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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

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.
  - no1youknowz 9y ago
    That sort of thinking is what got a newly competitor a nice chunk of the market. I'll say it again, one of THEIR OTHER PRODUCTS IS A BLACK HOLE. So what I'm trying to say is, their primary product is a relatively easy SaaS to make. They made a huge mistake in building a secondary product in their offering and thus requires the 300 engineers. Domain knowledge is something else that I and the other newly competitor has. HN developers who think they can build applications in a weekend completely omit this point. Domain knowledge is what makes something easy, compared to someone who doesn't have it and then thinks it's hard. Out of those 300 developers, how many in total have the domain knowledge. Not many I am betting. > Then you're competing with a more experienced and focused company. Yahoo was experienced and look how that turned out. Same goes for Bing. Never discount domain knowledge.
    - lazugod 9y ago
      It's not obvious what you mean by "black hole".
      - CodeWriter23 9y ago
        I think the candy coated term used in this community is "pre-revenue". Multiply that by $35-45m per year in Engineer salaries and you have a giant black hole. For money.
      - no1youknowz 9y ago
        Black hole in terms of money. As a company, you throw resources (money) at solving a particular problem. You are hoping that as a company, you can accrue enough customers to cover that spend. Should another company come in and then disrupt your efforts, you have two choices. Either hire more engineers and develop more features, thus incurring more costs. Or you lower your pricing and hope your competitor is bleeding faster than you are. As a company with a black hole, if another competitor isn't bleeding and pushing out more features and gaining your customers. You'll then do something drastic like buy another company. This is what actually happened in that space. The only problem, is that it shows your competitors you have no ideas left. The company is effectively a zombie. It will collapse, it's a only matter of time.
shubhamjain 9y ago
How did you market your product? Did you target existing customers of your competitor?
- throwawayAf7jD 9y ago
  Primarily organic SEO. I did SEO/PPC consulting from 2006 to 2014 so I used that knowledge to help climb to the top. I won't lie, I engaged in some semi-risky grey hat techniques like buying links (only contextually relevant ones. Never spam). The competition was (and still is) just really bad at SEO.

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.
- no1youknowz 9y ago
  That sort of thinking is what got a newly competitor a nice chunk of the market. I'll say it again, one of THEIR OTHER PRODUCTS IS A BLACK HOLE. So what I'm trying to say is, their primary product is a relatively easy SaaS to make. They made a huge mistake in building a secondary product in their offering and thus requires the 300 engineers. Domain knowledge is something else that I and the other newly competitor has. HN developers who think they can build applications in a weekend completely omit this point. Domain knowledge is what makes something easy, compared to someone who doesn't have it and then thinks it's hard. Out of those 300 developers, how many in total have the domain knowledge. Not many I am betting. > Then you're competing with a more experienced and focused company. Yahoo was experienced and look how that turned out. Same goes for Bing. Never discount domain knowledge.
  - lazugod 9y ago
    It's not obvious what you mean by "black hole".
    - CodeWriter23 9y ago
      I think the candy coated term used in this community is "pre-revenue". Multiply that by $35-45m per year in Engineer salaries and you have a giant black hole. For money.
    - no1youknowz 9y ago
      Black hole in terms of money. As a company, you throw resources (money) at solving a particular problem. You are hoping that as a company, you can accrue enough customers to cover that spend. Should another company come in and then disrupt your efforts, you have two choices. Either hire more engineers and develop more features, thus incurring more costs. Or you lower your pricing and hope your competitor is bleeding faster than you are. As a company with a black hole, if another competitor isn't bleeding and pushing out more features and gaining your customers. You'll then do something drastic like buy another company. This is what actually happened in that space. The only problem, is that it shows your competitors you have no ideas left. The company is effectively a zombie. It will collapse, it's a only matter of time.

shubhamjain 9y ago

How did you market your product? Did you target existing customers of your competitor?

throwawayAf7jD 9y ago
Primarily organic SEO. I did SEO/PPC consulting from 2006 to 2014 so I used that knowledge to help climb to the top. I won't lie, I engaged in some semi-risky grey hat techniques like buying links (only contextually relevant ones. Never spam). The competition was (and still is) just really bad at SEO.