Why You Would Offer a Server for $1 for One Month

We checked in with an innovative webhost to learn about the promotion and whether or not it succeeded.

by Alex Goldman ISP-Planet Managing Editor [April 28, 2008]

We last spoke with Chicago-based SingleHop a year ago (see SingleHop Extends the Dedicated Servers Trend) to learn the company's story and its history. We checked in again recently to learn about the company's headline-grabbing promotional offer of a dedicated server for $1 for one month (after which the user chooses to renew for service at the full price or to abandon the service).

In order to prepare for demand, says Zak Boca, president and founder of SingleHop, "we made a large hardware order and had 500 servers preconfigured."

He admits that the promotion is "not a long term business model" but it achieved the goals he had set. The company measures cost of customer acquisition as a key business metric, and the goal was to drive down that cost.

In part, the promotion is intended to enhance the power of any advertising buys. "Obviously, we plan to spend a lot on advertising. So if the word of mouth publicity we obtain from the promotion lowers our cost per client, that's good."

And in fact, the company's customer acquisition costs have declined. Obviously, word of mouth is not something that you can measure directly. The company does not keep track of the number of news stories generated by the promotion, or the number of blog posts featuring it, nor can it look into the minds of its customers and learn how many have recommended SingleHop to people they know.

It's much simpler than that. If the monthly advertising spend per customer win is lower this month than it was the previous month, the company attributes some of that efficiency gain to customers recommending SingleHop to new clients.

Other initiatives
At the same time that SingleHop rolled out the promotion, it also began work on two other programs. One is a reseller channel, which Boca says is still in beta with about five shared hosting providers. The company is building a reseller control panel, due out any day now, and when that channel buildout begins, we'll tell you about it.

Another initiative focuses on customer retention. Obviously, if you're growing by adding new customers, and you're concerned about the cost of customer acquisition, you want to keep the customers you've paid to acquire. SingleHop is now giving each dedicated server customer a single account executive to call if there's a problem.

"We wanted to allow our new customers to see the benefit of having one person with a direct dial phone number handle all their personal service issues," says Boca. "We believe this program will increase customer retention."

Conclusion
The hosting market is a tough one, even if you are focused on a single niche market as SingleHop is. "It's a capital intensive business," says Boca.

The company's goal is to obtain customers at a reasonable price and to retain them with better service.

Asked whether he could save money by moving from Chicago to Iowa, Boca points out that there are benefits to being in Chicago. "It's important to us to be close to the bandwidth providers and to be able to tap Chicago's impressive talent pool," he says.

—End