Pricing Packages

[bandboy]

Can anyone help here decide how to price a package?

I have tried to divide what i get by what i pay for, but that hasn't helped much to price a package i want to offer to my clients.

What criteria do you use to fix a price for packages?

 

[LaneHost]

Depends if you plan on selling as low cost budget, average or premium and what kind of profit margin you are comfortable with. Everybody is different and no one formula is the same.

What is you target market?

 

[ldcdc]

Cost plus markup = price?

Of course though, you need to make reasonably sure that your provider's prices are sustainable too, otherwise your own business will not be sustainable long term.

 

[Artashes]

What is you target market?

I think this would be the key ingredient of your pricing strategy. First of all you have to figure out who is your customer and can you rip the most premium by reselling hosting service to them. If you run a "local" shop, most local clients would not be big accounts, they would use less resources than most resource-demanding kids that host media sites, and they will also be ready to spend more.

Then there is professional markets such as design studios that will pay the premium as well.

However, if you targer average hosting customers, these ones do a lot of research and as a rule of thumb would go with a company that offers the most resources for least dollars.

Best,

 

[bandboy]

Thanks for replying.

I am targetting audience which needs to have web sites in place to run may be small business or for personal achievements. I am not focussing on coders, developers or those kids who may be resource leechers.

As far as profits are concerned, i want to cover basic costs atleast. Once basic costs are covered, a small profit is welcome but pricing is what stumps me. Because if i work out module or package with that intention, pricing is very low since i am getting services directly without having middle men thereby saving on hosting costs. With low pricing, comes abusers and kids who'd continue to drain server. But if i raise prices, competition will kill me. Thats my main worry.

 

[Lesli]

Once basic costs are covered, a small profit is welcome but pricing is what stumps me. Because if i work out module or package with that intention, pricing is very low since i am getting services directly without having middle men thereby saving on hosting costs. With low pricing, comes abusers and kids who'd continue to drain server. But if i raise prices, competition will kill me. Thats my main worry.

That's pretty much everybody's worry, though, isn't it? How to price low enough to be more attractive than the competition, but not so low that you get every resource leech to sign up?

You could start out pricing your packages on the higher side of things, and gradually lower prices to where you're getting signups. That means anyone who signs up with you will end up paying less on future bills, and script kiddies and ultra-budget folks (those who want the world for a dime, so to speak) will steer clear.

You'll also want to plan enough profit to build up a savings: for software upgrades, hardware upgrades, regular maintenance of existing materials, all that kind of thing.

Just remember: your prices are never set in stone. You control them. You change them. You may have to experiment around with package makeup, pricing, and bundling; but as far as I know, there's no "magic formula" for figuring that out. Hosting platforms, support options, back-end costs, management requirements, employee costs...everything's different for each web services business.

 

[bandboy]

Thats great suggestin. As i have been scrolling through various forums, a member at another forum dropped in a suggestion and here it is :-

She suggested to have a security deposit which would be refundable if member hasn't abused or lapsed in renewal/payment. She advocated that such a deposit would drive away leechers but at same time let me have competitive pricing. And since it is a refundable security deposit (*conditions applied*), it shall not affect genuine clients much but only leechers/ ultra-budget clients (as you mentioned above )

I have seen similar concept but not in hosting industry or may be i am not aware of such concepts in web hosting. Are they feasible and a workable solution? Does this have any downside?

 

[Artashes]

I have seen similar concept but not in hosting industry or may be i am not aware of such concepts in web hosting. Are they feasible and a workable solution? Does this have any downside?

The downside is that I haven't heard of "security deposits" performed within the web hosting industry. I am afraid such practice will drive most away, not just leechers. It really is makes little difference whether you place a security deposit up front or place fees to be charged for various violations in your Terms of Service during sign-up - they would still authorize you to charge them.

I think if you plan on running a serious shop, establishing pricing that is right for you or your client demographic is the best protection you can create. Those who consider the pricing too low will automatically move away, while everyone else will understand that good service costs more.

Best,

 

[ADEPT]

I would say look around at other companies at a similar level of business to you, or what you will be. Then once you've dicided a price use some maths to figure out if you'll make a profit with the least amount of customers you expect to get. Hope this helps.

