Tuesday, January 04, 2005

Why Your Business Will Fail

This article is not about writing a business plan. Its not about your lack of technology savvy, nor your inability to slap together a few decent resources and turn it into a web hosting business. And its definitely not an article about why you should not start your own web hosting business.

Then what is it about? Good question. Its about why your business will fail, regardless of how good your business plan is, regardless of how much technological knowledge you possess, regardless of your experience and the resources you have available to you. Your business will fail. Why?

Web hosting is a very competitive field. As startups spring forth on a seemingly daily basis, competition continues to grow and in essence, everyone is after the same pie. Granted the pie continues to expand as well, due to the ever increasing number of businesses finally realizing that they need a web site, and because of countries whose economic condition now make the internet an affordable commodity.

Sure, we are all after the same pie, and even if you are competing with businesses on a local level, you are still after the same customers, customers who will pay you money to host their web site.

One question continues to linger on, particularly in an industry as competitive as web hosting: why should customers choose you over your competitors?

It is this question that, if left unanswered, will eventually drive your business into the ground in due time. Regardless of your marketing plan, or how much money you have budgeted for advertising. And no matter how many books you have read about managing servers. Answering this question ought to be a priority for web host startups.

Do I Have Your Attention?

Many web hosts have ventured into a plethora of different marketing strategies and explored different avenues when it comes to devising an advertising campaign that will reach their target market. But many web hosts fail to realize who their customers are, and ignore the fact that their very own competitors are out to reach the same customers.

Visit your favourite internet search engine, or more specifically, a web hosting directory and you’ll see what I am talking about. You are instantly bombarded by a number of web hosts screaming for customer attention. But just how do they grab customer attention?

What? By showing off their features and price? How many times have you seen advertisements of web hosts showing off the features of their web hosting plan, along with the price, and, of course, the name of their company? Now multiply that many times over and that is what customers are seeing.

How does a customer choose amidst a flood of data, features that vary from one host to another, disk space and bandwidth numbers that do not really mean much for customers new to web hosting, and prices that seem to be randomly pulled out of the air?

Compete By Price?

Okay, so one way of catching my attention is giving me the absolute lowest price imaginable for web hosting. Thats right. Give me your absolute best, ultra-loaded, gargantuan hosting plan for pennies on the dollar, and give me a free domain to boot. Do we have a deal? Yes? Well thats great! Now, where do I sign up?

You have probably seen web hosts offering ridiculous offers with prices that are so low they make you cringe with fear. How do they get away with it? Do they even survive? Who are their venture capitalists, mom and dad?

Competing by price is the lazy marketers way of attracting customers. First of all, if you can not afford to offer web hosting at such a low price, why would you be tempted to offer it in the first place? In high hopes of up-selling your clients? Or perhaps because you think volume will make up for it?

Consider this: the people that pay the lowest prices for web hosting usually demand the most service. Lets be straight up about it: they are cheap customers. From the experiences of many web hosts who have learned their lesson after trying the ridiculously low pricing structure, it doesnt make sense to charge customers a low price if they demand the most of your time and resources. You lose money. And you will eventually lose customers. Not to mention the fact that you will not make money taking this route. Your business will fail.

What Makes Me Different?

Ask yourself that question: what makes me different? What makes you different? Why should a customer choose your web hosting service over another company's web hosting service? Don't you both offer the same service anyway?

If you fail to realize the fact that you need to do something different in order to survive in this business, it will take sheer luck for you to survive. If you're like everyone else, chances are your business will fail. Your business plan should have outlined a marketing strategy, but you should have also considered the competition, and what it takes on your part to generate enough business to grown and prosper.

Service Differentiation

Essentially, every web host offers the same service in the perspective of the customer. They pay you to host their web site. Wow, big deal isn't it? With this kind of thinking, your competitors are set to fail because all you have to do is set your service apart from everyone else. Begin by brainstorming to yourself or with your team. How can we differentiate our service enough so that customers can see our service as superior to that of our competitors?

You've probably seen many claims including 99.999% uptime guarantee, or 24/7 support. In reality, these hosting companies are differentiating their services, although many are quick to jump on the bandwagon. Can you deliver an uptime guarantee to your customers? Do you provide customer service and technical support 24 hours a day, seven days a week?

What do you provide that your competitors do not? Do you use a control panel that makes it easier for customers to manage the features of their web hosting account? Do you provide free antivirus software that protects their e-mail? Do you provide a solution to SPAM e-mail?

Differentiating your services simply takes a bit of creativity and being able to see your service in the eyes of your customer. What will excite them? What feature will switch them on and see you as the ultimate web hosting service provider? What will make your competitors envy you?

Brand Experience

Web hosting is not as dull a business as you think. In fact, it's more than just hosting your customers' web sites and hoping the server doesn't crash. It takes more than answering the phone and helping them solve their technical problems.

The experience that your customers have with your company is one that is very important, and should be emphasized. The brand that you deliver to your customers is one they should feel strongly about, again, something that excites them every time they interact with it.

Start with your company name. Is it another one of those computer generated, high tech, dot com names, or did you actually think of something clever, something your customers can feel emotionally about? Now let's have a look at your web site. Did you splash it together using bits and pieces from the web sites of other businesses, or did you do something unique, and make it easy for your customers to navigate?

Are your web hosting plans designed to suit the needs of your customers? Do they have enough choice? Your ordering process is it easy? Can customers order without running into problems or feeling inadequate? Can customers get in touch with someone if they are having difficulty?

When customers call for customer service or technical support, do friendly representatives answer the phone with a strong feeling of rapport with your customers? Do they genuinely care about the well being of your customers, ensuring that they do whatever it takes to keep them happy?

Let Them Talk

Unless your web hosting business is worth talking about, you will fail. The most effective way of promoting your business is out of your hands. It's your customers that play an effective role in whether or not your business will succeed.

If your web host startup is just another mediocre, half-assed attempt to make money, or if it's just a dedicated server sitting somewhere out there begging to be filled with data, you will fail. Nobody will even notice that you exist, regardless of how many ads you put up, how cheap your prices are and how technologically ingenious your team is.

The easiest way to get your business off the ground is to excite your customers and get them to talk about you. Think about it because it really is that simple. When was the last time you told a friend of yours about a product or service you really enjoyed?

Now, what can you do about your web host startup that will get customers to talk about you? How do you tickle them enough so that they get off their seat and tell just about everyone they know about how great your web host services are?

Copyright © 2004 Johnder Perez

Johnder Perez writer for hire
The Startup Blog Join an entrepreneur as he builds the next successful web hosting company from scratch.