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Ask HN: Should I create a clone of a popular SaaS with rock-bottom pricing?

• ganesharul 9y ago
  "Clone" What you mean by that? Are you going to duplicate the product? Doubt it! Not only SAAS in every product there is an open market for alternate product atleast for 'popular products'. Alternate products just clone 'problem statement' and build their own version of the product solution. In case of popular product, well developed or well defined domain first few steps of solution is going to be same which is unavoidable ex: A car will have four tyres. But, you have all the freedom to change it to be an electric car and make it better. This is how all better products are being made. Any solution need product market fit, persistence, best engineering, trust among customers, support, experience etc., Spend your time in thinking "How this could be done better?". Then you need not clone any product. Almost all forms of idea is been tried in this world. We should try with our own skill set and experience. All the best!
• alex95 9y ago
  This is silly. The problem with creating "rock bottom prices" is it only works when one company has a monopoly over something. Even so, usually there is a reason why a company has a high price. A lot of the time people under-estimate what it really costs to offer a service, and as such think that the prices are not justified. But hey, what do I know, give it a go and see what happens. I think you'll have a good time.
• mmcconnell1618 9y ago
  It's likely that the SaaS you want to clone is far more sophisticated than you think. Even if you clone the features, you still have to clone the customers, marketing, business models, etc. Is there a niche of customers that use the product you could target with a more unique offering? Find a way to provide more value to the niche. Yes, cheaper offers more value for the same product but there is more money in solving a valuable problem and charging more based on that value. Competing on price alone is a really tough road to take in business. You end up with everyone losing margin and it is a race to bottom. Only really sophisticated operators can drive cost out of their business fast enough to stay ahead. If you don't want to be the next Walmart, don't compete on lower prices.
• dsugarman 9y ago
  This is a great question! My opinion is that it's a really bad idea, the cheapest solutions are typically really bad businesses because they have far too little resources to invest in their product and company. Our pricing is always going up because our best customers are the ones who pay us more, not only because we make more money but because they have more resources to invest in their success and they churn less. if you double pricing you need half the number of customers to make the same revenue but you have way less people to make happy.
• empath75 9y ago
  At the low end, you aren't going to be competing with SaaS providers, you're going to be competing with people who just self host a similar solution that's either open source or they built themselves. If you think you can knock out a cheap version with a few developers all of your potential customers are going to be thinking the same thing.
• no1youknowz 9y ago
  > I am looking forward to dabble in SaaS. I want to create something for which market already exists. Should I create a clone of any popular SaaS with rock-bottom pricing? Certainly. Do you have the domain knowledge of why it's already been created? Do you know all the problems it's trying to solve? Do you know other problems it may solve? That last part is important. Even if you clone an existing app, you may see other uses for it. Now develop that other functionality and you are better than your competitor. As for rock bottom pricing. Well this will only get you so far. Need to hire support? Can the business now support itself? Nope? Oops, need to raise pricing now. Also marketing, can the business pay for that and sustain it, to keep on getting new customers? Nope? Oops, now need to determine pricing to support marketing. > Would I be able attract customers? Anything can attract potential customers, converting them is another story. You may have rock bottom pricing, but that may actually turn a segment off. Will you still be there in 6 months? What's your stance on privacy? What will you do with my data? A big thing, is why they should use you, compared to similar saas products. If I may ask, what is the SaaS product you are looking to clone?
• juandazapata 9y ago
  My.02. If your selling point is "I'm cheaper than X", then it doesn't worth it IMO. Think about how you can deliver added value to the solution and maybe you can steal some customers.
• codegeek 9y ago
  Good news and bad news for you. Good news: You want to create something for a market that already exists. Good. Bad news: You assume that cheaper pricing will make you win. Not even close. There are tons of SAAS clones out there for every successful saas. Do you know how many Trello clones are out there ? Slack ? What matters is your ability to execute and sell. Cheaper pricing is one small factor that may get you a few clients but in order to run it as a successful business, you will need a lot more things. Some checklist: - What significant advantage are you offering over existing ones that you are cloning ? Please tell me pricing is not the only differentiator. Most clients won't care. Trust me. - What is the reputation of your company ? Even if you are starting out, you need to show that people can trust you. - How easy is your UI/UX ? Are you creating a better clone or a worse clone ? - Can you win on customer support ? Lot of people want to switch from their current provider due to customer support. Pricing does influence that decision but not a whole lot.
  • tmaly 9y ago
    I second this notion, there are so many clones. If you can niche down on one specific feature for a segment of the market that is not being served, you would have better luck.
    • funzofactofive 9y ago
      Freshdesk seems to have done well pretty much cloning zendesk, so there are examples of it working out, but few and far between
      • sumedh 9y ago
        If I remember correctly the founder of freshdesk read on HN that people were frustrated with zendesk and had lot of of complaints. So its not exactly a clone of ZD, I am assuming they understood the customer's pain points worked on those features not just compete on price.
  • arielm 9y ago
    I completely agree. These questions should be the ones you ask before starting any kind of business, and regardless of your pricing. It's really hard to convert a user that's already using a competing service just on price because they're probably already used to it, too the time to set it up, etc. If you give them a little improvement it'd be as hard, but if you give them something they just can't get anywhere else you might have a chance. At that point the lower price isn't necessarily even a consideration but rather just a nice to have for them and probably a growth challenge for you because you'd be undercutting the revenue potential of a feature no one else has. On a side note - price is what many founders believe potential consumers base their entire decisions on. While that's true for some products, it doesn't mean that it is for you. It's always best to figure out how to reach users first, then experiment with pricing.
