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Ask HN: Should I create a clone of a popular SaaS with rock-bottom pricing?
383 points by aminmemon on May 6, 2017 | hide | past | web | favorite | 220 comments
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?

Would I be able attract customers? Does this make any sense?




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.


Agree with this. We have a successful cloud call center product Cloudagent in India and it has an enterprisy pricing structure. We wanted to launch in the US this year and we came up with a new simplified product getkookoo.com and went with a drastic price change to capture the market. We removed per agent pricing and said a flat $19.9 for unlimited agents and pay for only the calls you make. We thought the super simple and cheaper pricing is all we need. Turns out, its not. Though we have got customers, its been harder than we thought. In our case, it looks like the second point above, trust, is what we have not been able to communicate.

So yeah, pricing is just one very small factor. It is a factor, but only after all other factors have been taken care of :)


Your website is honestly really confusing. The design is nice and clean but the messaging is really lacking. I've ran multiple small businesses and I have no idea what "Zero agent rental forever" would ever mean to a business owner. I also had no idea what IVR meant and I've actually built automated message systems on Twilio.

Are you providing me the agents or do I have to supply themselves? It looks like you're just the software but once again the wording/copy made things incredibly confusing.

Your messaging should reflect that you provide easy to use call center software. If you're competing mainly on price then the "pay only for the calls you make" should be a tagline somewhere... that's a powerful message but I don't see it anywhere on the site.

I also don't really like the design on your features pages..at first I thought they were lists of blog posts. There's so much spacing with big faded images that don't make it easy to see the product. Not to mention you're peppering me with that free trial button when I really just want to read what each feature does...and then you could throw me the CTA at the end of the page if I liked this feature.


Since you took time to give some inputs, please do let me know if you need a business phone number. Free for you :)


Hey, thanks a lot for the useful input. Will work on this now.


May I add if Ola, GE, Monsanto, foodpanda and DD are indeed happy customers of yours... that's an amazing achievement that should be highlighted more. With testimonials.


They are very happy customers :) and we have more too, HDFC life, Zomato, BigBasket, Practo, Intuit, HUL etc. But they are all Indian customers, so not sure if their testimonials will have real value for US customers. But I think your suggestion is good. Let me A/B test with that. Thanks.


I believe Intuit and Zomato are relatively well known in the US. Inuit especially through TurboTax. Maybe you could do something like "Inuit, developer of TurboTax"


I second this. Many of the people who might have the decision to buy, whether barely or really technical, will have heard of Intuit TurboTax. They'll know that's big deal.


But did "Intuit of India" develop TurboTax at all, there might be an issue of truth because same-named entities in different countries aren't necessarily legally part of a single corporation.


The brand is known, so maybe don't mention Turbo Tax but if you show the logo and it's a real testimonial it won't hurt too much that it's all Indians.


Zomato and Inuit are very famous also in Europe, plus satisfied client always give a professional look and social proof


Zomato and Intuit stand out immediately to me. I would definitely back the testimonial point.


You should really think about investing in a copy editor for getkookoo.com. The style is great but the content is confusing and writing the price as "$19.9" is highly unusual in the US. There are also common sensical things that a copy editor will help you find, e.g. if your tag line is "Let's make those customers happy!" the line underneath it should clearly state how your service helps make those customers happy. The metrics on the number of agents and call minutes per day are tiny and easy to miss - check out how prominently metrics are displayed on other SaaS products.

Hope this helped, and best of luck to you!


Seconding the need for a copy editor. I lost interest immediately.

- The "Lets make those customers happy!" should be "Let's make those customers happy!"

- There is no space after the comma in "calls,IVR," and "chat,customer"

Don't underestimate the importance of attention to detail. These tiny mistakes would have even been caught by Microsoft Word.


This certainly helped. Thanks for taking the time to reply.


If you want to communicate trust I would think hard about using a clown in marketing.

I think I understand what you want to communicate, but it reminds me more of something suitable for marketing a used car sale at jaw dropping prices.

If trust is what you want to communicate it should also be visible in the design of your web site. That means focus on details and optimization here and there.

E.g. you should check how many visited your site with a mobile phone today and see if you can spend some time on optimizing the first inoression. Also remember that users who come to your site might have other ideas on what is important. For instance maybe you should try to give your logo a little bit less prominent space and don't scroll it back into the view because it's annoying. Also optimize the page so that the call to action and testimony now beneath is visible and above the fold.

