No one ever went broke selling at a profit. If you let this smaller competitor win he now has a bona fide win against you he can cite the next time you run up against him. If X, Y, and Z are close they will also be influenced by the win. The government buys on price, something to bear in mind if you want to continue to play in that market.
Ask YC: Competitor flying under us...
21–30 of 36 posts
Re: Ask YC: Competitor flying under us...
#22A 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 matche…
Not enough data to determine if it's a tactical problem or a strategic problem. It would be interesting to hear the "tiny startup competitor's" perspective. They sound a lot like the early cisco. If the poster can't find a feature/benefit that segments the market away from this low cost provider so that his feature set no longer qualifies, it's not clear what stops them from taking this win and continuing to prosper at his expense.
Re: Ask YC: Competitor flying under us...
#23Drop the price sensitive people. Those guys suck up your time and make the entire business no longer fun. The guys with money are always there for follow ups, upgrades and so on.
Re: Ask YC: Competitor flying under us...
#24Here is what I would do. I would take the contract at a lower price and ensure that the other guy is history. This is good because
1. It breaks the competition's back. And leaves no room for him to claim territory in the future.
2. With the one man competitor dead you can start increasing prices, clearly in your market there is room for higher pricing. And spend your energy on tackling the rolls-royce and whatever other car you got going there..
Re: Ask YC: Competitor flying under us...
#25You'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…
Some clarification on what this product does...
* It requires a physical component beyond desktop computers, one that requires ongoing support and maintenance and precision installation. This isn't like a sales order system or something like that, it might more be called a public works project.
* It is a service-based ASP model
* Bear in mind that the usual pricetag for organizations of medium to large size is $2M to $30M and we are doing these deals in the $100-200k range so we very much are operating on razor thin margins
Re: Ask YC: Competitor flying under us...
#26You'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…
Some clarification on what this product does... * It requires a physical component beyond desktop computers, one that requires ongoing support and maintenance and precision installation. This isn't like a sales order system or something like that, it might more be called a public works project. * It is a service-based ASP model * Bear in mind that the usual pricetag for organizations of medium to large size is $2M to…
So your smaller competitor is doing to you what you are doing to your more established competitors. Do you think your major competitors initially discounted your ability to prosper? Also from the perspective of your prospects, given that the next nearest major competitor is 20X your price there may not be enough of a difference between you and your lower priced competitor. Why not be just be 1/2 price of your nearest major competitor instead of 5%? Do you have to discount so strongly? Will you significantly enlarge the number of buyers with your price point or just shrink the total spend in the market? You may be being excluded from many more deals because your price is not credible (e.g. are you trying to sell a $10 car, people wonder what's missing or wrong with it).
Re: Ask YC: Competitor flying under us...
#27Earlier quoted context omitted.
Some clarification on what this product does... * It requires a physical component beyond desktop computers, one that requires ongoing support and maintenance and precision installation. This isn't like a sales order system or something like that, it might more be called a public works project. * It is a service-based ASP model * Bear in mind that the usual pricetag for organizations of medium to large size is $2M to…
So your smaller competitor is doing to you what you are doing to your more established competitors. Do you think your major competitors initially discounted your ability to prosper? Also from the perspective of your prospects, given that the next nearest major competitor is 20X your price there may not be enough of a difference between you and your lower priced competitor. Why not be just be 1/2 price of your nearest…
There are two types of government entities: let's call them "private" and "pseudo private"....then there is a third type that is very public, very well funded, and very demanding. The first two markets were grossly underserved because they couldn't dream of affording the product for the third. A few startups have sprung up in this area, and that's where we got our start. Only the two rolls royces have any substantial market share in the big public market, and we're going to be the first company of the little guys poised to make the jump into the big one. We're trying to figure out how we're going to multiply our price by 20x, and it is probably going to mean we fork the product development into two separate lines for the smaller ones and the bigger ones even though the cost structure is more or less the same. The big big guys have been enjoying OBSCENE margins (think 5000%) in the big market for a long time due to the barrier to entry of "establishment" there.
Re: Ask YC: Competitor flying under us...
#28Sell this customer a crippled version of your software. Just make it slightly better than your competitor. This 1) Provides a clear future sale when this customer wants to upgrade, and 2) Allows you to sell at your standard rate to X, Y, and Z.
Re: Ask YC: Competitor flying under us...
#29You'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.
"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"
That's only possible if there has been a paradigm shift that the original poster has not identified. He's stated a few times that his company is operating on thin margins. I'm gonna give him the benefit of the doubt and assume he's running an efficient shop.
I don't believe that leaves room for a "low cost" competitor at the bottom. And, unless it's a commodity, it wouldn't matter anyway. People who do these kinds of acquisitions make a check list...the product that checks off the most items on the list, and brings in a reasonable bid vs. all of the other bidders, gets the contract. It's not like consumer markets.
I still suspect the OP is charging too little, if his product is good, because being the low cost provider in just about any market is not a good place to be. Margins are thin, customer satisfaction is low (think eMachines and Packard Bell vs. Apple and ThinkPad) and you can't make enough to push forward on the projects that'll help you grow and provide better services.
Re: Ask YC: Competitor flying under us...
#30OK 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…
Another thing you can do in both this situation and for your company in general is plan on raising your prices.
You've said that you are operating on razor thin margins. Raise your price and possibly get the attention of the clients of the higher-level competitors.
It's also a kick in the rear to your current potential client that "you are worth it," showing them that this is a good deal for them and that what you're offering is clearly a steal at the present time.
Whatever you do though, don't "threaten" to raise prices on them if they don't call in the next 10 minutes. Just let them know, "We're planning on raising our prices about 15% (made up) next year (quarter, month, whatever), but if you decide the other guy isn't what you need we'd be happy to work something out for you. Just let us know soon."
Goodluck!