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We Are Indefinitely Suspending Our Standard Plan ($20/mo)

Jesse Nickles   |  4 Feb, 2018

After tons of careful research, we’ve decided to suspend our Standard Plan, starting immediately. While current customers on this plan can retain it for the time being (probably until the end of 2018), we will not be accepting any new orders.

Priced at $20/month, this plan has been our entry-level and cheapest managed hosting plan since the beginning of LittleBizzy nearly 3 years ago, in early 2015. Because we try to be as transparent as possible — and consider nearly everything to be a case study — we are sharing the details of this decision below for your own curiosity and/or criticism.

Why It’s Being Suspended

1. Customer Churn. One of our biggest sources of pride at LittleBizzy is our very low churn rate. Web hosting is a fiercely competitive industry, and we have truly been humbled by our high client retention rate — with the one exception often being our Standard Plan customers. From the beginning we always liked the $20/month price point. Especially in the United States, “twenty bucks” just sounds good, and in the hosting world it was priced high enough to position LittleBizzy as something more than cheap, old-fashion shared hosting, without getting too expensive. However, without trying to over-analyze the financial aspects of the market and all the psychology it entails, it has become clear after 3 years in business that inflation (and perhaps other factors) have simply outpaced this price point. In other words, “twenty bucks” is now around the cost of lunch for two people at a fast food restaurant in America, and its become almost too easy for customers to sign up. If our system was entirely scalable and “hands off” it wouldn’t really matter, but that’s simply not our model here, and probably never will be. Therefore, an “easy come, easy go” price point resulted in businesses that weren’t stable — let alone launched, in may cases — casually pushing through orders, and canceling a few months down the road after ditching their website (and business). It often seemed to be the case where inexperienced business owners were just throwing money at us, hoping something would magically stick and their company would start to grow — the same psychology, perhaps, that can be found in over 90% of Shopify customers (and is exactly who they seem to be targeting). There’s a lot of talk in marketing about reducing so-called “pain points” but something we’ve come to appreciate as time goes on is introducing a few psychological “challenges” if you will during the customer acquisition process (something along the lines of pre-qualification), in order to make sure customers understand our setup, and that they truly appreciate the value in both our pricing and features as they look to achieve a greater degree of stability. Clearly, $20/mo attracts more signups each month, but these clients are much “cheaper” in more than one way, tend to require (or “demand”) more support, and tend to bring with them less serious websites that may or may not completely disappear just a few short months down the road. There is no point in higher conversions if it comes with a much higher churn rate. We considered playing with various filters such as being “invite only”, or even disabling frontend order forms in place of manually approving new clients on a case-by-case basis, but at the end of the day this is all a bit silly for such low prices (and would require more time) when simply raising our prices would solve all these issues in a blink.

2. Server Specs. When we started out in 2015, DigitalOcean was getting huge. Initially we had overly generous RAM and CPU offerings, in an abundance of caution while we grew comfortable with our custom LEMP stack configurations, but also because there weren’t many options to choose from. A year ago when we switched all our clients to Vultr, we began saving a nice chunk of cash each month, while also slightly tweaking the specs per each hosting plan. What we’ve learned (and freely share with the WordPress community here) is that if you want to truly ensure a dedicated VPS server is stable for the average “growing” WordPress site, it requires at least 1 CPU core and 2GB RAM memory. (Note: I’m not trying to start a debate here over how “actually, you can tweak the heck out of a 512MB RAM server and get millions of hits per second”. I’m simply going to make this claim without any technical data for now; maybe in a future post, we’ll address things like DDOS attacks, traffic spikes, etc). While Vultr (and now DigitalOcean’s revamped pricing a few days ago) make 2GB RAM much more affordable than it was a few years ago, it still requires a minimum of $10/month, so there’s that. The point being that while a small “homepage” site with only 5 pages — such as a lawyer, or coffee shop — typically don’t need more than 1GB RAM and 1 CPU core to remain stable and fast over the long-term, we have arrived at the point where we don’t want to have to keep explaining to businesses why they should upgrade to a higher plan if they are planning to install WooCommerce, or launch heavy advertising campaigns, or so forth. We want to keep our server configurations as uniform across the board as possible, and our feature set (and supported extensions) as uniform as possible across all plans, which means that 2GB RAM should be our minimum server spec at this point. Ultimately we aren’t aiming to host the homepage of the coffee shop down the street who gets 2 visitors each day and has zero interest in growing their website. We are increasingly targeting “business critical” sites that are serious about growth, and serious about trying new WordPress extensions, etc, so continuing to support lower spec servers just because lower-end sites only need that much means we are stuck targeting the types of clients that we don’t really want, or at least, the types of clients that are not challenging us to grow LittleBizzy and offer cutting-edge solutions. We can still host the low traffic coffee shop down the street on our 2GB RAM Business Plan of course, but we want them to be able to expand their website at a moment’s notice; this will also mean that we can market new services or solutions to our entire client base without continually compartmentalizing the lower-end sector of our customers as some sort of inept “other category.”