I would also focus on the value you provide to your customers and not only that you are affordable.

One issue I have with Indian companies are that they are not too good with their workers. I have heard a few stories. So maybe something that would assure me you are good with them, if you are, would be nice to see there.

Best of luck!


And carefully check grammar and spelling on your site. If you can't get that right on your homepage, I'm not going to trust that you're going to get the details right in the rest of your business. Some examples:

- Each comma in a sentence should be followed by a space.

- Each sentence should end with a period.

- U.S. prices always have two-digit decimals. $19.90, not $19.9.

- Use a comma to separate thousands. 30,000, not 30000. (No space after commas used to separate thousands.)

These might seem nitpicky, but they make a big difference in establishing initial trust.


Most of the globe actually writes €/$19,99 and 30.000, if we're gonna be nitpicky.


They're trying to launch in the US. The USA doesn't


This doesn't seem to be true. India and China, as well as the USA and seemingly all Commonwealth countries, use "." for decimals.

https://en.wikipedia.org/wiki/Decimal_mark

https://www.datacamp.com/community/tutorials/decimal-comma-o...


Your link indicates that I'm right. Scroll down to the 'examples of use page', and you see that adding up the 'SI (French style)' plus the second box below that yields by far the most countries.


"Most of the globe" does not obviously mean the same thing as "most countries". "Most of the people" would be a much more plausible interpretation than a metric that gives Swaziland equal weight with China.

"Most of the area" would also be a plausible interpretation, but "most countries" isn't.


Its actually the most plausible. If you go for 'most people', the most spoken language isn't English, its Chinese. Yet ask people, and they will happily point towards English. If you go for 'most area' you again run into a problem, because Russia and Canada are totally out of whack with regards to population per square km. 'Most countries' is the happy middle ground.


If you are trying to launch in the us you need to appear american, one typo can squash your whole business


> If you want to communicate trust I would think hard about using a clown in marketing.

The first thing displayed was the clown image, it took couple of seconds to load the text later. The first impression I got was this does not look like a serious site.


Too funny I initially took this as "use a clown in marketing" to mean use some guy in marketing. I just figured as an IT guy you were being derogatory. I guess that says a lot about me.


Also, the term coocoo/kookoo (however you wanna spell it..) typically has a negative connotation attached to it.


Thanks for the detailed analysis. Will take this into consideration. Did not understand the point about taking care of the workers. Did you mean the employees? If so, then yeah, we have had almost zero attrition. There are people who have stuck with us for the past 8 years. So guess, they are well taken care of :)

But how would I present that on the website? Any ideas? Thanks!


To add to what adambratt said, if you thought your main differentiator would be pricing, I have no idea what "$19.9" means. First, in the US, we always use 2 decimals, so "$19.90" - may seem minor but just kind of looks like a scam otherwise. Also, what's the time period? Would be much more understandable to say "$19.90 per month fee plus x cents per minute. No per agent fee, ever"

It would definitely be worth it to spend a couple hours with perspective customers usability testing your site.


I've already taught my eight year old that this kind of copy editing issue is a red flag when he is buying pokemon cards on amazon. For a core business service it's a showstopper. Also the website was oddly slow to show me any text.


The domain, the pricing, the content - get it fixed. It screams red flags.


Your website is completely broken at higher resolutions

http://i.imgur.com/xw4XHWY.jpg


OT but does this problem of sites broken at higher resolutions happen to you often?

t. Exclusively 13" screens user


No they usually work.


An additional note about the North American market, Copy-wise $19.9 should always be shown as $19.90 with 2 decimals to represent the number of pennies in the price.


For something like call center agents, as a small business $19.90 is too low a price. I have the same problem with Wordpress hosting. I use wpengine for $50+ per month (I don't recall what we actually pay) because for less money I presume the service provider won't care or have the resources to resolve any problem.


This is something we discussed. Thats why $19.90 is an introductory price. We are actually losing money on that. But since our India business is profitable, we are offsetting that for the first few customers. The actual price is ~$50


You should raise the price. Under twenty bucks sends the signal that the product is more of a toy.


Say I'm looking to have a local Indian phone number that routes to the US -- either like Google Voice or Twilio. Do you offer something that could help with that?


