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Differentiation, Compelling Offer
Posted By: michaelg on 8/2/2006 2:02 AM (CST) 500 Points
As a hosting business with 30,000 competitors, prices being driven down and product commoditized it's getting harder and harder to differenitiate and innovate offers. Everyone in our market it seems is chasing each other and generally in a downward price spiral.

At http://www.m6.net we've been in business since 1997 with a strong customer base and we continue to make good sales. Why we have so many competitors it is still a good, healthy and growing industry.

The question is: what is it that people want from a hosting company that can pull it out of being a commodity? What could differentiate a hosting company from the rest? What would make a compelling hosting product offer?

Thank you
Michael

Posted by: akgabar Member Response
8/2/2006 5:42 AM (CST)
Hi Michael,

I am a student on the Eindhoven University of Technology (in the Netherlands). And I just had a subject about starting up a business. During the lectures four possible ways to differentiate from your competitors where discussed (this counts for all businesses)
1. Quality/ Innovative solutions
2. Price
3. Convenience
4. Trust/Familiarity/ People can count on you.

Of course all the points are important but in your case for example you can guarantee 99% up time, or you can guarantee you got the latest software, or you can just give courses to help with the use of the software, or you can just be the cheapest around or you can just host, design and maintain the web page.
This means you score like 6 out of ten on the other three points, but you should try to get to 10 out of 10 for that one point you are focusing on.
Keep in mind the copying possibility of your competitors, and the wishes of your current customers They chose for your company for some reason, if you can find that out you can try to strengthen that point even more.

Hope this helps,

Andre Donders
 
Posted by: adammjw Member Response
8/2/2006 7:32 AM (CST)
I suggest you run a survey among your loyal customers asking them why they stay with you. What they value most of all in your offering and wht, if any, makes you different.Thus your will find out what really makes you different from you competetitve world.
Ask them also what they are missing in your offering and think you should have for them.
What's the churn rate of your customers?
Do you lose same % of customer every year or the process is getting faster?
Again ask your clients how likely it's they would recommend your company to their friends using a scale of 1-6 or similar.

Regards

Adam
 
Posted by: Jon Aston Member Response
8/2/2006 7:46 AM (CST)
I think 'adamcustom' is on the right track, but I don't think I would limit the scope of my research strictly to loyal customers. You can learn from customers who have left, customers who have returned, customers of your competitors.

And, just in case you missed it, check out http://www.marketingprofs.com/newprem/library/pack.asp?id=80
 
Posted by: whimziequiltz Accepted Answer
8/2/2006 9:05 AM (CST)
Michael -

I use the free hosting service offered by my cable account, for two reasons - one, it's free and I don't make any money, and, two, I don't have time to research the 30,000 (your count) web hosting companies out there.

My point is, education might be a good way to differentiate your firm - especially explaining the jargon of web hosting to me in a way I'd understand. Go after the non-techie market. Do my research for me. (There's a lot of jargon on your webpage. Even though you say you do simple websites, I didn't see it.)

A compelling offer to me would include helping me switch my current hosting AND offering to help me switch back if I didn't perceive a benefit. (Of course, the hope is, you'd offer so much benefit I wouldn't want to switch back to the free service.) It may be the easiest thing in the world to switch, but as a non-techie, I don't know that and the fears that are holding me back are it's going to be time-consuming, difficult and that I'll be stuck in a contract with a hosting firm I don't like.
 
Posted by: jay_trinh Member Response
8/2/2006 2:10 PM (CST)
It depends who your target market is. If your TgtMkt is young entrepreneurs, then having value pricing with several affordable packages would be key. Alternatively, if your TgtMkt is large corporations, then your price tag can be higher if your servers are larger and more reliable, and aiming to get some awards for reliability would be a great asset also.

However, if your business is going for ANYONE looking for hosting, then I'm afraid your niche is just not strong enough.

What you could do is contact ALL of your clients, and have them fill this out:
"Please rate the following from 1low to 5high in how important it is when choosing a host"
a) Low price
b) Feature set
c) Reliability
d) support (forums/etc)
e) etc

Then, ask the same question except ask them to rate YOUR COMPANY in the following.

The result is that you get to view how important each element is to your client base in choosing a host, and can also view how they rate YOU on those elements.

With that, you can determine what your customers are looking for and whether you are catering to them as well as you should be. It also helps you to forecast how many new clients can join and how many clients you may lose.

All the best
 
Posted by: darcy.moen Accepted Answer
8/2/2006 2:21 PM (CST)
You need to take a 360 degree view of your business.

Ask new customers 'what attracted you to us?'

Ask existing customers 'why they do business with you?'

Ask long term customers ' why do you stay with us?'

Ask customers who left 'why did you leave?'

Ask customers who are about to leave 'What can we do to have you stay?'

These days, there is so many ways to sell hosting. Its become a generic commodity. Pretty much anyone with a few bucks down can become a reseller. Finding hosting services is based on price, features, location, etc...is pretty easy with web sites like Find My Hosting out there.

