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  1. #1
    Join Date
    Nov 2005
    Location
    Boston
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    816

    Lowering prices without killing yourself

    I am fairly new in the marketplace of selling webhosting space. Just wondering, I have lowered my prices to try and be a bit more competitive with the competition. But at what point are my prices so low that no one will sign up for the services. Do people even care about getting the best rate for hosting or is it one of those you get what you pay for attitudes?
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  2. #2
    Join Date
    Jan 2004
    Location
    USA
    Posts
    109
    Your prices need to be sustainable over the long term. This is what people shy away from if they think your prices are so low that you can not survive with the prices you are offering. This works in 2 ways people who are after the cheapest package come to you for the price. People who are after good service and reliability will quite often leave you alone because of the price even though you may offer excellent service with the low price.

    In some cases though low prices can be used as a marketing tool in the short term. This is called loss leading. The idea being that you run at a loss for a short time during a promotion so that you gain a large number of customers. These customers pay a small amount for your services but receive the full service package. This creates good word of mouth promotion that in turn brings in more full paying customers later down the track after the promotion.

    You have to be careful with such promotions and they still need to be factored into your long term business plan. I have found that with our promotions like this that people do just look at the price and go no way. Even if the actual plan specs are very low if you offer a $1 plan that only has 50MB space they still associate you with the cowboy who offers his everyday plans of 10gb space and 100gb bandwith for $1. Unfortunately people too often just look at the price and not the whole package.

    It is a catch 22 you have to find the balance between too cheap, too expensive and just right. This comes down to good long term business planning.
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  3. #3
    Join Date
    Sep 2005
    Location
    Toronto, ON.
    Posts
    95
    If you are charing 22 cents for 20GB of disk space, I think I'd be a little sketpcical. Pick a good price, then when the clients pay for the server, plus some extra for yourself if that's what you're after, lower the prices to a reasonable price. Or if that price works, keep it.

  4. #4
    Join Date
    Jul 2004
    Location
    North Carolina
    Posts
    743
    This time of the year is a very hard time of year to compete with the prices. Pick a good price, which is reasonable for you to still make money, and your potential clients to save a bit. You have to find that Happy Medium.

  5. #5
    Your prices should maintain constant inline with your target revenue objectives, current incoming client stream and retention.

    Figure this pricing structure out first and then test varying pricing structures via coupons and discounts on a small focused audience, which represents your wider base.
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  6. #6
    Join Date
    Nov 2005
    Location
    Boston
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    816
    great tips guys, glad to see people who know what they are talking about. Again im new in the business but I wont be dissappearing. So i look forward to bouncing ideas off you guys so we can help make the industry good. Friendly competition will be fun.
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  7. #7
    Join Date
    Mar 2005
    Location
    Derby, UK
    Posts
    219
    Never lower your prices unless you’re happy with the future outcome. Lowering them as a marketing tool as Host Capacity said, can be a wise decision. Once you have the client base and can survive without making a profit, then you can start to increase your prices to new customers. After all you’re likely to get customers whatever the price once word-of-mouth kicks in from your current customers.

    Do have a good strategy. Don't try competing with competitors. They are ten times bigger than you and can afford to advertise cheap prices. I believe most people prefer small-medium hosting companies anyway.

  8. #8
    Join Date
    Dec 2004
    Location
    San Francisco, CA
    Posts
    1,905
    Lowering or increasing your prices is not going to get you any sales. Presentation and how you package as well as represent your product and services would make you a sale.

    Price competively, yet profitably. Work on the packaging, marketing and promotion of your services.
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  9. #9
    Join Date
    Dec 2002
    Location
    Los Angeles
    Posts
    559
    Quote Originally Posted by jmcallister
    Friendly competition will be fun.
    You are new...

    All web hosting is the same. Set your price according to the type of clientele you want to attract.

    They did tests in the 1970's where they wrapped 10 cent chocolate bars in gold foil and put a price of $1 on them. They had people compare the two identical - but differently packaged and priced - chocolate bars, and almost unanimously, people said that the $1 chocolate was of a much higher quality and better tasting than the "cheap" 10 cent chocolate.

    Web hosting is just like that Hershey bar, kid. You can sell it to someone at any price you choose.
    datapimp - You only get one soul, ya dig?

  10. #10
    Join Date
    Mar 2001
    Posts
    1,434
    Quote Originally Posted by datapimp.com
    You are new...

    All web hosting is the same. Set your price according to the type of clientele you want to attract.

    They did tests in the 1970's where they wrapped 10 cent chocolate bars in gold foil and put a price of $1 on them. They had people compare the two identical - but differently packaged and priced - chocolate bars, and almost unanimously, people said that the $1 chocolate was of a much higher quality and better tasting than the "cheap" 10 cent chocolate.

    Web hosting is just like that Hershey bar, kid. You can sell it to someone at any price you choose.
    I'll second that! If a small business spends a few hundred dollars *per week* on ads in the yellow pages and newspapers, what's a few hundred per month to host their website? If you market to businesses, charge business prices. If you market to hobbyists, then charge $1 per year.

    - John C.

  11. #11
    You could GIVE away your hosting, and you'd still have trouble finding customers.

    It isn't about price.

    If you are going to compete on price alone, then you have already lost and you may as well sell your company right now and save yourself the work and eventual heartache.

    I can personally testify that it is possible to build a good company with pricing FAR above "average". In fact, you could charge $100 month for a basic 1gb disk/10gb bw account, and do quite well at it.

    It isn't about price.

    It's about value.

    If you can show your potential customers why paying you $100 for [insert plan specs here] is a good deal for them... then they will sign up and stay with you forever.



    Good luck!
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  12. #12
    Join Date
    Mar 2004
    Location
    Seattle, WA
    Posts
    490
    If there are only a few of you providing support, ask yourself, "if a customer paying me $x/mo kept me up with a support issue, would I hate them forever with the burning fire of a thousand suns, or would I eventually forgive them." Keep raising your price until you can get to the point where you will not hate all your customers.

    Having a lot of customers is a bad thing if you get drowned with support issues but don't aren't making enough to start hiring support. It's bad to hate your customers!

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