Yes, we do that, but not on this product. This product is specific to service the US businesses. If you have some time, please check out our company site which lists all our products, http://ozonetel.com


in us, it's 19.90 not 19.9 :)


On the bright side, you can expect your clone to actually not be a clone.

When initial product you want to clone was made, its makers had to solve a lot of problems and made choices, which are not documented anywhere. You will face some of those problems and may make different choices, even have new ideas to solve them. Ultimately, your product will have its own DNA and strengths, most likely.

There's a say I really like in the world of music composition : don't be afraid to copy your favorite composers, you won't do the same thing anyway.


You'll also end up cloning their mistakes, except that they know what didn't work out and you won't for a while.


I'm not sure I agree with this. Most big software platforms are used differently by different users. They have a wide range of features that most of us don't need (and maybe don't even know exist). What I think ends up happening when you clone something is you end up improving the product for YOUR type of user. This may or may not make up the bulk of the market, and may or may not be an improvement for typical users.


There will always be some mistakes that you can't learn from someone else's experience, but a close examination of the history of a forerunner can be very informative and allow follow-on products to avoid many of the same mistakes.


This is absolutely true, and equally applies to other artforms as well - films, games, etc.

Copying is an excellent way to get started. You're very unlikely to end up with a copy at the end.


Your checklist is wrong.

The checklist should be :-)

1) how are you going to acquire customers?

2) how are you going to acquire customers?

3) how are you going to acquire customers?

4) how are you going to acquire customers?

5) how are you going to be better than competition?


This.


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.


It's still possible in the case of Digital Ocean vs AWS: 5-10x price reduction, focus on a subset of core service. You still need to deliver friction-less service in the beginning, reliability and customer service eventually.

Not all will move from AWS, but the price saving is significant for small players who doesn't need the full suite of AWS.


DO just happens to be cheaper than AWS for certain use cases, but they didn't get there by out competing on price alone, it ticks a lot of other boxes: it's easier and simpler to understand for a new developer looking to get started, you can calculate and anticipate usage costs with ease, etc. It's not just a good copy with better pricing, it brings something to the table.


Exactly. DO launched with great pricing, SSDs, and an attractive UI. If they launched with only one of those three we wouldn't be talking about them today.


not to mention the excellent tutorials and documentation they produce


that is a big difference maker. Those tutorials are really extensive and they paid people to write them


The one click installs, api access, dns, monitoring. Price is only one of many things.


What about Freshdesk which admittingly cloned Zendesk with cheaper pricing?


If freshDesk doesn't push sales as hard as ZD then it's a win in my book


I don't view digital ocean like that at all. I would be using them even if the price was exactly the same. Digital ocean offers a competitive advantage over AWS, they have a simpler to use interface that focuses on getting one server setups working asap.

Some points, integrated console, root password reset, automatic backups. These are features that make them better than aws for a simple side project.


Digital Ocean started as a lower-priced clone of Linode (Vultr did the same later). They started with just a subset of the services (finally catching up now), but had good developer marketing and a lower starter rate.

It'll be interesting to see if they can continue to grow now that Linode have reduced prices to be lower than them. That's one big catch with coming in at a lower price, the incumbent probably has the scale to lower their prices below you, if they consider you a threat.


Linode has a featureful but very old interface. This is were newer competitors shine. Though I heard Linode wants to replace the old interface


An important thing you should consider is the cost of change.

I once built a screenplay editor in Hebrew for Israeli screenwriters. It had everything on your list. For free. The competition was practically Microsoft Word + macros.

The problem, though, is that the pain of moving away from these carefully crafted macros was too high.


This. We tend to underestimate the cost of switching. A new service doing the exact same thing as another (and not just software - the support, help, documentation, community etc) is still not good enough to get someone to switch, in spite of price. It might be easier to get new customers though, but remember, your competitor probably has an upper hand in marketing, and in general acquiring new customers.


What about new users? Did you try advertising to film students?


Yes, but we have very few of them and they don't write enough


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.


Freshdesk seems to have done well pretty much cloning zendesk, so there are examples of it working out, but few and far between


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.


Absolutely. MailerLite vs Mailchimp is a great example of this. Half the cost, but just as good, if not better, experience and execution.


"What significant advantage are you offering over existing ones that you are cloning" -- I keep hearing this. How do people answer this? Because, let say you add feature X that Trello doesn't have, but since they're bigger than you, they can simply add feature X as well.