What is hard to find is...a QUALITY host company. Sure, there are a few feedback forums out there where you can read comments (likeWeb Hosting Stuff.com). I can tell you, there are enough horror stories out there right now. Currently, I'm helping a company recover their domain name from a domain name/hosting service in Souther California who logged into the client's domain name administration account and locked the client out of administering his domain. Then, the service provider took down the web site the client had been paying development fees (of 20 grand worth) to develop. The service provider then demanded $15,000 to restore the web site and promised to return the domain names. Guess what, he lied! Now he wants even more money to simply return the domain names. He claims that he has a contract that binds the customer to him in perpetutity and the client owns none of the code he's been paid for. What BS.

You going up companies like that....and you want to know how to compete? Simple, write a code of ethics and stick to them. Set your price where you are comnformtable and offer after market services like web development and IT consulting to padd out the bottom line. Work on service delivery and education. And for God's sake, help save clients like I'm helping find their way to a lifeboat! Do this, and you will surely prosper.

Lets face facts, there are a lot of snakes out there, and a lot of 14 year old kids getting into the hosting business with mommy and daddy's credit card. You really have nothing to worry about...there is a rush to quality...that's most likely why you are growing.

Thanks.

Darcy Moen
Customer Loyalty Network
 
Posted by: KSA Accepted Answer
8/2/2006 6:58 PM (CST)
Michael,

I agree with other comments about doing some research. Here's an additional perspective -

You asked:

what is it that people want from a hosting company that can pull it out of being a commodity? What could differentiate a hosting company from the rest? What would make a compelling hosting product offer?

Having looked at your site, I'd suggest that you first clarify your definition of your target market. It doesn't look to me like you want "people" who need a hosting company. As you say on your home page:

"Our focus and commitment as always been in providing web hosting for web developers and designers that need the flexibility to utilize ASP.Net, ASP, PHP and .Net hosting technologies in one hosting account. We also go to great lengths to help our clients setup and configure the most complex of ASP, PHP and .Net requirements. "

I'd promote the company as THE web host for developers and designers. And, it sounds like you have some strong competitive advantages (compelling offers) to sell to that target market.

I'm not a heavy techie, so when I look for a host, I look for things like Fantastico, and features that will help me do as much as possible without a 2 year learning curve.

You can appeal to the developers and designers in a way a lot of other hosts can't, in my experience. The hosts I'm familiar with don't help folks set up complex applications. In fact, you're lucky, sometimes, if they can answer questions about the control panel!

And, they don't always have 24/7 phone support. I'm sure there are a lot of other things you do differently than a host who is targeting a less technical target market.

If developers and designers are your target market, then I wouldn't worry about creating offers to appeal to everyone. I'd focus my research to that audience. Go with your strength and create compelling offers that make developers and designers drool.

Hope this helps.

Kathleen
 
Posted by: michaelg Author Response
8/2/2006 9:33 PM (CST)
We have done research and they all say the same thing : Support, uptime-reliability, features: this all hinges around quality. All hosts say the same thing and then low prices to boot.

We are focusing more on developers and designers on windows and I believe we could do better here. We need to clean up our message a bit.

We have tried to show we are humans that go out of our way to help, sometimes at great expense to us, which we do - but people generally dont care, they expect this for a low price. So much competition from large players with big pockets are creating unreal expectations.

This is a good idea from whimizequiltz: "A compelling offer to me would include helping me switch my current hosting AND offering to help me switch back if I didn't perceive a benefit. (Of course, the hope is, you'd offer so much benefit I wouldn't want to switch back to the free service.)"

I am looking for ideas along these lines.
 
Posted by: rbauman* Member Response
8/3/2006 3:25 PM (CST)
You need to define what customers you are targeting - those who already have a hosting service and may switch or new companies that do not have a hosting service. Also, do you target companies or individuals?

Once you define your target in as much detail as possible you will be in a position to start analyzing their needs and pain points. As suggested above, ask customers and don't try to second guess what they want - let them tell you.

Some things that may attract customers (aside from the low prices, high availability and conversion assistance):
- Offering application software on a subscription basis and eliminating the need for your customer to purchase licenses.
- Offering an extra security option (VPN?)
 
Posted by: Clive Fernandes Accepted Answer
8/4/2006 6:27 AM (CST)
Dear Michael,

Since you have now defined your target market it makes it a lot easier to think up ways to attract them and differentiate yourself from the competition.

I think you have already differentiated yourself from a whole bunch of your competitors by portraying yourself as a hosting company for designers/developers rather than the site owners itself. You now need to expand on this.

You could make the developers your partners. Offer them a percentage of profits if they recommend your services to their clients as preferred hosting. Many a time, website developers need to contact the hosting company for some information or changes to be made in server configuration. For this, setup each “partner developer” of yours with his own personal contact at your company. That would make it easier for them to get anything done on the behalf of their clients.

Another benefit would be to provide free tools on your servers that these developers will need. For example - shopping cart, payment integration, etc...

Also, why don't you try sub-niching even more? For example, you can become the preferred hosting for forums. What you can do here is contact the forum software developers and offer them a discount to users of their software. Then set up personalized servers that are set up to run that software most efficiently.

Hope this helps.

Clive Fernandes
Clive Fernandes Consulting
 
Posted by: michaelg Author Response
8/6/2006 8:12 PM (CST)
Thank you to all who provided answers. It is much appreciated. I accept 3 responses which all contributed to the new direction I have worked out

thank you again
Michael
 


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