Nov
04

Price is not the Main Criteria

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I am tired of reading on supposed help sites that price is the main factor when buying web hosting or anything else. When you go to the grocery store and buy lettuce do you check the price or check to see if the stuff is rotting? When buying milk do you check the price or the expiration date? When you buy furniture what is the first then that catches your eye? How it will look in your living room, or the price tag?

Price is not the main factor. If you make price your main factor you are going to wind up disappointed. Instead let me offer a replacement to Price and that is Cost.

Surely I jest yes? Isn’t cost and price the same? Some of you already know where I am going with this and others need an explanation. Price is how much you pay from the outset. It is the sticker cost of an item. For instance, $1.99 a month for a web hosting plan, the price would be $1.99. Cost is how much you end up paying over the long haul of the product or service.

For instance, taking a jaguar (price at a cool $60,000) to a mechanic to find that the parts need to be special ordered (ka-ching!) and an authorized mechanic should install them (ka-ching!). That you have to use the premium gas (ka-ching) instead of the cheap stuff. The oil put in the car must only be synthetic (ka-ching) and since the engine is constantly purging oil, the topping off of the oil reserve is a weekly activity (ka-ching). As we add all of these together we might find that the initial $60,000 is dwarfed by the total cost of ownership of that vehicle.

This can be applied to web hosting, especially those who desire the world for free from their web host. However, this brings up a bit of a quandary. If people know you get what you pay for, if people understand that $1.99 is probably really cheap (thrift store cheap) for web hosting why do they still want to have everything for a few bucks? I have to assume it is because of two things.

1) What idiotic company would sell a product without making a profit on it? The logic then goes, if you can make profit off of 1.99 a month then why are there companies selling the same stuff for 5.99? 10.99? 19.99? Are they all greedy or something? Which leads to my other point.

2) The average person doesn’t know the true cost of the service.

As a service industry, web hosting requires staff, a lot of staff depending on quality level. Employees don’t come cheap, in fact I would think that salary would most likely be the highest cost for companies who put support ahead of other factors. The unfortunate part is that this large cost is difficult to manage. Let’s face it, customer support staff has a high burnout rate. Hopefully, they are being moved to different departments if they are talented, but that doesn’t help the customer support section. New employees must be trained as old ones leave. Companies tried to lower this large cost by going overseas. Instead this often made their customers hostile. So hosts were forced to shave costs everywhere and hope it adds to big savings.

Virtualization is one of those shaves. Being able to combine more accounts on a computer and use every last resource in the data center greatly reduces power cost, real estate, and the rest. Automation reduces work load of employees, streamlines efficiencies and plays well with others, especially virtualization.

But even if you used green energy servers, topped them off full of accounts (without overloading), automated everything, purchased discounted bandwidth, used recycled air from outside… did everything right when it comes to cost, you still couldn’t justify $1.99. In fact, I would believe it difficult to get a high level of customer support for less than $10. And that is being generous. Especially considering that even with the best video FAQs and rock solid hardware (which would also cost a lot of money), there are a lot of customers that just want to talk to a real life person. And if you want to staff it 24/7 you need several shifts of customer support techs. Not too mention writers who can update the FAQ and knowledge base, while promoting the company. What’s more, the cost to acquire a customer generally put the web host in the hole sometimes by a few hundred dollars.

Though it is treated like a commodity, I assure web hosting is not. If you want nothing, then feel free to pay nothing. But, if you require something more substantial, do not balk at paying more upfront. The question then becomes is it worth paying more upfront to ensure you don no pay a huge amount later? I think you know the answer to that.

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