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Ask YC: Competitor flying under us...

news.ycombinator.com

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Re: Ask YC: Competitor flying under us...

#11

Post by theyoungceo »

OK guys. I have to admit that I was planning on meeting the price and driving down to the customer site this morning to hand deliver it, but upon reconsideration with several advisors including the great ones here, I'm not going to do it. We do have the best product in the market at a very fair price by all measures, and our success shows that. The client in question has already admitted that he knows the funding people are making a mistake and they are probably going to eat it, so I'm going to emphasize the differences and let them stew in their own decision. We are all but guaranteed to win in three other sister entities to this one, and if we have to let one go to hold our line then that's life.

I owe you all some karma lollipops, they will arrive overnight tomorrow.

Re: Ask YC: Competitor flying under us...

#12

Post by trevelyan »

wehriam wrote: post #6

Perhaps you could lower the initial price, raise the support contact cost, and add a sunset clause. This may appeal to those in charge of funding (who you mention are absent anyway) by shifting dollars around. More diligent clients would see this is not necessarily an attractive alternative and opt for your more traditional pricing model.

If the product and price are reasonable, he should stick to his original pricing. People who need the service will come around as long as it is not terribly expensive, and you avoid perception problems if you change your price wildly.

The reason to be concerned about the competitor offering a cheaper product is if: (1) it will turn into a better product, or (2) it works differently enough to make your business model or product obsolete. Unless either of those conditions are met, this guy should focus on growing his own business rather than trying to crush someone else.

Re: Ask YC: Competitor flying under us...

#13

Post by petercooper »

Be honest with this potential client. Don't act or sound bitter or jealous at all. Totally accept their decision but just point out that if they need you at all in the future, you're just at the end of the phone.

If your competitor is as inferior as you say, those agencies might come back to you for advice on how to "fix" the problem caused by the competitor. Then you can charge more and still look helpful.

This happens a lot in other industries and I have personally benefited from it myself. You get to look good, charge more, and providing service to a customer that was previously shafted is easier than one demanding perfection from day one.

Re: Ask YC: Competitor flying under us...

#14

Post by iamelgringo »

You'll never win with a price buyer. You can cotton to his needs, but they won't stop until the price is free.

It sounds like you are selling to enterprise and/or government. The normal rules about being the low cost provider don't apply like they would in the consumer market. Joe Spolsky has some interesting tidbits on that one. Every time they increased Fogbuz's, their sales went up as well. There's an aura of price==quality in enterprise software. Instead of offering a product with less features for a cut-rate price, introduce a deluxe version with a couple extra features and double the price. You might be surprised.

Re: Ask YC: Competitor flying under us...

#15

Post by m0nty »

theyoungceo wrote: post #11

OK guys. I have to admit that I was planning on meeting the price and driving down to the customer site this morning to hand deliver it, but upon reconsideration with several advisors including the great ones here, I'm not going to do it. We do have the best product in the market at a very fair price by all measures, and our success shows that. The client in question has already admitted that he knows the funding peo…

Just make sure you walk away graciously and make it clear you'll still be there when you're needed. Keep sending them your newsletter or other promo material with details of your latest features, case studies of other satisfied customers, testimonials, etc. If these people are digging a hole for themselves, make sure you're the guy who has the rope ready when it starts filling with water ;) These guys could end up being one of your most loyal customers ever, if you save their asses later. Good luck.

Re: Ask YC: Competitor flying under us...

#16

Post by dcminter »

I have no advice, but this worries me:

"The product [...], has zero features other than what we consider the one, basic, bare minimum feature of the product space."

That sounds like a well targeted product to me, however you feel about it. Could you produce an economy version of your existing application that only had that feature? Then you would be in a good position to upsell later on. Even if the time scales make it impractical for this bid, it might be useful if you come up against this guy again later.

Re: Ask YC: Competitor flying under us...

#17

Post by josefresco »

"I can meet their price with little margin, and it's not a big deal, we'll still make money on the up-front but we'll make a lot less than usual on ongoing (not a problem)"

Industries with a high enough profit margin that they can still make good money even with discounting heavily are doomed for extinction, and replacement by someone smaller, younger and hungrier. Good luck and enjoy your success while it lasts.

Re: Ask YC: Competitor flying under us...

#18

Post by josefresco »

SwellJoe wrote: post #8

You're reading way too much into one piece of advice. The whole "eating from the bottom" thing is a time honored tradition in the computer industry. IBM mainframes were eaten from the bottom by Digital systems, which were eaten from the bottom by Data General mini-computers, which were eaten from the bottom by PCs, which will be eaten from the bottom by mobile devices. But, your problem is not a paradigm shift that a…

OR, the smaller competitor will deliver a much smaller and simpler product for less money and build a solid reputation as a high value low cost provider who's not over pricing their software just because they're working for the "government" which is known to have deep pockets and understand little about what they're buying.

Re: Ask YC: Competitor flying under us...

#19

Post by TrevorJ »

dcminter wrote: post #16

I have no advice, but this worries me: "The product [...], has zero features other than what we consider the one, basic, bare minimum feature of the product space." That sounds like a well targeted product to me, however you feel about it. Could you produce an economy version of your existing application that only had that feature? Then you would be in a good position to upsell later on. Even if the time scales make…

depends on how you define features. For instance if you say that a firewall has a single feature of keeping your network safe then maybe not, but in reality, there are lots of sub-features involved in that that may not be irreducibly complex.

Re: Ask YC: Competitor flying under us...

#20

Post by fdschoeneman »

A couple of short pieces of advice. This is a tactical sales problem, not one of strategy or positioning. It sounds like your strategy is just fine. Do your best to at least slow down his decision cycle (keep him from making a bad decision for his organization) which prevents your low-flying competitor from early success. You can do this by offering a very limited version of your product for him to review that matches your competitors features, or ask to delay the decision until you've had a chance to show your product to other stakeholders. There's some chance the buyer is simply using the other company as a negotiation tool to get your price down.

In which case, ignore it. Find the customers who see their problem clearly, and why your specific solution takes care of their needs better than anything else, an concentrate your efforts on them.

Also, if you haven't read SPIN Selling by Neil Rackham, consider doing so when you get some time.

Good luck!

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