3. Included Services. Our entire collection of unique “hands-on” hosting features such as CodeGuard backups, DNS management, free malware removal, and so forth simply are not sustainable at just $20/mo, which is why we began removing some of these features from the Standard Plan over the past year. In fact, these types of bundled services are extremely high end when you compare the vast industry of web hosting, so we are literally confusing new visitors who check our pricing and see such an impressive feature set at such low prices. Instead of consistently impressing potential new clients, too often the Standard Plan was either confusing visitors (“how can this be so cheap!?”) or in the case of features not being included, was perhaps leaving a bitter taste in their mouth, especially when we tried to upsell them on the Business Plan. We want both current and new clients to quickly grasp the inherent value of our managed hosting plans — how we give every single website our full “sysadmin” attention — and our pricing and included services simply needed to reflect that better.

4. Competition. Simply put, no other hosting company out there even comes close to what we offer at our price points, and we say this with no exaggeration. Our competitors think we are crazy for putting every single website on its own VPS server in a datacenter of the client’s choice. I can personally count on one hand the number of WordPress hosting companies that I’ve come across doing something even remotely similar to LittleBizzy, which is why so many of our clients notice drastic and immediate improvements in their SEO performance. All of the largest managed hosting companies out there ALWAYS combine hundreds of sites onto the same server, at least on their cheaper plans — which are still more expensive than ours. One of the main reasons they do this is to attract design agencies and other resellers, which is something that we try specifically not to do anymore, at least not outwardly. One of the most important concepts in marketing is pricing your products or services at a place where “perceived value” makes sense, especially when your value truly is higher than the competition; however, by maintaining a $20/month plan while cutting out flagship features is perhaps signaling that we are simultaneously targeting two very different types of clients, or are overly desperate for new clients by advertising low-end pricing that doesn’t match our messaging (not to mention the added liability and problems introduced by not including CodeGuard backups into our stripped down version of the Standard Plan). By stabilizing our price points into the higher end of the spectrum while continually adding more value to our plans, we seek to reinforce LittleBizzy as a “boutique” hosting company for business critical sites, period.

5. Market Position. As touched upon above, finding our spot in the competitive web hosting space has always been a top priority for us. We’ve known since we first launched that we wanted to offer literally the “best quality” LEMP-WordPress configuration out there, but that doesn’t mean much if we don’t know our place; and if we don’t know our place in the market, how can our potential clients know if we are a good match for them? By adjusting our pricing (and thus establishing a more uniform feature set) we hope to double down on efforts to attract serious and growing businesses who may have in-house design, content, or advertising, but who ultimately would benefit from partnering with an extremely stable and performant server management team (“remote IT department”) to look after their website infrastructure. In recent years, more and more agencies have launched flat-rate maintenance services, or have tried to bundle very poor hosting packages into their maintenance services. To us, retaining an “infrastructure only” mindset allows room to synergize with some of these other services, while remaining the best at what we do. Whether a company has a full-time Advertising Manager, or a part-time blogger, or even a web designer across the world in India, our VPS management should fit perfectly into any one of these situations while allowing us to stand out when compared to typical “shared server” web hosts.

In conclusion, as we’ve strayed away from targeting resellers and agencies over the past year, it’s become even more apparent that the Standard Plan simply had to go. Large and growing websites that clearly required more server resources kept trying to order our cheapest plan; plus, our desire has always been to nurture direct relationships with our clients whenever possible rather than prioritizing a middleman relationship with resellers, due to our “hands-on” approach. While $20/month meant we could usually sell more plans each month, they inevitably resulted in more support requests for businesses that ultimately tended to fail anyway, thus cheapening our time invested. Even if we could offer 2GB RAM servers AND all our flagship features at $20/month, we still have concluded that this price point is not a sustainable use of our time, nor is it attracting the types of customers that we seek to attract (generally speaking… we still love you all). Instead, selling less plans but at a higher price point is something that we’ve seen will provide greater stability and steady growth to LittleBizzy, while improving our marketing message and reputation, and solidifying our niche in the massive world of website hosting.

While we do hope in the future to offer a low cost service called SlickStack that can be used by a wide variety of resellers, agencies, developers, and so forth (those looking for high end LEMP servers at lower prices), it would only be sustainable with better automation. This means less staff involvement and support required, and not the current hands-on management that LittleBizzy offers. The only way to sustain the hands-on detailed approach at LittleBizzy is to reduce churn, keep our time costs at a more premium rate, and partner with serious long-term clients who are willing to pay a bit more for the best performance and management in the market. If some resellers (who perhaps are less tech savvy, or simply want to outsource server management) still use LittleBizzy for their clients, that is completely fine, but we have concluded after nearly 3 years in business that resellers with higher-end clients are completely willing to pay $40/mo or even $160/mo per server.

If you made it this far, we hope you’ve found this post useful!

Thanks for your support, as always.

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Last modified: 4 Feb, 2018https://www.littlebizzy.com/?p=21377

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