Our Daily Bleg: Need Some Startup Strategy, Please

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A reader named Patrick Nash needs your advice:

My friend and I have developed a cutting-edge technology for social media. There are other similar technologies out there for social media but we could never compete with their resources. Should we just point blank say we are the cheap alternative as a selling strategy? Sounds cheesy and flimsy but may be our only avenue.

What do you have to say to him? I don’t expect a lot of you to have experience specific to his product, but I know there are a lot of starter-uppers among our readership (yes, both kinds of starter-uppers), as well as what you might call “psychology of pricing” pros. So let’s see what kind of advice you have for Patrick.

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  1. Amy Weissfeld says:

    Nobody likes cheap. But we do like affordable. So just find a better way to say it. We say, “Bringing Enterprise-class personalization to the SMB market.”

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  2. andrea says:

    Hmmm I know that sounds like a good idea. I have no experience, but from what I have read and seen it seems that pricing is not the only factor that makes someone choose a company over another.

    As you mentioned “you could not compete with their resources” from which I can conclude that you are a smaller company, so the one big advantage your main competitor has is that they are bigger, most people associate bigger with being more reliable.

    The best way perhaps is to compare your product with your competitor(s)’s product and equal out the similarities and then show at the end (without focusing too much on it) the price difference.

    Also approach some forums that discuss similar products like yours and talk about your product and introduce your product and why is a better alternative.. perhaps it simply is because of the pricing, but I’d find one other small benefit .. perhaps (easier to use), more support.. etc..

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  3. StatSpotting says:

    Also reg the pricing itself – pls see if the decision maker will have any issue picking the cheapest. some ppl do not pick the cheapest.

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  4. Dirk says:

    Patrick – I have experienced the pain of a crowded market in the Internet space and I am a pricing expert.

    My advice is that unless you have a dominant strategy and the associated tactics to spread the word on your solution, you are better served by a HUGE price on your service and add in a high level of customer support.

    Remember the only winner in a price war – which is what you will initiate – is the customer. Your competitors will only react to your lowered pricing by lowering their pricing.

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  5. Jeff Cronin says:

    Just like Andrea I assume that your inability to complete with competitor resources is really just a proxy for being smaller, not necessarily that you can’t deliver a superior product itself. I have always been in this position professionally and worked to leverage the upstart position vs. a larger and more well known competitor. In general you will need to align your specific capabilities to the needs of a subset of your potential buying community and focus there. If your goal is to grow into the ‘big’ company then you need a strong (read; high-margin) position to leverage into adjacent segments.

    If your goal is to be a successful business being run by you and your team then I would recommend you simply become a boutique provider to a specific segment.

    Focus is the one thing you have that your competitor cannot match, that and the fact that they typically won’t find a $40 million market attractive while you as a startup could play there for years.

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  6. Mitch says:

    You offer a better value proposition than your competitors.

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  7. Will Caskey says:

    Give up. Four large competitors (Google, Facebook, Apple, Microsoft) have not already bought your service, which is the best statement of its value as can be requested. The market is healthy, and it has spoken.

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  8. Sam says:

    Does cheaper mean less reliable?

    You could always set the price in accordance With the demand you receive. Being the cheaper alternative wouldn’t always sway the client into investing in your product or business.

    Pick a unique selling point and promote it! Price isn’t always the winning factor (but it can only help!)

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