Who do you resell your hosting service to? I mean, why those website owners would purchase hosting plans from you instead of directly from the original hosting provider?

Most resellers provide it cheaper and oversell, or most find the market of the new users and Business owners, and most are un aware that they can go direct and get it cheaper.

Providing the reseller does not state he resells.

We target web designers and startup web hosts

Resellers can use their personal connections and social networks to secure jobs - it isn't always about cost.

Here is one idea. A Reseller or a web hosting company may have knowledge into one or more other industries and they understand the needs of those particular industries. Because of this the services are more tailored to the needs of those clients and is reflected in the content and site design of their web site. Some hosts or resellers may even set up more than one web site to target a different nitch.

Most anyone can come along and set up as a reseller or web hosting company, and they would become just another company. However, if you have something that sets you apart and appeals to a specific audience you can target that audience and surpass your upstream provider in some cases. Your upstream provider should have no bearing on your marketing efforts, they work for you and you are independent of them.

My best advice is, don't copy your upstream provider. However, you can use them to gain ideas for your own model. Why would someone buy from you rather than your upstream provider? Because you are offering something your upstream provider does not and hopefully it will appeal to a wide audience.

Promoting your site is also a very important step. Make sure that you express your services well on your web pages and make it as succinct as possible. Get other sites to link to you, this helps in your search engine ratings and although there is no guarantee, it can help get you closer to the top of search engines.

I looked to see what is needed and how I can provide that need cheaply and professionally.
Many SEO companies will have many hosting acounts with different hosting providers, so that they can have blog sites and comparison sites all on different IPs. Not just different IPs, but of different networks, so that google and other services see their sites are being owned by different people.
I've taken many ripe blocks and forward an ip from each block to a different dedicated server. This way every machine has many IP addresses on different Class C Networks.
I've then shared these IP, so that my resellers do not have to purchase dedicated IPs to have multiple IPs on different Class C networks.
This allows them to have a single account with me rather than multiple account with others.
Also because these are SEO people, I've beefed my servers to 16GB of RAM etc to make sure they are fast!!
I'm a little more expensive than the average host, but that way I can afford to have fewer users per server!
So my target audience is Fast Responce SEO aware people

Good question It is true what Steve said. Resellers run small enterprises and are flexible in their operations. But I do not hink that they have a technology capacity to oversell. The don't!

I have learned it a lot from this discussion. No wonder that many resellers did.

Well, many resellers are just reselling for their family, friends and neighbors, lets say a local community. That helps to cut down costs.

I would purchase from a reseller only if they are offering at rates cheaper than the original one. However, the point is how do the reselling people make a revenue from it?

Dake , a reseller can not go lower the price of the provider's pricing if they go they will be just face the lose and 0 gain.

First because they don't know who I'm buying host.
2. I only sale hosting to my clients. So if they buy a script from me they will trust me that the hosting will be good.

Company secret ;p

Jokes aside, people new to the internet and who might need a bit more friendly support rather than one sentence answers.

I'd mainly focus on new comers into the industry.

I also like to target the gaming market, Clans , Team Web Sites.

You should market the best target that is best for you, What type of services do you provide and how much resources do you provide? Depending on this then you can chose what target you would like to go after.

I agree, customer service can play a big part in defining your business from the others low cost providers around the net.