Just adding features is a deadend. Look for things Trello wouldn't want to do. For example, features specific to a subset of customers. Larger companies are not able to focus on specific smaller segments because people in charge won't have the attention span to handle that many, but you can survive with just one. Another example is addressing some scenarios with fewer / simpler features. Established products cannot remove features, hence even simple uses cases end up over-complicated over time.


Trello itself is the perfect example of "remove features to serve simpler use cases".

All sorts of business and development process tracking software has existed for decades. JIRA, FogBugz, PivotalTracker, MS Project, and so on.

Trello got rid of 90% of their features, and just kept "list of lists of short text snippets". That makes it great for planning small software projects, but also shopping lists, travel plans, or sales pipelines.


Notice that I said "Advantage" and not "Features". Users don't care about features necessarily. They care about how it helps them. If a feature helps them, then it is a good feature. If not, then it won't matter. Figuring this out is the hard part of running a business because every user is different.


Well, you have to have a value proposition. "We're cheaper" is usually not very effective and it gets you the worst possible clientele. What people mean is "Tell them why they should buy from you instead of your more-established competitor, because price alone is a sorry value proposition".

Products that start with nothing more than price differentiation will eventually be pushed into a separate niche, which better serve the more price-sensitive customer base. Knowing this, it will be easier to gain clients if you can identify something you can optimize ahead of time. The smaller businesses/clients that will depend on your product will really value this and feel like they're being served well by your product, and not like they're the fodder in a price war or that they're using a bargain-basement, barebones product.

People do not feel proud that to be stuck in the bargain basement, so they're less likely to spread your product through word of mouth if you make it seem like a discount version of a well-known competitor.

As an entrepreneur, you just have to get a sustainable foothold somewhere and you can take everything else from that point. Optimizing a system for a price-sensitive audience is a good way to get started because the bigger guys are trying to leave that audience in the dust and they're usually very appreciative of the tools you're supplying.


Then you have to think bigger. If you are cloning Trello for example, have it have a different UI that is more useful for a particular niche, but that they can't simply add because they would alienate their existing user case. Make it better by doing things that the competitor can't or won't do.


> but since they're bigger than you, they can simply add feature X as well.

You can just look at Google to see that it does not work all the time, Google could have replicated Watsapp, Facebook, Instagram but they failed. They even failed with Google Video and had to buy Youtube.


Wait.

> Good news: You want to create something for a market that already exists. Good.

Is this good news? I was under the assumption that, unless you were creating something didn't already exist, it wasn't worth the time?


It's far safer to make a product for a market that you know exists, rather than build a product and try to find a market. You differentiate yourself by providing more value than your competitors, whether it's a novel feature, better service, etc. There is obviously an element of risk/reward - if you go for a potentially unknown market, e.g. you have a cool idea and think people will buy it, then you could make a much better return as the only player. Or you find out that there's no market and you crash and burn.


"if you go for a potentially unknown market, e.g. you have a cool idea and think people will buy it, then you could make a much better return as the only player"

But not necessarily for long. If others see that there's money to be made in that market, you'll soon have competitors, some of which may be much bigger companies that have a lot more resources than you have. Being first to market doesn't assure that you'll dominate the market forever.


It's good news most of the time because you already know the market exists, you can see what the competitor is doing good or bad and learn fast from it.

Windows, Google Search engine, Facebook did not create a new market they built something better than the incumbents.


The biggest problem with cheap is no marketing and or customer service budget.


Personally I would like a Slack that works on older Mac operating systems. I had to leave the groups I was in since Slack made updates last month, and now I need Mavericks or newer to continue using it.


<team>.slack.com will work, no?


Yeah, I've never even installed the desktop client. It's an Electron (JavaScript) distribution, so it's essentially just a self-contained version of the site, isn't it? Just go to *.slack.com and you don't have to worry about it.


I even prefer it. The desktop client is an energy hog, drains my battery faster than video playback.


Having an alternative that works on older operating systems wouldn't help you unless the others in your group want to switch just for you. Network effects win.


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.


But you did think of it.

Q: "Why would you sell something for 5 euro when people are happily paying 10?"

A: "We'd make a killing!"

From what you've written it seems the customers are not happily paying €10. They've simply traded satisfaction for convenience.

