Managed hosting is much more than what DO does, I suppose. They offer services like setting up a Wordpress, emails, nameservers, etc. for people who don't want or don't know how to. You sell customer service basically, you talk to people on the phone, usually works better within your local community.

Edit: and I suppose HostLaunch's edge is to get all the hassle of setting up that business out of the way so you can focus on customer service instead of plumbing servers together.

This is perfect for freelancers. When someone commissioned them to build a wordpress site, they can offer them to host the site on that platform. No need to spend time to build their own hosting infra each of their clients. It's also pretty cheap as you can cram three or more Wordpress site into a single $5 vps on DO.

Another use case is people in 3rd world country sometimes need international hosting but don't have any local payment method accepted by international companies (they only accept visa/mastercard/amex, not small regional card/bank network). You can tap that market by offering local payment processor support, essentially become a middle man for those vps companies. This service doesn't support this kind of use case, but other web hosting kits are very popular in 3rd world countries for this reason.

In addition to other answers offered here it can be a good addition to an existing business. For example if you do some IT consulting with local companies you can offer them hosting as well without building out your own hosting infrastructure.

In markets such as hosting where differentiation is largely about quality of support, brand, and marketing, there are many different reasons why customers choose their hosting company. Some people will stay with their existing host. Many others, both existing and new customers entering the market, will seek out new solutions or be attracted to a different company for varied reasons (poor support experience with existing provider, recommendation of a friend, strong marketing attracted them, identified more closely with the brand values, etc.).

I'm not sure but it may be you're looking for an explanation of why consumers choose one product over others when the consumer doesn't have the full knowledge or information to make an ideal decision (regardless of whether they often believe they do). Brand and marketing have a huge impact in those cases, tied in with the values of the customer base driving who they trust and want to do business with.

Not OP but perhaps I can answer a different way. They are outsourcing the marketing. I can set up my own hosting company, do my advertising and to get clients and I don't have to worry about the technical stuff.