• tyingq 9y ago
  If there's a prevailing opinion that the existing popular SaaS is overpriced, you might get some traction. Especially if there's currently little competition. On the other hand, if you go too low, you won't attract the same customers. You'll get a more miserly crowd that is comparing it to running something themselves on a cheap VPS. They won't be easy to deal with, and will come and go. I get that being more specific is hard if you're trying to keep the idea to yourself. But, I suspect the answer is very specific to what SaaS you're considering competing against.
• jamiesonbecker 9y ago
  Price is the least relevant variable.
  • salesguy222 9y ago
    So amazingly untrue... do you pay extra for usb sticks, or do you buy 2 of whatever is cheapest unless something is extremely mission critical?
    • bdcravens 9y ago
      > do you pay extra for usb sticks Yes. Whatever I may potentially lose (even if it's time walking back to my desk and taking time to fish out the 2nd stick) is more than my cost savings.
• mmccaff 9y ago
  Consider if you will be fulfilled by selling a commodity. It's a race to the bottom and unprofitable users often demand the same level of attention and support as ones who pay more. Also think about hidden costs. The other company might be priced as they are for a reason. Is it a product where differentiating on price is something that would even matter to the user? The difference in price would be enough to choose you over the competition?
• fab1an 9y ago
  The fundamental equation you need to get right in SaaS (esp in a bootstrapped business) is to have a customer lifetime value that's vastly higher than your customer acquisition costs. Lower prices than your competitors mean that you'll also need to be able to get customers at much lower customer acquisition costs. This is A LOT harder than one might think. Worse, and contrary to popular opinion, lower pricing _does not_ necessarily mean lower customer acquisition costs in SaaS! Are you a marketing/growth expert with a proven track record of doing just that? If no, prepare for years of learning a lot of fundamental basics the hard way. If yes, well, do get in touch with me! ;) Another aspect to consider is that, assuming you're looking at B2B, lower pricing doesn't mean that your product will be more attractive to B2B buyers. If anything, you'll often find that the opposite is true.
  • bunderbunder 9y ago
    > lower pricing doesn't mean that your product will be more attractive to B2B buyers. This is true for consumers as well. Most people are familiar with the idea that you get what you pay for. Exceptions are generally things that everyone needs, but not everyone can afford the fancy models. So, cars, phones, food, stuff like that. Very little SaaS is like that.
  • logicallee 9y ago
    It's weird that people performing this analysis, including you, and many VC's, treat customer acquisition costs as though you had to write a check to someone, so determining your customer acquisition costs means looking at the size of that check. That can certainly be true, but don't most successful startups have some kind of viral, or networking, aspect, or get unexpected free press due to being the news itself, or piggybag on goodwill generated in other aspects of their business? Why do people consider that "customer acquisition costs" are some kind of given, or are easy to estimate?
    • sergiosgc 9y ago
      It's not easy to estimate, but it's such a relevant number that you can't ignore it. Engineers often fall into the trap of "make a good product and customers will come". It's a trap. Customer acquisition is a real cost and must be factored in.
• dharmon 9y ago
  While from an engineer's perspective it seems distasteful to do this, from a business perspective it can absolutely make sense. Low-cost leader can certainly be a sustainable competitive advantage. Think GEICO vs. All State. A lot depends on the service you are looking at, but I think it's important that low-cost be part of your marketing. Advertise the fact that people shouldn't be "paying for features they don't need" or support they don't need. If you are clear up front that you are cheap for these reasons (and are not afraid to fire customers, or at least tell the more difficult ones they should be using the more expensive service), you can sustain that lead. Be careful, though. You need to think about why your competitor is able to charge more. An illustrative example is a program called "Final Draft". They make screenwriting software and have been around a long time. Years ago I was curious after hearing the owner discuss how much they sold, how is this company that makes a niche product able to do so much business? How many active screenwriters could there possibly be? The answer, I realized, is that their business is not made from working screenwriters, it's made from aspiring screenwriters. Every wannabe knows that the pros use Final Draft, so if you wanna pretend to be a pro, you're gonna spend the $100 to get Final Draft so you can feel fancy. This is an awesome advantage for them, and it means I would have a hard time writing a clone and selling it for even $10. The actual software doesn't matter! It's the feelings it gives. There are tons of products in the Internet Marketing world that have a similar advantage. If your favorite blogger uses it, you feel like a bigshot so you'll pay up for tons of stuff you don't need as s small-timer. On the other hand, they may just be charging more because they have hired too many people or are being greedy. Up to you to figure this out.
  • bdcravens 9y ago
    > Think GEICO vs. All State. GEICO isn't a startup though. It has been around since 1936.
    • dharmon 9y ago
      > Low-cost leader can certainly be a sustainable competitive advantage. Think GEICO vs. All State. That makes my point even more dramatically, that being the low-cost leader doesn't have to be a race to the bottom if you have some structural advantage. That it can last. Startup or not is irrelevant.
• sonink 9y ago
  I know a friend who did something similar in a 'crowded' SaaS market. He thought it will take him 6 months to make a hundred grands an year - it took him 3 years, but he kept at it. Now it makes a few hundred grands an year to pay for his nomad vacation lifestyle and he has hired help to grow. I think growing an existing SaaS is one of the safest business to build online. The market is already proven and you will find a niche over time even if it is not pricing. The most important thing - dont die.
  • AJ007 9y ago
    I think your answer is the best so far. Making blanket statements about it being a good or bad idea isn't very helpful. The OP made a very generalized questions with almost no detail. Certainly not enough to provide much of any helpful advice. However, ultimately it is going to be dependent on how interested the developer is in making it work and their timeframe. Underestimating how much time and resources even the simplest of projects require is common - and that is if your management skills are really good.