So your idea is a pasta place that enters a market where the only choice is "terrible and overpriced" and provides an alternative of just "terrible", attempting to price-out the competition and rake in the dough.

Exactly what OP is considering (replace 'terrible' with 'equivalent').

So I guess what your boss is getting at is that the smarter business strategy would be "less terrible and overpriced" - compete on value not cost.


to go along w/ this--why not enter the market at $5, hopefully serve even a slightly better product, and get your competitor out of business and up your prices to $7 or $8, still cheaper, but better quality, and you'll stay in business longer, esp. if you knock your competition out.


If the competition is already charging $10 but could get by just fine if they charged $5, then that means they have far more capital available than you do and can afford to wait for you to go out of business.

It also means they have additional capital to

a) Advertise more

b) Improve ingredients and taste

c) Do all sorts of things to improve the customer experience.

In short, there are benefits to charging more from the outset that aren't always obvious until you're playing catchup.


I think this is a failing of a lot of businesses when they look at the 'undercut' pricing model.

What most businesses don't realise is that if you discount something by just 20%, you will actually have to effectively DOUBLE your sales in order to make the same Net Profit at the end of the day.

If you are looking to undercut the past place by 50%, then you will need to effectively sell 4x the volume that they are doing just to make the same sort of profit. That then brings further problems - in order to server 4x the customers during a lunch rush, you probably need to lease bigger premises with more staff on hand, thus increasing your Expenses - meaning a reduction in your Net Profit. More customers also means more customer problems (missed deliveries, reduced quality of service etc.)

You would eventually end up with a scenario where you have a bustling pasta dive with double the customers, but making LESS money than the original one next door - or worse still, making a loss. Even though you are charging half the price...


Right, but the cost of you distributing 4x as much software could be next to nothing.


Distribution costs perhaps (except for maybe CDN fees for extra traffic), but the flipside of 4x the users is extra support, server load, file storage space etc. which are real costs that a LOT of software businesses don't seem to factor in at an early stage.


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.


>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.


I'd argue that an excellent price point to target is just below the point where you have to switch to enterprise or Rolls Royce-style sales models.


The "innovator's dilemma" disagrees.


Is this Nooï? ;)


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.


> 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.


> 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.


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.


It's not obvious what you mean by "black hole".


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.


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.


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


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.


So we launched 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.


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.


Off-topic, but this touches on how I feel about all those "passive income" / "niche site" / FBA big shots. When you look at their income, almost all of it is for meta stuff (hosting referrals, tool referrals, book sales) and not for the stuff they -claim- to live off (the FBA, the niche stuff, ...).

Kind of how most people who got rich off the gold rush are those who were selling shovels.


It also pains me to have to sift through all the meta noise. But some examples do stand out. patio11 is one.

I recently found about Tyler Tringas, who has open revenue numbers, is profitable, and specifically focused on making the business as automated as possible to have time. He was going to write and sell a "metabook", but decided against it precisely for reasons of credibility. He's publishing it for free at https://tylertringas.com/micro-saas-ebook/.

Another one is Jason Kester, who wrote about how he did it for free on one simple blog post here: http://www.expatsoftware.com/Articles/guy-on-the-beach-with-...

It's good to see there are some actual cases, and it sounds at least more doable than the crazy startup lottery that is, ironically, more socially acceptable. (Passive stuff is for lazy people.)


Interesting links, thanks. I would like to point out though that since it asks for (though doesn't demand) email addresses to keep up with the book's progress, Tringas's book is not entirely without a profit for him. (Based on the assumption that a mailing list is highly valuable for these kinds of entrepreneurs.)


Except selling shovels in a gold rush is a legitimate business that provides value.

A more accurate analogy for 99% of the online passive income people would be that they got rich selling maps for where gold is, except the maps are a complete fabrication.


This is really interesting.

But it also means if you (GP) don't mind stepping on a few toes, you can turn this in your favor.

Start attracting attention by writing articles about

"What the big brand bloggers don't tell you about email marketing" and start showing some numbers on how much traffic a blog needs before the ConvertKits and the MailChimps start making economic sense.

"How to make $X by selling affiliate products" - with a link to each of these bloggers public income figures. And then you add a little message at the bottom that says "But for the beginner, my service is so much better because..."

