Ask HN: Should I create a clone of a popular SaaS with rock-bottom pricing?
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?
229 comments
[ 7.2 ms ] story [ 252 ms ] threadDoubt 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!
The problem with creating "rock bottom prices" is it only works when one company has a monopoly over something. Even so, usually there is a reason why a company has a high price. A lot of the time people under-estimate what it really costs to offer a service, and as such think that the prices are not justified.
But hey, what do I know, give it a go and see what happens. I think you'll have a good time.
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.
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.
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?
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.
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.
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.
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.
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.
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.
Not all will move from AWS, but the price saving is significant for small players who doesn't need the full suite of AWS.
Some points, integrated console, root password reset, automatic backups. These are features that make them better than aws for a simple side project.
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.
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.
Copying is an excellent way to get started. You're very unlikely to end up with a copy at the end.
So yeah, pricing is just one very small factor. It is a factor, but only after all other factors have been taken care of :)
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.
It would definitely be worth it to spend a couple hours with perspective customers usability testing your site.
Hope this helped, and best of luck to you!
- 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.
http://i.imgur.com/xw4XHWY.jpg
t. Exclusively 13" screens user
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!
But how would I present that on the website? Any ideas? Thanks!
- 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.
https://en.wikipedia.org/wiki/Decimal_mark
https://www.datacamp.com/community/tutorials/decimal-comma-o...
"Most of the area" would also be a plausible interpretation, but "most countries" isn't.
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.
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?
> 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?
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.
Windows, Google Search engine, Facebook did not create a new market they built something better than the incumbents.
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.
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.
do you pay extra for usb sticks, or do you buy 2 of whatever is cheapest unless something is extremely mission critical?
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.
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?
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 a startup though. It has been around since 1936.
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.
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.
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.
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.
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?
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 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.
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.
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.
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.
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!
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/
If you have other differentiating factors, that changes the equation but all things being equal, lower price isn't enough.
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.
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.
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.
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.
Kind of how most people who got rich off the gold rush are those who were selling shovels.
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.)
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.