Where Is Joel?

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This post follows directly fron an issue we have been having with SnackPanda lately. We are looking for a good domain registrar that we can resell for. This isn’t because we care at all about making money off of selling domain names. It’s because we want domain registration to be a seamless invisible process to our clients. What we found is that many domain registrars provide a high barrier to entry to reselling domain names through them. Many ask for a high up front “down payment” before they allow any domain resale for example.

At first this seemed curious to me. Why would a store provide a barrier to entry to people who are planning on driving more traffic in their direction? It doesn’t really make any sense. My first thought was the barrier was there so that when buying a domain someone couldn’t claim to be a resaler and buy a domain at 8.50$ instead of 9.50$. But the more I thought about it that just seemed stupid, if this were the case they would provide a service where I could resell domains at the price I would normally pay. Then finally the answer occurred to me. Domain registrars don’t actually want you to resell their domains.

?!?!? What?!?! Seems bizarre right? Why would a domain registrar not want you to give them more business? The answer is that they don’t actually make any money off of selling domains. Say a domain registrar makes 3$ per domain and registers a million in a year. That’s only 3 million dollars. Seems like a ton of money, but for a company like godaddy which cleared over half a billion last year it’s a mere drop in the bucket. If anyone has ever registered at godaddy they know that to buy a domain you have to navigate through a million pages of “Do you also want to add this useful thing?”. Godaddy makes money on the extras they sell! For every domain name registration someone else resells that does not force the user to go through their crazy options they don’t make money.

This in fact is just the common practice of variable pricing applied to the internet. When you buy a coffee at Starbucks and get Venti it costs them virtually no more than to give you a tall, and yet you pay significantly more. Stores want to price items so the consumer who is willing to pay more for the item does. The same practice happens in retail with sales. People willing to pay more buy the item at full price, people less willing buy it on sale at the end of the season. In domain registration some people may be willing to pay 80$ for a registration, some might be discouraged by anything more than 10$. The registrar wants both of these people’s business but needs some way to part the person willing to pay more from their 80$ so they offer upselling options.

The last example of this I’m going to give on this ramble is Intel. Intel for while (and still may) deliberately breaks some processors to make them go slower. Because of this some slower processors were in fact more expensive to produce than the expensive processors. It was necessary however because without having different processor speeds there is no way to part consumers from exactly the amount of money they were willing to pay.

Use this wisely in your businesses. Extra upselling features don’t need to be magnificent, they do however need to exist so that you give consumers willing to pay more for your product the opportunity to pay more. Don’t believe me? Start looking around, you’ll see variable pricing everywhere!
Thanks for listening to my rant. Joel out.