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  1. #1

    How much is enough?

    It seems as though you can get the equilivant of a 50 gig hard drive and 500 gigs per month in bandwidth for less then $5.

    I have a couple of questions about this from both a user and reseller perspective.

    From a user perspective how much space do you really, really need? Are you going up load 10 gigs of content? If so, what, if you don't mind my asking, are you uploading?

    Or is this a case of simply trying to get more for less, whether its actually need or not? My entire music collection is only 12 gigs and I have no intention of putting on the web. So I'm having a hard time understanding what all the space is need for. Especially if, in the end, your just going to post some html and pictures of your summer vacation. My entire EBCSNetwork.net and EBCSNetwork.com sites combined take up about 75 megs total.


    From a reseller perspective, besides shear volume, how do you make a profit selling hosting plans for $.75 or 3 years for $20, or some of the other offers I've seen? Is this overselling? What about the cost of administering your users when you charging $1 per month. I'm sure it cost you more that a $1 per month in fees, support cost, overhead, etc?

    What whould happen if say half of you customers decided to use half the there resources? Could your plan handle it?

    I'm trying to make sense of this hosting thing and coming the community for help.
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  2. #2
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    Basically many companies are offering the very same thing, and there isn't a lot now days to differentiate yourself from others. Obviously quality of service and support is important, but for a user who hasn't used you many times that isn't overly important. So I imagine many of these companies are figuring that if everyone is charging basically the same fees, if I offered an extra 10GB of space then my closest competitor then that will make me look more appealing then them.

    For users, they usually never need 1/10th of what they buy, but thats how we work most of the time. If you go to a store and see that Bulk Toilet Paper is on for half the price per roll as a small bag you will buy the big bag. Even though it may take you years to use that much toilet paper, our minds see that it looks like more and therefore go with it.

    Usually newer users or those with non critical sites will go with these deals, then if they decide the quality of service isn't very good they move to a more realistic plan where support and uptime is important.
    Greg Lubbelinkhof

  3. #3
    So from what your saying, I would assume that overselling is the way to go?
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  4. #4
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    I didn't say that at all. You have to have a sustainable business plan. Overselling slightly is the norm now days, however if you oversell to an extreme you better be careful. Both have their pros and cons from a hosting provider and end user spot.
    Greg Lubbelinkhof

  5. #5
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    As Greg correctly mentioned, not many people use the 100% they have been allocated. Overselling done correctly can be a great way to maximize your resources. Done incorrectly, then it will severely damage your company.

    It's important to consider what market you are selling to, what the needs of those customers are and the budget of that group of customers.

    You can target for example graphics websites, in which case they will store a few gigs worth of images. This is in contrast to a host specializing in blog hosting which usually, doesn't use more than 100mb webspace...
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  6. #6
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    If you compete on price, you are more likely to attract the types of customers that will drive you insane. Its best to compete on value. "Value" doesn't mean massive overselling. It means providing good support, etc.

    Don't expect to get huge overnight. One way to grow your company is to keep customers long-term by providing a great service. A low turnover rate as the result of NOT competing on price (but rather on providing an overall quality service) is, imho, the best way to grow your company.
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  7. #7
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    Quote Originally Posted by everity
    If you compete on price, you are more likely to attract the types of customers that will drive you insane. Its best to compete on value. "Value" doesn't mean massive overselling. It means providing good support, etc.

    Don't expect to get huge overnight. One way to grow your company is to keep customers long-term by providing a great service. A low turnover rate as the result of NOT competing on price (but rather on providing an overall quality service) is, imho, the best way to grow your company.
    110% agreed. If you are speaking about selling hosting packages for .75 like you are you have to be making it up in HUGE amounts of volume in order for you to notice any profit margin increases or any money for that matter. If you are just starting off hosting, and you are like many who think that the world and work of a hosting CEO or owner for that matter is easy, then you are off by a long shot. Maintaining a hosting company is hard work and even harder to sell.

    Mainly if you do your research on the hosting industry you will quickly see what you can sell service for. By that I mean good service. You don't want to price a package too low but you also do not want that package to be extreamely expensive for new comers to the world wide web. Also you need to figure out your support costs. You may have to get outsourced support if growth is in your future.