• maxsavin 9y ago
  If this is how you are thinking, then no.
  • dang 9y ago
    Please post civilly and substantively, or not at all.
• lucaspiller 9y ago
  Last year I took over a SaaS from a friend that had rock bottom pricing. It was free and he eventually got fed up of paying the $50/month hosting fees. There are similar services that provide many more features, the only selling point this had is it was free. Since then I've starting charging new customers and it's just about making enough to cover hosting costs. Thats all I planned to achieve, so in my eyes it's a success :D I've also sunk a good few hundred hours of work into it, so I'm nowhere near breaking even but heh. However I now have customers paying me between $1 and $21 per month, and honestly it's not really worth the support headache - it was a lot less work when it was free. I could happily ignore users and forget about it, but it's a whole different level when you start charging people. So can you make a business doing this? Yes, but figure out what you want to achieve from it first. If you plan to quit your day job and earn $X000/month from this, then it's probably not a good idea. If you just want to get some experience running a business and don't value your time, then go ahead.
• spo81rty 9y ago
  Lots of good comments here but wanted to point out a key point nobody else mentioned. Price alone won't let you win, but perhaps it might if you are targeting a different market segment. For my company, our competitors focus on large enterprises. We focus on the small and mid sized companies. Our pricing is lower, our product is simpler too. Focusing on smaller companies also changes our customer acquisition strategy to be different than our competitors. That was the hardest part to figure out too!
• nurettin 9y ago
  You are on the right traco, however, pricing is not the only aspect people consider when choosing a service. Features are the most important assets that you have. Try using their service and listening to their customers in order to get a feel of what is missing.
• mittermayr 9y ago
  Your only main advantage is that you can probably move faster through iterations than the established provider. But also, you've got to do some catching up and then making sure you navigate through the deadly sea of feature-hell. Use the product, understand it, go through forums and talk to users, figure out their pain points. If you find an opportunity, just one niche thing you can help them with, then go all-in on that. It will help get some users interested. They'll say things like, "if you also had X,Z and Y, then we'd be able to switch completely" — and that's where you'll likely crash your boat again when conquering the hell that is the sea of possible features once more. It's doable, but it's a lot harder than it may seem at first.
• shubhamjain 9y ago
  Case in Point: Mailerlite [1]. They started as one of the most affordable email marketing software. Even today, I think their pricing beats every other big name out there. Today, I think they have grown to a decently successful bootstrapped business. I won't say "rock-bottom pricing" is the way to go unless existing solutions are exorbitant but I feel "pricing" is the easiest and safest differentiator. MessageBird doesn't need to create a complex go-to market strategy, they can simply say they are an affordable alternative to Twilio. Amplitude didn't have to pretend that they were better than Mixpanel, only cheaper, especially if you were utilising millions of events. I also asked this question to a VC who suggested that it can definitely work, notably if it's in commodity markets. If I software is specialised I don't think it makes sense to sell it cheap. But if it's a well-established solution that everyone uses than I don't think there it's bad idea. [1]: https://www.mailerlite.com/ https://www.mailerlite.com/
  • FanaHOVA 9y ago
    I think you mean Twilio, not Trello, when talking about MessageBird :)
    • shubhamjain 9y ago
      Ah Thanks. Fixed now. :)
• sparrish 9y ago
  I would discourage it. Having rock-bottom pricing, you'll not be able to afford to market to the same customers as your higher priced competitors and it will take you a very long time to build your customer base. If you have other differentiating factors, that changes the equation but all things being equal, lower price isn't enough.
• 02thoeva 9y ago
  So we launched https://emailoctopus.com https://emailoctopus.com around 3 years ago, it was pitched as 10x cheaper than Mailchimp and that's remained our core proposition. That said, it's very difficult to grow a bootstrapped business when you're not charging much. At the lower end of the market you usually have less committed customers and depending on the SaaS, you may attract less favourable customers. As such we're slowly moving away from pricing being our only unique selling point and beginning to look at differentiating features. Copying features at a lower price is a fine way to start out as a one-man band and gives you sufficient focus to get it out ther door, however, to grow the business I think you'll need to look bigger.
  • dharmon 9y ago
    I thought a lot about entering this space as a low-cost alternative to the unnecessarily expensive choices out there. So if you want some unsolicited advice, here goes. In my opinion, one of your biggest problem in acquiring customers is that the gatekeepers out there, the big name bloggers, have a vested interest in continuing to send their readers to Aweber, ConvertKit, MailChimp, etc. The kickbacks they get are huge. As a specific example, go to smartpassiveincome.com and look at his monthly income numbers, and how much he is getting from ConvertKit (a few years ago it was Aweber). Those affiliate commissions alone are a solid six figure income. The end result is that he has no incentive to push a basic mailing list management solution that satisfies 99% of his readers' needs. Instead he has a great incentive to push the narrative that his readers need this overkill solution for when they launch their million-dollar course in 3 months. (I actually like Pat, or at least his internet personality, so no offense to him, this is just how human nature works) Not to mention the strong pull on the customers' parts to feel like pros by using software the pros use, even though they don't need any of the features or support they are paying for. I never came up with a satisfying solution around this. The best idea I had was to cultivate a brand as a rebel in the space, pushing back against this "evil conspiracy" by passing the cost savings directly to you. P.S., you guys really need double opt-in. I believe it is legally required in many places.
    • 02thoeva 9y ago
      Just checked out the Smart Passive Income post. It's amazing that almost 10% of ConvertKit's revenue has come from this guy. Thanks so much for sharing. Think this also shows how important your product pricing is, particularly if growing by these traditional methods. The affiliate model of giving away a 30-40% recurring cut (as Aweber and CK do) is unsustainable unless your prices factor this in and affiliates will also only work with you if your prices are high enough in the first place to make it worthwhile.