If you think that the big name bloggers are genuinely the gatekeepers, you can actually use this to your advantage in your marketing.

Although having said that, you are probably not going to be attracting the best type of customers for a business. The more a customer pays, the more invested they become in their own success and indirectly into the success of whomever they do business with. That just seems to be how human nature works.


Yeah, this is what I was thinking with the "rebel" approach.

A problem is that every budding internet entrepreneur thinks they are going to have a list of 10,000 in 6 months and be selling a $10,000 course to hundreds of people in a year. (That Ramit Sethi makes so much money off his $10k course is testament to this)

Most of them will never get to 1,000, and in the meantime, they're paying Aweber $20 / month.

So it requires getting them to accept more reality than they may be comfortable with to use a cheaper service for now and then switch to a high-cost one with fancy drip campaign features later when they need it.

I think it is far easier to sell big dreams for $20 / month than reality for $5 / month.


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.


If I remember correctly he is also on their board, so there's a chance he has an equity stake as well.

You're right about pricing. It's not a $30 / month product where they share the revenue, it's a $20 / month product where the extra $10 was directly added for affiliates. If someone happens to signup directly it's just a bonus.

They have managed to grow not just being one of the most expensive options, but also without any trial period. (They just added one, I think). This is substantially thanks to it being pushed by Pat at SPI.


I wish I knew about EmailOctpopus before I built an in-house solution at work to save $3k per month. Maybe you just need an explainer animation to market your service?

Here I made one for you using my startup: http://www.superanimo.com/animos/cartoon/148

But seriously I think starting out simple is the way to go anyway. I can't get anyone to make animations on my site and the site has an 80% bounce rate. I'm starting to think I started with a product that's too complex. Now I'm turning it into an app and trying to simplify it.


ahahah man this is the funniest thing i've seen today!


>> At the lower end of the market[...] you may attract less favourable customers

This is worth emphasizing. When you offer your service at rock bottom prices compared to your competition, you will wind up with all of the "bad" customers who will expect to be treated as if they're paying for premium level support. They want the same level of service they would get with your expensive competition, but without paying for it.

Regardless of your price points, you must handle support emails, phone calls, social media accounts, etc. - all of which take significant resources. If you neglect supporting these customers by saying "sorry, we cannot offer extensive support for the amount you are paying", some of your customers will drag your brand name through the mud and you may wind up with a negative reputation.


One the reasons I know about and use mandrill is that my framework's documentation had 3-5 quick install options and I really picked mandrill at random. This is a bit also like how stripe operates. It's free or dirt cheap to prototype indefinitely. Making sure popular frameworks have first class support (or at least obvious, easy to use installation instructions, and or great API with great documentation) could be a lot of benefit. The UI's inside those applications allow my support and non-dev technician staff to review data, refund payments, resend emails etc. without me having to build them an interface to use.


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.


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.


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.


Minor nitpick: I get what you mean, but GitHub might be a poor example since GitLab is a strong competitor in this space that is arguably better in both features (self-hosted) and price (free). That said, I can't think of ones for Basecamp or Trello off the top of my head.


I use Bitbucket instead of Github because it is way, way cheaper than Github even though its pretty much a clone.


+1 I use BitBucket instead of GitHub purely because: Private repositories for $0.


Idem Gitlab


I'm using gitlab exactly because it's cheaper (free private repos).


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..."


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.


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-...

(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.


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.


GEICO isn't really a "low cost leader" (even if they are lower cost in many instances) - they are where they are because of marketing. Something you might want to remember if you're going to get into the SAAS business yourself.


> Think GEICO vs. All State.

GEICO isn't a startup though. It has been around since 1936.


> 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.


Yes but OP is talking about building from scratch AND being a low-cost leader. GEICO over the years has pivoted (they originally started as Government Employees Insurance COmpany) and they had the advantage of the business and resources they had already built up. Today, they're owned by Berkshire Hathaway. They spend millions on marketing. So yeah, some serious structural advantage that's irrelevant to OP.


Ah, I see the confusion.

The structural advantage is that they sell directly. They don't use the intermediate agencies who are collecting commissions. That, combined with specifically going after certain customers (originally govt. employees, as you pointed out), allows them to undercut their competitors like All State.

But not just undercut, undercut in a way that All State cannot match. The last part is key, and what makes it a long-lasting competitive advantage.