    There are alot of different variables when thinking about web hosting, and how to sell it, etc. I say keep posting on WHT, read, read, read and do some more reading. Look at other competitors pricing levels and what they offer, and go from there. However, I must say that you have chosen a great place to do research. WHT is excellent.
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  8. #8
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    It has to be a delicate balance between overselling and performance.
    Maybe if you host two resource/cpu intensive sites per every 30 accounts that
    hardly use the resources, then u would do fine.

  9. #9
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    For example:-

    If you sell hosting for $4, you'll get 2 customers. So you'll get $8 profit. And 2 customers that you have to support.

    If you sell hosting for $8, you'll get 1 customer. So you'll get $8 profit. And 1 customer that you have to support.

    So what's better, overselling or not overselling? I think it's obvious.

  10. #10
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    If you sell hosting for $4, you'll get 2 customers. So you'll get $8 profit. And 2 customers that you have to support.

    If you sell hosting for $8, you'll get 1 customer. So you'll get $8 profit. And 1 customer that you have to support.
    Things are more complicated than that.

    Just because the price is halved, it doesn't mean sales will double.

    The sale price is not the profit. At $4 the profit might be $1, at $8, it will be $5. But, costs can vary non linearly, as advertising costs might vary with the market you go after.

    There will always be cheap hosting, low quality hosting, high end hosting and expensive hosting. Yet there will never be a direct relationship between price and quality. We can thank marketing for that.
    Last edited by ldcdc; 10-15-2006 at 10:55 AM.

  11. #11
    So there needs to be a balance between overselling - in order to stay price competitive, and service that allows you to keep customers once they've signed up.

    But from what I can see, just by looking at the number of views per ad in the share-hosting forum on this site, the lower the price the more views those sites seem to get. The more views they get the more likely they are to attack customers.

    As far as budgets go, it seems as though we are splitting hairs. Does the difference of a dollar or two a month make that much difference in a persons budget. I could understand if say prices where tiered such that premium hosting was say $20 a month and provided space, bandwidh and good service and budget hosting was say $5 a month but provided a lot less space, bandwidth and service, but with what is being given away at the $5 a month level, there is no room for a preimum service with higher margins. - Just my opinion.
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  12. #12
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    Quote Originally Posted by ajs5mz2

    But from what I can see, just by looking at the number of views per ad in the share-hosting forum on this site, the lower the price the more views those sites seem to get. The more views they get the more likely they are to attack customers.
    You might also want to look at reviews for alot of those providers aswell. The good ole saying "you get what you pay for" is especially true for web hosting....most of the time. If you are going to sell packages for that cheap, remember to make it up in large amounts of volume and be prepaired to offer GREAT customer service and EXCELLENT support. Otherwise, you will be added to the bad reviews if not.
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  13. #13
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    Quote Originally Posted by gopzap
    For example:-

    If you sell hosting for $4, you'll get 2 customers. So you'll get $8 profit. And 2 customers that you have to support.

    If you sell hosting for $8, you'll get 1 customer. So you'll get $8 profit. And 1 customer that you have to support.

    So what's better, overselling or not overselling? I think it's obvious.


    You certainly cannot determine that. Wish it were that easy.
    You have absolutely no idea what the host expense is just for "server payment"
    Now factor in merchant, billing fees, support for said client, and all those misc. fees that will come up.
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  14. #14
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    Quote Originally Posted by ldcdc
    Things are more complicated than that.

    Just because the price is halved, it doesn't mean sales will double.
    Correct, there are alot of dynamics involved in increasing and decreasing prices. If you decrease prices, will your sales actually increase? Will you be converting more traffic into customers or will you simply be selling out cheaper to the same potential customers?

    If you increase your prices, will you lose out on potential sales or get more return per customer?

    Let me give you a small example. If you decide to up the allocations of spacing/bw across you plans, you will actually see a significant number of customers (depending on how big your client base is) downgrade resulting in loss of revenue. You may also lose new clients to lower plans... resulting in lower return per customer. You will have to weigh the losses and see if higher volume of sales would offset your losses in the long run .. many times thats not the case.

    I know at least one host that was doing pretty well and they started going downhill when they upped space/bw allocations. They saw a large dip in revenue and actually ended up selling cheaper to the same potential customers... Their service dipped and they started losing even more customers from disastisfaction.. I think there are many more cases like this
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  15. #15
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    meh

    I keep having this combo with n00bs
    you get what you pay for you pay bugger all you get bugger all (Not talking plan size)
    You pay for more you get more (STILL NOT TALKING PLAN SIZE)

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