• drchiu 9y ago
  I'd say go for it. Many of us who have learned the lesson of competing on pricing learn to do it differently the second time around. Pricing is one of those things that's hard to understand as not to compete on if you're still new to understanding saas business models. Until you've experienced some sort of success with a low priced saas, it's hard to see why everyone always say to price it more. Sort of like the matrix, nobody can tell you what it is. You have to see and experience it for yourself.
• cerved 9y ago
  Focus on the cost of the problem solved as opposed to the pricing of the solution.
  • throwawayAf7jD 9y ago
    This is a good point, however, from a customer's perspective the cost of the problem solved includes what they're already paying for the service.
• throwawayAf7jD 9y ago
  Throwaway here. I did this with my startup. There were two major players in the industry and I undercut the cheapest one by 35%. Both are hemorrhaging long time customers to my service in droves. Though the key difference is that the product and customer support is vastly superior (as noted by those that have switched). Launching with a lower price point allowed me to win over the price comparison shoppers and thus further refine the product. That helped the business grow organically and get in the same conversation as the long time players. It's now making $25k/m and growing a lot faster than I expected. So to answer your question. Yes you can attract more customers by launching with rock-bottom pricing, but you better make damn sure it's a better overall product. Otherwise you just become the "cheap" option in the customer's minds. It's also important to consider what would happen if one of the competitors reacted by matching your pricing. In my case I tried to estimate their overhead by looking at their office location, number of employees, etc. Then I figured a price that would really put some pressure on their finances should they try to match.
  • no1youknowz 9y ago
    > In my case I tried to estimate their overhead by looking at their office location, number of employees, etc. Then I figured a price that would really put some pressure on their finances should they try to match. I've done that same calculation myself. One of my competitors has well over 300 engineers for a relatively simple Saas. I know why they have done this, one of their other products is a blackhole and the other is pandering to VC requirement in staffing. These types of companies are the best to disrupt.
    • throwawayAf7jD 9y ago
      > well over 300 engineers for a relatively simple Saas This would be a huge red flag to me. As a solo-founder I would assume that I'm overlooking something or incorrectly defining "simple". If it is really simple and they are allocating that many engineers to solve the problem, then they'll eventually figure it out and downsize. Then you're competing with a more experienced and focused company. On the flip side, if you're solving a problem they think is hard, then an acquisition may be in your future.
• throwaway2016a 9y ago
  Yes. But only if... 1. You can still afford marketing. Products do not market themselves. For all you know that super expensive SaaS is spending only 10% of their money to run the tech and the other 90% is marketing. (intentionally going to the extreme other end) 2. You have TALKED TO CUSTOMERS and you know that price is a sticking point for them. - OR - You have another business and the savings on the monthly bill alone would pay for the R&D and running the product. In which case attracting other customers is just icing on the cake. Edit: Also, side recommendation. If all things considered equal the product is the equivalent. Don't sell it for rock bottom. You don't need to. Sell it for 25% (for example) lower than the competition. You don't need to be rock bottom you just need to come out slightly on top when the customer is doing their decision matrix. Not to mention physiologically if it is too cheap people wonder why and they think there must be something wrong with it. Which can get you less sales not more.
• ronreiter 9y ago
  Instead of looking for doing the same thing better and think that would get you customers, I would advise to start from the question "how do I get customers" first, and do that. That's really what you want.
• kumarski 9y ago
  Only works if you're in a country outside the US. Developers in the USA have really high salaries because of the INS moat. If you can crack that equation, then you could do a lot. BrowserStack vs. Others. Sheer number of people you can task to a single problem.
  • throwaway2016a 9y ago
    This is only relevant assuming... - The founder is not themselves a developer. - The founder needs to hire more developers. - The founder can't afford to live on a shoestring budget while building the product (and doesn't have another income stream). This is where developer founders have an advantage. I am US based and I know business and I am a principal level code / architect. I can build and launch a product in a month or less working on it at nights using just sweat equity and besides the time cost, all I need are to pay legal fees ($2000 to register the business, write terms of service, etc), a domain name ($10), and some servers ($100 max if I don't feel like optimizing for cost). In fact I have... my side projects bring in more income to me than most developers make in a year and they cost me < $2000 to launch. No I won't say what they are on a throw away account because it will reveal who I am.
• kapauldo 9y ago
  Yes but build the importer first.
• skdotdan 9y ago
  I would try to find a niche within the market of this competitors, and unbundle the set of features that are relevant for this niche, making the product simpler and slightly cheaper.
• quizme2000 9y ago
  There is an inversion building in small market Saas pricing. Due to Saas consumers being burned by disappearing or deprecated services, a low or rock-bottom price is a red flag. This is especially true for a Saas services that are business oriented. If you can deliver a true clone, why not double, triple, or 10x the price? Most Micro or Small Saas are under-priced anyway. You will not be able to snipe a competitor's customers, unless their service is not working, just by having a lower price. However, if you can clone the service and attract your own customers you should charge more. Revenue will allow you to build out a more valuable/reliable product. A potential customer will assume the service is more valuable and reliable than the product you cloned simply because it's higher cost.
• wand3r 9y ago
  If this is a pure-play quick money motive; then yes. Make something you care enough about to do a good job; compete on value not price. Then have an exit strategy/timeline: e.g. x amount to get to y traction or pull the plug. If you hit y traction then prep for a small sale on Flippa.
