you said they offer you the world but when something breaks they run for cover cause they are so concerned with making a buck they forgot that you actually have to provide a "service" too...

[hawhaw]

One other thing that you may need to watch for with the cheapie hosts s what they charge for the extras. Are they also nickel and diming you for anti-virus or something else where the higher priced host will throw these in at their price.

In general though, I agree with most of others who say that you need to compete on more than price unless you have preferred access to a few hundred thousand customers.

Quality Service and support (even if never needed) are "priceless" to most people....especially after they have been burned by someone who considers them worthless instead of priceless.

If you go for the higher price point and that is a prospects only objection, a few tre nightmare stories from current clients who were with cheapie hosts should close the sale.

[Energizer Bunny]

Originally Posted by WN-Ali

Prices are falling daily, the market is becoming heavily competitive and if it continues you will soon see plans for a penny per month ( I pray that day never comes ).

Ever heard the term Technology Boom? Well just wait and see that day will come also when you get hosting for penny.

And dont judge hosts with prices , cause i seen expensive hosts take the fall , so its not the price that matters , its the support that is provided.