Create identical product and sell for half price?


4

I would like to compete in the software market and I thought that if I just present a product that provides the same functionality and is as good as its competitors and sell if for half the price then surely I will succeed.

Is this theory correct? If not, why not?

Pricing Software Competition

asked Feb 1 '12 at 16:08
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Cj7
124 points
  • I choose originality whenever possible. – Bneely 8 years ago
  • Too be fair, this is a valid business strategy which has been known to work well. However, as others have pointed out, there's more to a business than the product. – Steve Jones 8 years ago

5 Answers


11

No, it is not correct.

  1. Creating a product is just one small part of selling software.
  2. Is your documentation as good as your competitors?
  3. Is your installer as good as your competitors?
  4. Does your product look as good as your competitors?
  5. Is your domain name as good as your competitors?
  6. Is your web site as good as your competitors?
  7. Is your SEO as good as your competitors?
  8. Is your company reputation as good as your competitors?
  9. Is there enough profit margin at half price to keep your business afloat?
  10. Where will your advertising money come from? Your competitor has much more money to spend than you do.

You seem to assume that customers will magically find you and buy your product in place of your competitors. How will your customers find you? Why will they choose you over the other firm? If your competitor has been in business 5 years and you start today, it will take you years to catch up with their 5 years of existing marketting.

Finally, many buyers equate price with quality. Lower priced products are seen as inferior to higher price products. Your half price strategy can work against you.

answered Feb 1 '12 at 16:49
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Gary E
12,510 points

2

I think you may not have considered all the things that will go into making a viable product. This question reminds me of something I used to see a lot. I would be googling the name of my software product to see what people were saying about us, and would come across posts all the time in places like elance or guru that said "Developer needed to build exact copy of [my software] for $300." Those project always got bids, I'm sure, but none of them ever resulted in anything that I noticed competing with me...

What they didn't know was that I'd been working pretty much full-time on my product for five years, and had thousands of man hours (mine and others) invested in it. Not just the software development, but the marketing, advertising, graphical design, product development, community building, customer service, financial stuff (merchant account, credit card processing, bookkeeping, taxes and accounting), hiring, firing, etc. Plus all the intangibles like years worth of insight gained from customer support and feature requests and feedback.

Sort of reminds me of a guy I had a meeting with many years ago when I was consulting. He said (exact quote) "I need you to build me something a lot like Yahoo. What would it take to make an access database and a few scripts that could mimic the functionality for yahoo? Could you do it for less than $5,000?" (Yes, this was back in the day when Yahoo was the thing...). When I was done laughing, I explained to him that Yahoo had a budget worth Billions, Thousands of employees, and years worth of brand and development. I think he then went off looking for someone else who could give it to him for $5,000 or so. Pretty sure he has a day-job now.

It's funny, tech people look at a thing and say "I could build that" but they have no idea that (for them) 90% of the work will be in things like admin, marketing, sales customer support, etc.

Then, non-tech people look at the same thing and say "I could sell/market/support/etc. that" buy they have no idea that (for them) 90% of the work will be in getting it developed and dealing with the various technical issues.

It's a weird paradox.

If you want my advice, rather than seeing what people are doing and doing that, find what they AREN'T doing, but should be, and do that. Look for something really annoying and offer a way to remove that annoyance. Look for something you would like to have and do that. Think more about your customers than your competitors.

=o)

answered Apr 4 '12 at 07:46
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Eli
121 points

1

In order to succeed on half the revenue, your costs also need to be half of your competitors'. That means it should be 50% cheaper to research, develop, market, distribute, and support the product and 50% cheaper to run the administrative side of the company. Moreover, your product needs not only to match in features but also in quality.

Finally, human brain is wired to match price with quality. A cheaper mission-critical software product will be regarded as lower quality and you'll have a tough time convincing that you're as good as competition.

answered Feb 1 '12 at 16:46
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Dnbrv
1,963 points

1

Why make it half the price? Make it twice the price and suggest your product is better than the competing one.

But price alone is a bad way to discriminate your products from the competition. You need a unique selling point and you will need to put a lot of work into marketing/sales.

answered Apr 4 '12 at 19:20
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Jsz
268 points

0

Many of your competitors may be selling their product for free and making money on advertising and support.

answered Feb 1 '12 at 20:29
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Toby Allen
101 points

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Pricing Software Competition