 

[Lesli]

She suggested to have a security deposit which would be refundable if member hasn't abused or lapsed in renewal/payment. She advocated that such a deposit would drive away leechers but at same time let me have competitive pricing. And since it is a refundable security deposit (*conditions applied*), it shall not affect genuine clients much but only leechers/ ultra-budget clients (as you mentioned above )

I have seen similar concept but not in hosting industry or may be i am not aware of such concepts in web hosting. Are they feasible and a workable solution? Does this have any downside?

I don't know how well this would work for a recurring-service-based industry. People are sometimes asked to put down a deposit to get cable/water/phone/electric services started, but I think that only happens a) if that's their first cable/water/phone/electric account ever; b) if they've got a history of late payments; c) possibly if they move to a new state/province/country and have to establish a history with the various providers in that state/province/country. I can see something like this for design or development services, but those aren't generally thought of as 'constant' or 'recurring'.

I wouldn't sign up for a hosting or management provider with a proviso like that for two reasons: 1) there are plenty of other hosts that don't require this payment up front; 2) that sounds kind of shady. If I'm Joe Hosting Customer and don't know the providers personally, what's going to let me know that this company isn't going to just keep my money? Or fold up shop after a few months, leaving me without money and without hosting? The horror stories are out there for the Googling; and if I don't know someone and am not purchasing a tangible product (which can be tracked, traced, and is easier to prove as 'defective' in a court of law, if it came to something that ugly) I'm not going to be too inclined to gamble on their honesty. Once I've worked with the provider for a while, I'm a bit more willing to extend them the benefit of the doubt - but you'd probably feel the same about long-term customers, and you're looking for initial barriers to entry. Correct?

One thing you could try is to set up your lowest-costing, smallest-resource plans so that people can pay quarterly, semi-annually, or annually. That will provide an extra barrier of entry to the resource leaches, since they'd have to part with a greater amount of cash up front if they want to get on your server; but the actual business owners might likely have that cash (or want one of the higher-priced plans with more features, anyway.)

No matter how you eventually price your hosting plans, be prepared to deal with the occasional obnoxious customer or PITA client. They happen. There's no way to avoid them completely, not even if you set your prices sky-high (because then you get to deal with the divas).

 

[bandboy]

Some interesting points made ut there and i must admit, these got ignored while i was considering her suggestion. But good i vomited it out here and can now safely discard the concept.

Thanks again for sparing time and advising on the issue.

 

[hanber]

You should divide the time of your hosting and the money you've paid, but you should take into account setup fee and maybe some hidden costs.

 

[bermuda]

Also, you should be careful about the past experiences of your members. As an example, if you know that they have already tried some cheap but quality web hosting services in the past, by starting the packages with high prices, well, you might not see them coming back again, or if you are sure that bandwidth is more important to them than actual web space, well concentrate on that factor.

Also, it is nice if you begin, if it is your first experiment, with monthly payment options as well. Fixed yearly subsciption packs might not work from the very beginning.

 

[othellotech]

But if i raise prices, competition will kill me

If the only reason people are going to pick your hosting company is price, then dont even bother starting, as you'll fold within weeks.

 

[iNetManila]

When it comes to pricing your packages, you should have a goal as to how much would you like to profit. Let's say you wanted to at least have a profit of 40% of your total cost.

Low pricing can always grab the attention of your customers but it can also raise doubts if your offer really offer quality hosting. But having cheap hosting packages is not a crime. You can start selling off real cheap packages and build your customer base. And as soon as you build your name in the business and satisfied a hundreds of customers then you can increase your price a little for new sign-ups.

 

[MisterV]

I think that increasing price with new sign ups bad idea. In this phase better to make redesign and become provide different packages for new customers.

 

[Lesli]

Yes - pricing low, then raising, doesn't seem attractive. New customers may be driven away by the higher prices, and existing customers may be upset that they're seeing an increase in price with no additional benefit to them. To me, it somehow seems not completely straightforward. I really prefer to be straightforward with my clients as much as possible.

If you're able to institute a "price lock" - you start out offering lower price packages, and for people who stay with your service, their prices never rise - you could start prices low and go high. However, that can be an extra admin headache for you: higher churn in the beginning, keeping track of which clients are pricelocked at which levels, and so forth. Plus initial low costs may attract some of the types of customers you're looking to avoid: the scammers and abusers.

Whatever you do, there are risks involved: start high and lower your prices, you run the risk of few new customers; start low and raise your prices, you run the risk of alienating your existing customer base and giving yourself a more complex admin situation. Just figure out which set of risks are most acceptable to you.