
Ask HN: Pricing strategies in a small niche market - nicheqs
I&#x27;m considering spending some free time making what is essentially an event planner for a sport&#x2F;hobby I&#x27;m passionate about. There are two other SaaS competitors, and I believe both are clunky and antiquated. Both products are run by individuals and each are around the same age (50-60yrs). I also believe this is the primary source of income for both of them.<p>Competitor A:<p>* I consider the better product of the two. It&#x27;s simpler and clean. It&#x27;s typically the choice of premier events.
* Platform based on Cold Fusion. The software is mostly unchanged since 2006. 
* His pricing model is a simple $10&#x2F;entry. Last year he did ~300 events with 13000 entries = ~$130,000 in revenue unless he gave discounts anywhere. 
* He&#x27;s a nice guy who&#x27;s well-liked in the community. His reputation for service is great.<p>Competitor B:<p>* The more &quot;feature-full&quot; product, but it&#x27;s confusing to use, poorly organized, and buggy. 
* Platform is PHP with a lot of c&#x2F;p JS. I believe he uses contractors to build the product unlike the guy behind A. 
* Pricing model is a percentage fee on entry fees (which can vary depending on the event). He also runs ads. I believe this product is considered less expensive for smaller events. 
* Last year he did ~800 events. I&#x27;m not sure how many entries yet. There&#x27;s no easy way to guess his revenue.<p>I&#x27;ll be able to beat them easily on quality of product, but I&#x27;m not sure how to price myself, what model to use, and how I&#x27;ll overcome the personal connections they have with event managers.<p>Should I pull a Google Apps and go free until they give up? Should I price higher as the &quot;premium&quot; option? Should I try somehow to do subscription?<p>Any advice would be very appreciated!
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leesalminen
My nich market sounds very similar to yours. I entered a market with 2 older
competitors who were stagnating.

We talked to a ridiculous number of people about what would make a better
product. We then built that.

We charge ~40% more than our competition and have had remarkably few
complaints about pricing.

My email is in my profile - reach out if you have questions!

~~~
nicheqs
Thanks for the inspiring answer. How have those competitors reacted?

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leesalminen
Our biggest/largest competitor is not happy :P. We've met with them a few
times at trade shows now. They're decent people, but the founder (lead dev)
told me point blank that he _will not_ write JS. We scared them enough to do a
"rewrite". It took them nearly a year and consisted of installing Bootstrap
and applying CSS classes. Oh, and copying a few (read: all) of my awesome (but
super simple) features. They're yet to copy my difficult to build features.

We're still switching people over from them every day of the week and not one
of their customers has ever complained about the 40% increase in price.

The only other company I would consider competition has done nothing to their
product, message or marketing since we entered the market.

There's a new competitor entering the market- but their product is far too
simple. It's cute actually; reminds me of my concept for the product before
talking to thousands of potential customers.

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ddingus
I want to second leesalminen.

Do the analysis and figure out where there is a lot of value to add, then ask
for that value in your pricing.

To be frank, say you make a "me too" product. Not that I'm implying that is
your intent. I'm not.

You could roll it out, cut the better product pricing by some amount, promote,
and score some revenue. The expectations on this may well result in a race to
the bottom, though it could also fund you making some real improvements too.
However, your better competitor will likely respond and you've got an arms
race where your first move would be just to cut cost.

IMHO, adding more value is a harder sell, but when you are successful, you
have a lot of room to move, and this is very likely to fund keeping the
momentum up. Start out ahead, and the other guy is playing catch up, with
market expectations moving up on price / value, not down.

You might also, while talking to those people about what would make for a
better product, find out what "better" means to them, and price on some
fraction of that value added.

Things are worth what people will pay for them, and a high value perception
often means more dollars. Further, setting that expectation means generally
higher margins and maybe you don't have a corner on the market. That's fine.
You will be earning your keep very comfortably.

Look at Apple and it's smartphone profit / market share, and then Samsung and
it's profit / market share.

IMHO, doing the work to establish a clear, high value proposition early on has
many advantages over a more streamlined, "hey we are cheaper" approach.

In this case, given the better product is backed by someone well liked and who
gives great service means the market is very likely open to the high value per
dollar proposition, and a discount or maybe just aggressive price to gain
entry might not be seen as a favorable thing. Or, you may find this "A" person
has those connections somehow, or has found some of the market will pay more,
or is more profitable. The "B" competitor may do more deals, but might just
not make anywhere near the revenue.

Find this out.

Given the connections in play, a high value / dollar play is likely going to
require some real sales effort, and the numbers you put out here are doable by
an aggressive person, and that's all fine. Get the value add done, and it will
be something to sell.

Finally, it's awful hard to bring pricing up. It's a lot easier to either
bring it down, or bundle more to maintain value / dollar in the eyes of the
users.

Start aggressive and high value. You can always take a different path should
you find it's just not going to make sense. This also leaves the door open for
tiers. Adding higher price tiers to what is seen as a lower price offering has
different dynamics than adding lower price tiers to a high value / price
offering does.

Your discussions on "what is worth what?" with the market should help you
understand which of those dynamics makes more sense.

~~~
nicheqs
Thank you for a fantastic answer - this is incredibly helpful!

Because of the nature of this small market, it's unlikely my research would go
unnoticed by either competitors. Should I care? Is there advantage to asking
customers what "better" means discreetly or can/should I do this publicly?

~~~
ddingus
That is a hard call. A small niche magnifies this kind of thing.

Do you think your target competitor is fat 'n happy? Will they move quickly?

I prefer discrete to start myself. I prefer it just because it's unwise to set
expectations and make commits without knowing what the potential outcomes of
both of those are. Nice to have options when trying to figure out a strategy.

Have you identified and to some degree segmented your prospective market yet?

If not, do this. You can very likely get some good, broad stroke kind of
information in a passive way. If nothing else, spend an evening evaluating say
50 of these prospects.

From there, target who might pay for value, who is more likely aligned with
your "A" guy, and who is aligned with the "B" guy, and what are the
commonalities?

Then, select a few of these and go have a chat with a few that you can reach
in person without a big investment. Those conversations are very likely to
tell you a lot, and they may not even appear on the radar, unless they go
talking. Buy 'em coffee, or lunch, and express your interest and desire to
understand how they do business and why the product has value for them. If it
goes well, ask them to "blue sky" things for you. "If they were king..."

So don't give 'em much to talk about. Ask and listen. Then go away and think
on it.

The most they can share is "some guy was asking me about X, and... their "blue
sky" vision is something your competitors can find out too, and maybe that "A"
one does this. What you don't want to share now is your strategy, or your
intent to enter the market. They could deduce this, because you would not have
that meeting otherwise, but they won't have anything material to act on, while
you come away with a lot of information you will probably find valuable as you
attempt to figure this out.

If it were me, you know my inclinations now.

Good luck!