• dba7dba 9y ago
  I was reading interview with founder of Ghost blog on indiehackers and he said something about pricing that was new to me. He said when he charged more for his product, quality of customers he got improved. Like less silly requests for help. Less demanding. Etc. Rock bottom price may just attract more rock bottom customers.
• pnw_hazor 9y ago
  Watch out for patents. Funded Saas companies will have patents. Avoid triggering trouble by hiding how your service works and try not to copy the look and feel if possible.
• richardw 9y ago
  One issue with attracting customers who are looking for cheapness is that they're very likely what Patio11 calls "pathological customers". To be avoided at all costs. Read his interview with Ramit Sethi here: http://www.kalzumeus.com/2012/09/21/ramit-sethi-and-patrick-mckenzie-on-why-your-customers-would-be-happier-if-you-charged-more/ http://www.kalzumeus.com/2012/09/21/ramit-sethi-and-patrick-... (Look for "How You’re Collecting Pathological Customers And How To Stop") Having said that, it's an option to attack a market, just be aware of what you're in for. To get reasonable revenue you have to get many more customers. Support loads will be higher. Revenue to support ratio might drive you crazy.
• jfoster 9y ago
  If your thing is an actual viable replacement, why would you charge rock-bottom for it? You would be leaving money on the table.
• DanHulton 9y ago
  Nope. You should clone a popular SaaS product, but focus on a specific niche in the greater market and charge more for it, actually.
• frik 9y ago
  Pricing page? Essential $ - Standard $$ - Enterprise (contact us) or just 14-day-trial and "contact us". What's your stand on that? What makes more sense to launch a SaaS?
• conceptpad 9y ago
  A better idea is to target the design of your SaaS at an underserved segment of the market with deep pockets and charge a premium. Here's your how-to: https://www.amazon.com/What-Customers-Want-Outcome-Driven-Breakthrough/dp/0071408673 https://www.amazon.com/What-Customers-Want-Outcome-Driven-Br...
• maxwin 9y ago
  Please. If you want to clone something, plz clone ERP like SAP S4/Hana . That will be a lot more useful and lucrative.
• rodolphoarruda 9y ago
  The less you pay, the less you care about it.
• ChuckMcM 9y ago
  Historically cloning a product with rock bottom pricing generally bankrupts the cloner, but cloning a product with rock bottom costs can be a winning strategy. One of the more interesting situations that entrepreneurs encounter are competitors who are under pricing them but are doing so at the cost of their own margin. The risk is that you can 'win' (capture the market) only to find the more customers you get the more money you lose to the point where you're forced to raise prices or exit the market. Sometimes that choice is made for you by running out of cash. So the bottom line is this, talking about pricing before you have the business does not make sense. If you can design a SaaS business and accurately cost it out and take a survivable margin and under price most or all offerings in the market, sure go for it. If on the other hand you just have a vague sense that it shouldn't cost as much as it does for this kind of service and so starting to sign up customers at a low price while you build and deploy the service? That is a recipe for disaster every time.
• problems 9y ago
  It's a good bet. Many of those popular SaaS companies are run like absolute shit and don't even try to optimize their pricing. If you can do it at a fraction of the overhead, I'd say go for it as long as you have a way out if it all goes to hell and you have a good idea of the upfront effort level.
• bdcravens 9y ago
  Rock bottom pricing doesn't automatically attract customers; they still have to know about you. What is your marketing budget? If your plan is to just code, and they will come because your price is the cheapest, you will fail. Additionally, I think you'll be amazed at the time it takes to build something, and the cost to run the infrastructure. The first time you lose someone's data, you're sunk. You're not going to put a SaaS app on a $5 droplet, even if you think that's easy. So still the same narrative: you might succeed if you can pour several thousands of dollars into it before you make any money, you may have a chance. If you think all you need is a laptop, coffee, and hope, I'd say you may be in trouble.
• mrspeaker 9y ago
  My semi-related anecdote: I was working in Paris, and we'd frequently go for lunch at a pasta takeout place that was very conveniently located. The food was terrible and overpriced. 10 euro for a small box of pasta with some generic sauce. But there were always long queues of people there, because it was convenient. One day we were walking there, complaining about it how cheap it must be to make such substandard fare. Someone suggested that we should get out of computer programming and start a pasta place: we'd serve the same shitty pasta and pasta sauce, but charge 5 euro instead of 10. We'd make a killing! The boss was walking with us and remarked, boss-ly, "Why would you sell something for 5 euro when people are happily paying 10?" I kicked myself for not even thinking of that.
  • timfrietas 9y ago
    This comment deserves much more attention; positioning matters. If your pasta was twice as good for half the cost people would probably still convince themselves there's something inherently inferior about 5 euro pasta and that it should be avoided. This is why starting upmarket and working down (Apple) works better than starting downmarket and trying to work up.
    • cookiecaper 9y ago
      >This is why starting upmarket and working down (Apple) works better than starting downmarket and trying to work up. I don't think we can go that far. Apple didn't start upmarket, first of all. Their original market was technical consumers. Jobs's obsession with design and beauty in combination with the Mac's decline in favor of more "business-oriented" IBM PCs, which were much uglier, eventually made Apple the de-facto brand of artists and designers, which led to it becoming the brand of those who wanted to showcase their creativity. Apple products became fashion statements that said "I'm creative and unique". That's what really drove Apple into the luxury segment. It seemed to be more accidental than anything else. Second, going after the big fish always sounds nice, but it's hard to do it successfully. Enterprise sales cycles take a long time, months or sometimes years. The features that big customers want are usually giant PITAs that have to integrate with 6 wildly divergent legacy systems. Enterprises want enterprisey support and they consider questions like "How likely is it that this product is going to be around in 5 years?" as part of the sales cycle (and until your company is at least 5 years old, it's hard to answer that). For high-end consumers, in most cases, luxury brands have to be aged and respected before they build up the panache needed to drive acquisition. The brand has to be carefully controlled and messaged. Aggressive marketing can sometimes speed up the aging process. If you're targeting mom-and-pops or normal consumers, there is a much bigger pool of consumers to draw from, and they have much lower barriers to entry. Find a segment to hook, inspire loyalty, serve them well, and then see about moving on to enterprise, hopefully targeting enterprises that your long-term customers work for and can convince to buy MyThing Enterprise Edition. If you're starting with $5M of cash, going after the big fish in the pond may work fine. If you're trying to bootstrap or trying to find a way to survive after some pittance of seed funding runs out, it's usually a different story.
