One of the most important questions a provider can ask himself is: why should someone buy from me instead of from a competitor? In marketing, this is called differentiation.
In the early days of hosting, the market was rapidly expanding and anyone could show up, offer services, and attract customers. Today this is no longer the case. The market is saturated and supply is highly elastic. Even worse, there are very few barriers to entry. If you want to sell a new type of microchip or a new kind of electric car, you need billions to setup shop. To start hosting, you only need to rent a server, throw up a web site, and start accepting orders. This leads to intense price pressure.
So how do small players compete? By differentiating themselves. They look at their business (and the market) from a consumer’s set of eyes and say “what will make me stand out?” They ask “why would someone shopping for hosting pick me?”
False Differentiators
Let’s look first at some things that are not good differentiators.
“Great Customer Service”: everyone promises this. Other than reading reviews, the consumer has no way to evaluate this. There are already tons of hosts that have 24×7 service.
“Small Company/Personal Touch”: This angle works better when you’re selling home cleaning services or auto detailing or daycare. In those markets, people want to know the provider intimately. On the other hand, they don’t care if their gas station is independent or part of a chain. Hosting is more like a gas station.
Things Everyone Offers: Saying you provide free SSL, Softaculous, etc. is not a differentiator because everyone offers those things. The bar keeps rising. Ten years ago, including DDOS protection was indeed a differentiator because few providers offered it. Today it’s very common and no longer sets you apart.
Many Locations: If you provide KVMs in multiple cities, you’re one of many. Adding a 9th or 10th city does not bring you to a new level. Now if you had technology that allowed customers to move their VMs around from city to city at will, that would be a differentiator because few hosts do that.
Security: There is genuinely a difference between someone who’s written a custom panel and had it professionally audited and someone who hasn’t, or someone who has good security practices in his farm and someone who doesn’t. The problem is that the consumer expects high security and has no way to knowing who’s not telling the truth, so from a marketing perspective, this is not a differentiator.
True Differentiators
Value-Added Services: For example, if you can provide a high-touch white-glove service to businesses, this will set you apart. I don’t mean just saying “24×7 support” because everyone says that. I mean offering web design, consulting, web site management, etc. Something you don’t charge $5/month for but rather $100/month. Of course the time and effort to acquire these customers is much greater but someone knocking on a business owner’s door, sitting down with a PowerPoint of services and a set of references, etc. is setting himself apart from HostGator.
Niche Expertise: An old example is game hosting, though that market is pretty crowded now. If there is a specific application you have expertise in, setting up hosting for that platform and positioning yourself as the best-known name for that product can be lucrative. For example, CaseBox is a solution for litigation management. If you sold VMs that came with CaseBox pre-configured and were there 24×7 to answer questions about CaseBox (not just the VM, but provide consulting on how to use the product), you would have a unique niche.
Unique Features: Geography can be a differentiator, if you are truly located somewhere unique or rare. Hourly billing is still not that common, nor are pooled services (where the consumer gets a set of cores and GBs and disk and deploys VMs as he wishes). There are some features which you only really see at the mid-market position such as load balancers, block storage, a robust API, etc.
Compelling Story or Company Personality: This is much trickier and lower impact, but a company that has an interesting story to tell, has unique branding, has an owner that is well-known in the industry, etc. can stand out from a host that uses the same ThemeForest template as 100 other hosts. Just having a fun or eye-catching web site isn’t enough, but it can be part of your strategy.
What Differentiates You?
Differentiation is not the end-all of a marketing strategy, but in a crowded market, examining what sets you apart is critical to the long-term health of your company. Try to look at the market as a whole and your place in it, and ask why the customer will pick you.
Are there some other things providers can do to stand out in the marketplace? Please comment below!
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I also enjoy using LEBs! I have an empire of little guys for VPNs, larger guys for apps, and big guys for databases and storage. When I'm not in front a screen I'm into German Shepherd dogs, quality knives, target shooting, theology, tabletop roleplaying games, and forest hiking.
I enjoy writing technical articles here on LowEndBox to help people get more out of their systems. You can find me on LowEndTalk @raindog308
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