So what happens when you cut prices....

[GordonH]

Hello

I decided to half the retail price of some of our domain names. This meant we were taking a loss on some of them.
The result was no increase in sales at all.
It seems that the only way to increase domain sales using price would be to charge $5 or less.
As some of you may know I tried giving away domain names for free last year and only managed to give away 150 in a month (there were no strings of any sort and I had budgeted to give away a few thousand).

People seem to respond best to an unfeasibly low price (i.e. sub Godaddy).

It has been an interesting exercise but not worth the effort.
I wonder what woul dhappen if we charged $50 for a domain name.
Sales would be lower but maybe we would make more profit?
i.e. reassuringly expensive. Auto renew them all and send out paper invoices in the post.

[Trigger]

No matter what price you sell at someone will always try to underbid you. look at what you can get for $1 in the hosting market.

Better to price things reasonably and stay in business.

If it costs you $5 and you sell 100 at $4.99 then you are out of pocket $1 plus your time and effort doing all the accounting.

If you sell at $10 sure you may only sell 10 units but thats $50 profit and you have only spent 10% of the time doing the accounting for it.

Take into account all the incidentals 3PP fees (cost per sale), your time what thats worth.

You may gain 100 new customers and it only cost you a dollar on the face of it but if price was the only thing that keeps them then come renewal they will look elsewhere. For those customers who purchased for $10 even if you only keep 10% of them you still make more.

For domains some people are still willing to pay more than $29.95, here in Australia you can purchase .com.au for $55AUD (2 years) but some people are still happy paying $70AUD/Year for a .com and $140AUD (2 years) for .com.au go figure

[GordonH]

Yes, but the idea was to bring in more customers to sell other things to so a reasonable immediate loss was not a bad idea, plus this is the last month of my company financial year so every $1 we lose this month saves us $0.24 (crazy I know).

ANyway it was interesting to see that lowering domain price did not encourage people to buy.
If I had gone to $5 I think it would have been more successful as there have been other companies done that and done well from it (sign up wise).

[wisehosting]

Originally Posted by GordonH

Yes, but the idea was to bring in more customers to sell other things to so a reasonable immediate loss was not a bad idea, plus this is the last month of my company financial year so every $1 we lose this month saves us $0.24 (crazy I know).

ANyway it was interesting to see that lowering domain price did not encourage people to buy.
If I had gone to $5 I think it would have been more successful as there have been other companies done that and done well from it (sign up wise).

I think what you were trying to do was what supermarkets are great at doing - ie creating a loss leader product but knowing that customers will purchase other items at the same time.

Perhaps domain names are not the product you should look at. You need an item that is wanted - but not being offered at stupid prices elsewhere, that you can promote. Or an added extra that people dont mind shelling out an extra $ for.

It's not easy - we go over this every month!

[GordonH]

Well I AM going to introuduse a web building tool at no extra charge in the next few months.
The idea of that is to help us justigy the prices we charge which are seen by many customers as being extortionate.
Actually, I went through this a few years ago and doubled the plan sizes and things took off again so its going to be a combination of various things plus beefing up the cheap brand so it can compete with Hostsave etc and with the same reliability.

Its actually been fun working on the cheap brand again as historically it made a lot of money and it is still growing but I know we can do more with it as the demand at the bottom end is increasing all the time and we are not getting our fair share.

I amalysed all the customers using the cheap brand.
The average disk usage was 250MB and the average bandwidth was 2.5GB per month.
The limits are currently 1000MB disk space and 40GB per month bandwidth.

[ldcdc]

I love the kind of info you share Gordon!

I still don't see why you'd go for the silly (IMO) Hostsave pricing and open yourself to a never ending appeal to the "too many server resources" policy. But then again, I'm not a host, so I don't see things like a host does.

[GordonH]

The reason is that sales are dropping.
Potential customers compare and see better value elsewhere.
Therefore I have no choice but to go down a similar route.
We were one of the first hosts to start offering very large plans.
I used to do a 500MB when Hostsave was still on 20MB and it was the same price.
We used to draw in large numbers of customers from other hosts and made lots of money from it.

I think I can pull off the same trick again and the procesor usage issue may not be as severe as I imagine because I am going to use dual processor servers for the new service.
AT the moment we get about one in 200 customers who uses a bit too much but as long as they are not affecting other users i don't normally enforce the limit.
Its possible I can get away with the same policy with dual processor servers.

[ldcdc]

Its possible I can get away with the same policy with dual processor servers.

Let's hope so! Only real life experience will tell.

[GordonH]

Well to play safe I am starting with one new server and will add accounts gradually.
I will not put existing customers onto the new accounts until I have one full new server running and I can always stop adding accounts if problems arise.

[asp-hosting.ca]

Gordon,

What is your main source of visitors?

[GordonH]

60% existing business or word of mouth.
40% from PPC

[ldcdc]

No free traffic from the search engines?

[asp-hosting.ca]

I don't have any experince with budget hosting, so I can't really give you advice. Our plans start at $7.99 for a single domain, 100MB of space and 4GB data transfer. We still get customers with these plans

[Aussie Bob]

Originally Posted by ldcdc

I love the kind of info you share Gordon!

Yeah, me too. It's honestly refreshing and unpretentious. (sp?)

[asp-hosting.ca]

Aussie Bob,

How is it going with your new venture?



Peter