• manigandham 9y ago
  Price is rarely what matters, especially for any serious business. We look at actual value, trust, brand recognition, integrations, quality, longevity, and more, that go beyond a simple price list.
• clairity 9y ago
  i'll say this again: nearly every small business (startup or otherwise) is a marketing problem, not a technology problem. here are just a few things to think about: * how will people learn your product exists? how much should you pay for this discovery per potential customer? * what features must you offer for people to want to pay you? how many of these features can you buy vs build? * how quickly can you get to market, to reduce costs and risk and start learning about the market asap? * what kinds of people would want your service? why would they choose your version rather than an incumbents'? if price is your only differentiator, then how many features do you need to be a true alternative? how much support and availability do you need to keep customers loyal? * how do you create enough trust for potential customers to start to rely on your unknown company/product/service? * how much should you charge? as others have noted, "rock-bottom" is not a great answer. how much value do you generate for your customer, and how much of that do you intend to capture? * is SaaS the right revenue model for the type of product/service you're building and the customers you're targeting? * how will you measure satisfaction and engagement, and generate further value to retain customers? if you're eager to tackle these kinds of questions, go for it! if not, you probably don't want to start a business, because such questions (rather than the tech) will occupy a large part of your day-to-day. this is why yc's startup school essentially offers a mini-MBA curriculum, rather than a tech-focused one (these questions are also covered in the core marketing class of an MBA program).
• hluska 9y ago
  The problem with competing on cost is that you end up winning those customers who are most concerned with cost. Consequently, if another competitor that is cheaper than you enters the market, or if an existing competitors changes its pricing, you will end up losing all the customers you just spent $$$ acquiring. What about building a near clone that is perfectly suited for a use case that isn't particularly well met by the other product?
• throwawaySaaS 9y ago
  I run a product team in a relatively mature SaaS business in the infrastructure space. As you probably know, infra is pretty crowded so there's no shortage of competitors. While we had a unique take at slicing out a niche vertical, I wouldn't say what we were doing was entirely novel when we were getting started. So, it's definitely possible to get into an area where there is already product validation. As for competing on price. You'll quickly discover that if price is the only criteria which you win a deal that these tend to be your worst customers. They use the most of your resources, are least considerate when you screw up (and you will screw up) and don't expand sales necessarily well. When they realize that they can do something cheaper, they will be the first people out the door. That doesn't mean that customers aren't and shouldn't be price conscious. But, you really want to be winning sales based on perceived value, quality and strategic alignment. Your customers should place their loyalty in you by which you build new features in which they pay you more for. By doing so you inherently reduce churn, increase add-on sales, and turn your customers into your greatest marketing asset.
• deftturtle 9y ago
  Ultimately you will win on the relationship with people. Building trust, delivering service, being friendly, treating them as people and not customers, and doing your best is the right mindset. You can and perhaps should be more expensive in some industries, because you offer better relationships and service.
• yason 9y ago
  Rock-bottom pricing brings rock-bottom customers. Yet still they will complain that is costs too much. If you paid the rock-bottom customers to use your SaaS, they would complain you pay them too little.
• irishgeoff 9y ago
  Well quite a few people make money off the Digital Ocean referral program only if your webpage gets a lot of traffic. https://m.do.co/c/74f0841722e2 https://m.do.co/c/74f0841722e2
• z3t4 9y ago
  when competing in price make sure their product can be replaced by your product without friction. and thay your product is always an option.
• stretchwithme 9y ago
  Read Zero To One.
• dharness 9y ago
  I think that this is a great exercise - especially if you are in it to dabble. Making a SaaS app requires a lot of creative effort in design, scope, pricing, etc. By copying something that exists you can greatly reduce the cost of design by copying layouts and UX decisions, and focus on learning and coding. In terms of making money, possibly, a little, but I wouldn't count on it for any substantial income and if you made zero dollars I would not be shocked. It is very difficult to say without knowing the product specifically. I am certain some markets are just begging for a rock bottom pricing clone.
• faragon 9y ago
  Of course: do it.
• Beltiras 9y ago
  Features over pricing to shake up incumbency.
• argimenes 9y ago
  If you have the technical skill - if you can walk the walk, not just talk the talk - then why not?
• rvivek 9y ago
  Also, remember it will get harder for you & attract a strong team around you if the only mission is to create a cheaper clone. Startups are very tiring over the long run that a strong mission + team is likely the only thing that is going to push you forward.
• tlogan 9y ago
  There is one important piece here. If you can offer something for free that "original" requires payment then that approach might work very well - at least as customer acquisition strategy. That is reason why Trello and Slack are pretty much free. As far as I remember, Gmail did the same: they offered 1GB of free email. That was so much better then my Yahoo which asked me for 9.90 a month for 250MB. So I switched. But then when you ask users to pay (to upgrade) then 1.99 vs 9.99 vs 19.99 really does not make a lot of difference. And do not be fooled by "features matters", "support matters", etc. The customer acquisition is the most important part of any (small) business (including SaaS).
