I'd like to see your thoughts about account setup fees. Some hosts charge them and some don't. Here are some of the pros and cons each way as I see 'em . . .
Pros of charging setup fees:
- hedge against short-term host hoppers who only stay with you a few months
- opportunity to increase up front cash flow from each account
- opportunity for "setup fee waived" specials (as long as you don't do it too frequently, otherwise those who paid your setup fee might get a bit upset)
- use of setup fees can permit lower monthly fees
Cons of charging setup fees:
- risk of being non-competitive because many hosts do not charge setup fees
- potential customers are turned off because they see setup fees as just another opportunity for the host to charge for what the customers might think is simply an automated process
- issues with money back guarantees, such as should you refund setup fees or not
Pros of not charging setup fees:
- allow clients to believe you are giving them something for free
- method of differentiating your business from those who do charge setup fees
- avoid possible "sticker shock" as a potential client adds up the initial cost
- you have a personal issue with charging the customer setup fees
- less billing/bookkeeping hassles
Cons of not charging setup fees:
- host hoppers can drive up expenses without corresponding long-term revenue
- fail to realize initial cash flow from each account
- costs of doing business must be included in other fees so monthly fees may end up being less competitive
I'd like to see what else you would add to the lists of pros and cons?
I'd also like to see some discussion, from a purely business perspective, of why you do or why you don't charge setup fees. What factors influenced you the most to charge or not charge setup fees?
From a purely business perspective and not taking a competitive market into account I think set up fee's should be charged. There is time and energy involved in setting up a customers account, his billing info, initial support (here's how to ftp), etc. Setup fee's are meant to offset those.
IMO what may be a good incentive to gain long-term clients rather than host hoppers is to not only give them a slightly discount if they prepay annualy, but also waive the setup fee. This way you have more people signing up for long term comitments rather than your one month and leaving (which is more of a PITA than anything)
So even if say you had a 10 dollar setup fee, if you made it so that people who prepay for xx amount of time, they don't have to pay, and at the same time you are getting enough money up front to cover various expenses you would have otherwise gained from the setup fee.
IMO it depents on your target market anyway, and what type of clients you are looking for, etc.
I wouldn't charge setup fees.... people will not host with you cause almost all hosts don't charge them anymore.
Wrong. Almost all brand-name host (large host) charge set up fees. It is the commodity host who do not charge them. Also, set up fee doesn't real mean you are billing for the "set up". Most people use it to raise there margins or to cover other cost not associated with set ups.
We never use to charge. But now we do. We saw an increase in sales (coupled with plan improvement) and extra 'free-floating' cash to play with.
I would agree with UmBillyCord here. If you look at many of the large and dominate hosting companies they charge fees. They still have thousands of clients, even if the fees may seem high. I think more serious people looking for hosts will understand if they are paying a setup fee they will be recieving the best possible attention when getting their account running.
Seems to me a lot of the 0 setup fees come across as scams or something, whereas when I encounter a host that charges a modest fee to get your account going, in the back of my mind I'm thinking, yeah, these people don't mess around. I dunno, I just tend to think of web hosting as a serious investment your clients are making, so they look for a serious host and even if that means paying a small one time fee.
Again, that's just depending on the clients you're looking to get. If you want 100 people next month to sign up for your 5.99/mo plan and not pay setup fees, that's fine, but chances are they are not buying this plan in much seriousness but rather just wanting to get online quick and cheap. Chances are they may not be around more than a few months as well. So as for my concerns, I'd rather have half the clients, but have them stick around for a year or longer and gain more clients by the word of mouth from existing clients about how great it is rather than try to just get as many hosts as possible even if they don't stay long or give me free advertising.
Large hosting companies may offer tech support, have management overhead/office overhead and usually facilities overhead.
Small companies that colo- 2-4 servers, do their own maintenance and work through email, IM, trouble ticket support don't have the need for setup fees.
Takes all but 2 seconds to create a site, email a customer and be up and running.
Floating cash is the money you get from happy customers, not the 5-10 bucks you get for new accounts. If they cancel, are not satisfied or get ticked off then people who paid for service + setup fee complain alot louder then everyone else.
If you have phone support, if you have 24 hour call center customer support/tech support then yeah, justify that setup fee. Otherwise, it really isnt needed.
I'm sure most of the sales people at the places that do charge fees just drop them as the pitch to make the sale anyhow.
I offer my first 30 days free just so i don't have to worry about charge backs/cancellations or unhappy customers. Most people have ended up pre-paying for a year doing it this way.
The issue of setup fees is something that I've been wrestling with for a while now. It is really a trivial matter to se up an account for a client, but I see the biggest benefit of a setup fee as, like the original poster pointed out, scaring off the short-term host hoppers. I don't think it would take more than a few bucks to accomplish that, since these are usually the same people who are shopping with price as their main criteria.
We don't charge Setup Fees for small shared web hosting accounts . BUT ... we do for sure charge setup for larger accounts so as to ensure that we are able to provide better support to clients . When certain installations , Configuratiosn , softwares etc needs to be implemented . And our clients are more than happy with that .
Thanks again for the comments and ideas about setup fees. Although I don't post much, as you can tell from my very low post count, I've been a lurker for many months and I'm learning quite a bit from everyone's comments and experiences.