pricing, strategyI loved Joel’s “Strategy letter III” about barriers to entry.
I completely agree that the best strategy would be to eliminate ALL barriers, and there are probably infinite number of ways to eliminate many of them, but how would you eliminate the most visible barrier - cost?
Suppose that you offer a product or SaaS which is… well, more expensive than competition. And there’s ALWAYS going to be a cheaper competition, unless you are fighting just one monopoly - but in most cases you are going to fight the entire market of competitors, and some of them are totally free.
So, here’s my question: how do you eliminate the cost barrier?
A barrier to entry means that there is some obstacle that you need to overcome if you want to enter a market.
Cost barrier refers to any scenario in which you need to invest a larg sum of money before entering the market. (i.e. oil extraction business, you need to buy oil rigs and drills, which cost a lot of money, hence the high cost barrier for the oil extraction market)
In your case, for a SaaS startup, the cost barrier would be almost 0 since writing code doesn’t really cost money.
Lowering the cost barrier in a market can by done if you invent a cheaper way in which you can set up your business. (i.e. 3d printed oil rigs).
Not sure how you connected your overly priced SaaS product with the cost barrier though.
You need to offer an easy to communicate differentiating feature that shows the value of your service counters the value of a free license.
Free is never really free because use of a free product requires a non-free commodity - your time. Free is typically the ability to use something without having to pay for a license. Many products exist that are free, and they are popular. But they have successful, commercial competition that remains, because the competitors provide time saving value or special features you won’t find in the free product.
The challenge is conveying the value proposition of your non-free solution.
The best way is to show that you provide value. Most users are lazy.
The users will choose you.
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