• drc37 9y ago
  A great book to read to read is the Innovator's Dilemma. It talks about a different industry (steel), but I think it could be applicable.
• pbreit 9y ago
  I wouldn't go rock bottom because that signals to prospects that your product is lousy. I would price it below average so that price is not an objection but have at least 1 strong differentiator.
• patio11 9y ago
  Name, without looking, the cheapest alternative to Github, or Basecamp, or Trello. Do you use any of them? No, you don't. Because you do not make decisions primarily based on price. You may think customers, in aggregate, primarily make decisions based on price. You'd be wrong. You're going up against a lot of empirical economics research conducted by, among others, SaaS companies, where they hire someone to tell them to double the prices and that results in 2X the revenue plus or minus 10%. Preview of coming attractions for running a SaaS company: at virtually every company, churn rates go up as prices go down, because low prices attract tire kickers, pathological customers, and folks who are loyal only to the thrill of finding a deal. You might think that customers paying $10 are worth 10% of customers paying $100, but it's actually closer to 2~3% once you factor in the elevated churn rates. Do a SaaS! (Though dabbling in SaaS is, perhaps, hard. Maybe dabble in writing a book about the problem your SaaS would solve. If you can't dabble your way to a book dabbling your way to a SaaS app is harder in every way.) Charge more than you think is reasonable for it. Then, double your prices.
  • deleted 9y ago
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  • cmadan 9y ago
    I use Bitbucket instead of Github because it is way, way cheaper than Github even though its pretty much a clone.
    • cyberferret 9y ago
      +1 I use BitBucket instead of GitHub purely because: Private repositories for $0.
      • lllllll 9y ago
        Idem Gitlab
  • golergka 9y ago
    I'm using gitlab exactly because it's cheaper (free private repos).
• kbos87 9y ago
  Two main problems with competing on price that I've experienced - #1 - As others have mentioned, competing on price will mean that you attract users for whom price is the most important thing. These users are often more fickle, retain at significantly poorer rates, and in my experience, they (counterintuitively) consume more support resources. They also have a substantially lower NPS, which also shines through when they write reviews. Those are some big negatives. #2 - Pricing your product substantially lower than the pack means that you'll have a very hard time competing with other players in many paid acquisition channels, if you ever intend to. There are plenty of other ways to find customers, but you'll have to rely on channels & audiences with lower intent (as in, people who aren't directly seeking out and already motivated to find what you are selling.) There are ways to succeed with low cost and free products, but it's a winding path that is far from as obvious as it may seem.
• cyberferret 9y ago
  A few people might say that it worked for Borland back in the '80s when they released Turbo Pascal. Most compilers back then were in the vicinity of $1000+, and were complex beasts. The comes along Borland with a compiler that fitted on a single floppy disk for $69, and it could compile code in the order of 100x faster than the nearest competitor. The rest is history. But I think that the point people miss was that as well as being less than 1/10th of the price of incumbents, Turbo Pascal ALSO promised a hundred fold increase in performance. If they had brought out a bloated C compiler on a 19 disk installation pack that ran in the same time as the Microsoft C compiler that came on 20 disks, I don't think it would have been game on. Plus, Borland also swamped all the popular magazines with brash, full page ads that were the antithesis of the staid developer tool ads of the day. As others have pointed out - there are many more things than price which are important.
  • manquer 9y ago
    There should more to this story.. If their product was that much better (it clearly was) there is no logical reason to not also price it 1000$ and it would have still sold almost the same. considering the 100x speed increase it probably have sold at 2000$ almost the same as a premium compiler. Something else made Borland sell it that cheap, either competition was going to release the same boost or they were reaching a new larger segment entirely , i don't think it was about just being lower cost with extra features
    • cyberferret 9y ago
      > there is no logical reason to not also price it 1000$ and it would have still sold almost the same Maybe not. In my case, I was just out of school in the 80's and would never be able to have afforded a $1000+ compiler. When Turbo Pascal came out at that price point, I jumped on it. It was my chance to do some 'real' programming at a budget friendly price. Even IBM's Macro Assembler at that time was several hundred dollars. I would credit Borland and providing the launchpad for thousands and thousands of students, hobbyists and amateur enthusiasts to start their programming careers, who never would have otherwise. My first program I sold for $$$ was written in Turbo Pascal.
• cyberferret 9y ago
  Anecdotal Story: Back in the 90's a colleague of mine had a small company here in Australia that developed a financial forecasting model for larger organisations. They were doing OK, but needed a huge client to really get them on the map. Then, one day, they received a phone call from one of the 'Big 4' banks in Oz to pitch their software solution to them with a view to the bank taking it on nationwide. This was the 'big one' they were after. They made their pitch which went well, and my colleague was asked for their licence price, which they up front said was calculated at $50,000 for each state. The bank thanked them, and they left the pitch meeting, but they never heard back. Months later, my colleague approached the procurement manager who was at the meeting and asked why they didn't get the contract, as they had discounted their licence costs significantly in order to try and get the business - was it still too expensive? The manager told him: "Actually, we LOVED your solution, which was perfect, BUT we had budgeted $1Million dollars per state for the final software solution. When you said $50K per state, most of our committee members thought that was too cheap, and they had reservations that you would be around for the long haul to support the software, so we voted against you..."
  • nudpiedo 9y ago
    this is a very good point, especially because the size of the customer matters a lot and often the big ones perceive your value mostly in the price.
• thefahim 9y ago
  Yes, this makes sense and is a great way to get started. Once you get your foot in the door, you can start introducing features to differentiate yourself and increase your price. Focus on marketing to price-sensitive customers and keeping them happy month over month.
