I have a small startup that developed a software program. I've copyrighted the software and am working on patent protection, and I've started some marketing. It has been a very low-cost effort so far, and so the revenues I need to break even are low.
After developing the program, I discovered several competitors. The programs that we all have are helpful programs for members of a specific profession (like doctors), and the competitors charge $100+ for their versions. (I haven't bought or even done much examination of the competitors' programs, but at first glance they seem like good programs that do more than mine, but not much more.)
If marketing doesn't result in strong sales, I'm thinking about either just giving away mine for free (through various routes) or charging just a tiny sum for a download, like 99 cents. The competitors are more established than I am and have more visibility in the marketplace; I figure that the market for our programs is large but mostly untapped, so a large number of 99 cent sales (or free downloads, with various ways of earning revenues in connection with that) could be just as profitable as a small number of higher-priced sales.
If you were one of the competitors, how would you respond? I am pretty sure that their investments in the programs have been far higher than mine have been, although their ongoing costs may be low, but not as low as mine are. If they had to match me on price, I'd think that they'd lose money and their initial investment would go to waste.
The competition will ignore you initially. Until you're impacting their market-share, you're a footnote.
That's big opportunity for you. If you think of your value in terms of customer market share (not revenue), you'll be much better off. Just get people using your software, and then listen to them and build a product that they love.
Think of it as delayed revenue. If you can get to a meaningful mass of users, you'll have a ton of opportunities to monetize a captive audience....or even force a premium competitor to buy your company.
p.s. The difference between 99 cents and FREE is not just 99 cents---it's whether or not I have to get out my credit card to get started with your software. I'd strongly suggest FREE over 99 cents. How much more likely are you to tell a friend about something that's free vs. something that's "cheap"?
Get users. Build for users. Charge a premium fee for premium features later. Sell to competitor. Good luck!
Initially, the larger and more established competitors will probably ignore you. If you haven't done much marketing yet, it will take a while for the word to get out that you are giving your program away for free. And until they lose some sales to you they probably won't much care.
Once the word gets out, and you begin to barely cut into your competitors market share, they'll probably still ignore you because they know you won't receive significant revenue. So, you won't be able to support the program and finance the ongoing effort necessary for you to become a long term threat.
However, if they see you cutting into their market on an increasing basis AND they see that you have established some type of uniqueness AND they see that you have a plan to capitalize on your business model... THEN they will either harass you legally OR re-target marketing and product development to compete with you directly, OR THEY WILL TRY TO BUY YOU OUT.
On the subject of patent protection of software, it's a classic sign of an excuse for having a worse product when people try to patent software. Aside from how ridiculous the idea of patenting software (which you can't enforce in the vast majority of countries), unless you compete on quality, the only winners will be lawyers if you go to court.
Why focus on the competitors? You should focus on the market reaction! If you are selling for $1 what everyone has been selling for $100 the market will perceive no value/no longevity/no reliability in your product and that you will soon go out of business. You will barely cover the cost of the sale and a single tech support query will make you lose even more money. Why would a business person waste time and effort (cost is not their main consideration) on a product that won't last long?