To bring it back to OP. If their competitor has built-in high costs, there is an opportunity here. That's why I said at the end they need to figure this out. If the competitor just has fat margins then they can easily cut prices, but if they have some high headcount, or maybe some legacy stuff that costs a lot, then can't match the low price without losing money.


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).


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.


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.


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.


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.


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?


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.


That's just what I'm saying. It's not a real dollar cost (as in, a certain number of dollars which you have an invoice for) because, for example, blogs are free, emailing reporters is free. If you have an iPhone even high-quality promotional photo shoots, and a YouTube channel is free.

So when you invest your time into getting the word out -- is it fair to say, "that is a real cost"? It's a time-cost. It's an effort-cost. It impacts your business. But is it a number?

I realize that for some people this number is easy -- how much are we spending on Ad Words? -- but for other businesses the effort that you mention is very hard to dollarize. It's kind of weird that some people assume you can.


You should dollarize your time. Maybe you're severely undervaluing it? Randy Pausch has a great argument why you should (in his time management talk).


VC: "Do you know your customer acquisition costs?"

You start to think. You started working on this full time 9 weeks ago. You've spent maybe 45 hours per week on the project total. You spent between 15 to 40% of your time managing the press, blogging, replying to email inquiries. Honestly, it's hard to estimate. You have not given your credit card out or made any bank transfers, it's been only just you. You are now closing a round at a valuation of 1.7 million. You have 745 users. Scenario A: your last day job was as a florist, working for someone else and netting $9.50 per hour after taxes. Scenario B: in your day job you make $165k as a senior engineer.

Question: what are your customer acquisition costs? If it's relevant, answer separately under scenario A and B. (A and B may also be red herrings,- a trick, irrelevant information.) if you need additional information to perform the calculation, ask and I'll give it to you.

What is your calculated response? Justify your calculation.


I can always make another dollar. I can't get back the minute that just passed.


> 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.


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.


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/


I think you mean Twilio, not Trello, when talking about MessageBird :)


Ah Thanks. Fixed now. :)


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.


For some nostalgic value - here was that ad [0] in Byte and PC Magazine etc. back in the '80s. I seem to remember that $49.95 was USD but the software was AUD$69 over here in Australia?? I could be wrong.

Another point I realised from this ad, was that Turbo Pascal was one of the first compilers to actually include the editor portion as well, as part of the total package, including the ability to compile directly from within the editor. A precursor to the modern day IDE, I guess.

In a lot of way, really innovative work from Anders Heljsberg and Borland - they really broke a lot of new ground with Turbo Pascal and like I said above, they really opened up programming for a lot of people who might have otherwise taken a different path due to cost.

[0] - https://community.embarcadero.com/files/2008/11/turbopascalv...


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


> 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.


Correction: "I would credit Borland *for providing the launchpad..."

And in thinking about what I wrote above, I seriously believe that if it wasn't for Borland bringing out a $69 compiler all those years ago, I would be in a totally different profession today. It seriously was the catalyst for me becoming a programmer.


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.


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.


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.


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!


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-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.


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.


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.


Nope. You should clone a popular SaaS product, but focus on a specific niche in the greater market and charge more for it, actually.


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.


> 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?


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.


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).


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.


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.


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.


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-Br...


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.


"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!


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.


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.


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.


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?


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?


If your thing is an actual viable replacement, why would you charge rock-bottom for it? You would be leaving money on the table.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


Please. If you want to clone something, plz clone ERP like SAP S4/Hana . That will be a lot more useful and lucrative.


Yes, and please clone hosted ELK, or some other log handling stack. The current options are crazy expensive.


Price is not a competitive differentiator. Didn't have to go to business school to learn that one!


Price is the least relevant variable.


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?


> 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.


If you have the technical skill - if you can walk the walk, not just talk the talk - then why not?


Focus on the cost of the problem solved as opposed to the pricing of the solution.


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.


when competing in price make sure their product can be replaced by your product without friction. and thay your product is always an option.


Yes competition and alternatives are critical


Features over pricing to shake up incumbency.


The less you pay, the less you care about it.


Of course: do it.


Read Zero To One.


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-softwa... http://www.startupproject.org/2011/06/price/ https://theadaptivemarketer.com/2012/01/14/a-pricing-lesson-... 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


Yes but build the importer first.


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?


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