• smilesnd 9y ago
  You need to do a ton of research to make this call. When you look at starting a business even if it is copying and pasting someone else you need to make sure their are certain elements in place for yours to also be successful. Is the market big enough to support multiple players? If it has a market size of 1 billion dollars then all you need to do is to get roughly 1% to be successful. If the market size is only 1 million dollars then you might be fighting over a small amount of money, and their isn't enough space for any one to grow into a successful business. Does that other SaaS have one large client that make it possible to stay a float? I have seen a ton of small companies exist just because they have one giant fish making it worth it. I also seen companies crumble because that giant fish decide to leave. If that is the case you might not be able to copy the success the other SaaS has. Is the SaaS your trying to copy already running at rock-bottom pricing? You might be surprise how much certain things actually cost. Whatever you think it might actually cost to run a copy cat service it is a safe bet to double that amount. Copying someone else idea might give you short cuts, but you don't know everything they learn along the way to get where they are now. Could you make a better product then the current SaaS? The only way you are going to attract customers to your product is to do it better. Like some of the other comments say having the lowest price also means having some of the worse customers. Their have been post here before about SaaS companies raising their price till the customers that complain the most finally left. If you are at the rock bottom then be prepare for the bottom feeders. Pricing is a tricky subject that is less logical and more human nature. A human will typically pay more if he feels like he is getting more value peer penny. A human will over spend if it fulfills some strange idea, as making him look important, makes him feel good about him self, or because it easies his mind knowing it is properly done. Here some links about increasing the cost actually benefited them. http://kevinhoctor.blogspot.com/2013/03/the-future-of-software-pricing.html http://kevinhoctor.blogspot.com/2013/03/the-future-of-softwa... http://www.startupproject.org/2011/06/price/ http://www.startupproject.org/2011/06/price/ https://theadaptivemarketer.com/2012/01/14/a-pricing-lesson-from-the-concorde/ https://theadaptivemarketer.com/2012/01/14/a-pricing-lesson-... http://jacquesmattheij.com/Double+your+price+(and+no+Im+not+kidding) http://jacquesmattheij.com/Double+your+price+(and+no+Im+not+... My advise build a better product or add more functionality, price it higher then the current SaaS, and make sure you listen to people but never let them control your hand. Best of luck
• fuhrysteve 9y ago
  Price is not a competitive differentiator. Didn't have to go to business school to learn that one!
• ishwarjha 9y ago
  Whether you are making clone of a popular SaaS or building a brand new product, just looking at pricing alone won't help you go anywhere. To make it a success, you need to make 1) Interesting to sell - product, features, usability, experience, and availablity are the enablers for making it interesting. 2) Interested to buy- you'll need to generate leads, engage with customers, build trust, and develop relationship to find the customer to buy/try-out your product. 3) Interested to Pay: your strategy and actions for converting the customer to a paying one. And this involves a whole lot of thing. Not just pricing, positioning, cloning or copying.
• theprop 9y ago
  The fundamental problem you have with this plan is that at rock bottom pricing you're not going to earn enough money to pay for customer acquisition. SaaS companies generally need to spend a lot of money to acquire customers. That said, there are some relatively big, fragmented markets for SaaS like email marketing in which there are at least 15+ companies with at least $10 mn /year in revenues, but most of them are not rock-bottom pricing.
• ravivyas 9y ago
  Based on my attempt to build a SAAS analytics product and failing, here are my inputs. - Lower pricing may sound like an entry point. But what ever will allow you to build a competing product, will allows others to compete with you. While we were building our Analytics product, we believed using Google BigQuery and other managed services, we could offer a cheaper analytics product, we would pass all the savings of a managed service to the customer. But then Google release FireBase analytics and made Data studio free, AWS released Pinpoint. While currently they might not have the traction of others, they will gain and pretty much make other's current business models un-viable - There is no right answers as to why a company will move from one provider to another. I was always under the impression that "better customer service" will get people to move and more importantly stay. But the real fact is, if you have competition, there are going to be multiple reasons. The tendency of "hackers" to find the single "silver bullet" is harmful, in most cases the whole is more than the sum of its parts. - Most folks who build a startup, don't event thing of branding. Having a known brand is very important in a world where the users almost always self select into SAAS products. I had written a little about it here: https://medium.com/@Ravivyas/abundance-sales-startups-99b42ec7fafe https://medium.com/@Ravivyas/abundance-sales-startups-99b42e... - In most cases basing your startup on a single assumption or theory is a risky prospect. Just being cheaper is not enough, you need to have feature parity, comparable support and a brand. - Most important point, you need to make money, for that you need to chase people willing to spend money, who are not looking to cut corners. Such customers won't stay long. As an extension, having 1-2 big clients on a customer page is more comforting for a prospect rather than seeing 10-20 who they can't relate too.
• homero 9y ago
  Yes competition and alternatives are critical
• twic 9y ago
  Yes, and please clone hosted ELK, or some other log handling stack. The current options are crazy expensive.
• petraeus 9y ago
  The main problem with clones is this .. they are clones and no original innovations will ever arise out of said clone. The original product was not successful because it was the lowest cost but because it was innovate.
• StevenForth 9y ago
  What you are talking about is a penetration pricing strategy. These generally fail. They are a good idea if (i) there are real first mover advantages or (ii) there is a steep learning curve or (iii) there are strong internal network effects. Preferably you have two of these. This is not true of most enterprise solutions. Generally, companies that adopt penetration pricing strategies do not generate enough cashflow for sustained innovation and are displaced by the services that invest in such innovation. Or, the service becomes completely commoditized and is often taken over by some form of open source option.