Why Coupons in Webhosting Services Require a Long Term View

Webhosting providers are increasingly using a combination of affiliate and coupon marketing to attract customers. For instance, web hosting companies send their discount codes to their affiliates who then promote the offers on blogs, coupon sites and newsletters. The discounts provided may be very attractive, some reducing the prices of web hosting products by 50 percent.

One of the main reasons even the best of web hosting businesses use coupon is new customer acquisition. If this is the case, a major objection to coupon marketing arises. One wonders how web hosting companies know whether the people redeeming the discount vouchers are new customers or existing users. What percentage of discount vouchers are being used by new customers?

If the coupons are used primarily by existing customers, then obviously these web hosting companies give discounts to customers that would have anyway paid full prices on the products and services.

young engineer business man with thin modern aluminium laptop in network server room.

Coupon marketing means having a long term view

Is giving coupons to existing customers, really, a waste of potential earnings? In the short term, it may look like web hosting companies are losing a big chunk of their potential earnings by giving coupons to existing customers. However, the picture is different in the long term.

Bluehost and Domain.com are two of the best WordPress hosting companies in the USA and very popular among bloggers. Both companies have shown that making profit is possible, despite offering generous webhosting coupons.  Firstly, these web hosting providers make money because theirmargins are high. Secondly,they still make money because the customers can be convinced to buy more products than the vouchers provide.

Webhosting allows bigger discounts

You will know that web hosting solutionsare software products so they don’t need shipping or delivery. This being the case, web hosting companies do not worry about shipping costs. They can, for instance, create huge servers where they can accommodate hundreds of websites.This is called shared hosting. In this case, since acquiring another customer does not cost the webhosts any more in terms of infrastructure, they can easily afford to offer the first month’s hosting free for a cent. That is why we see offers like “$0.01 for first month WordPress Hosting”.

Repeat business is a big source of revenue for webhosting companies

The next objection against coupons is that existing users of a webhosting provider, who used discount vouchers to purchase a new product or an upgrade, would have done so paying full prices anyway. The answer to this issue is that you cannot be sure that customers would have purchased without the coupons. As a matter of fact, even existing customers are more likely to return for additional purchases when the merchant offers discount vouchers than when there are no discounts at all. In the web hosting industry, there is so much competitionthat getting repeat business from the same customers brings in more revenue than trying to acquire new customers.

IT network administrator in a server room.

Referrals and word of mouth in webhosting services

Finally, if a webhosting company has just made a coupon promotion where, for instance,existing customers made 80 percent of the coupon use and new customers made only 20 percent of the coupon use, is this a losing marketing campaign?

“The answer to this” says Alex Papaconstantinou of US voucher site Wikigains.com,“is that it should not be assumed that the new customers directly brought in by the discount vouchers represent the only new customers. If you win a few satisfied customers, chances are they will recommend your business to friends and family, and this may result in more new customers”.

Leave a Reply