Ask HN: Should I create a clone of a popular SaaS with rock-bottom pricing?

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-software-pricing.html ↗ http://www.startupproject.org/2011/06/price/ ↗ https://theadaptivemarketer.com/2012/01/14/a-pricing-lesson-from-the-concorde/ ↗ http://jacquesmattheij.com/Double+your+price+ ↗(and+no+Im+not+kidding)

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

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-99b42ec7fafe ↗

- 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.

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.

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).

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..."