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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.

Thanks.

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As an aside, you've a 0% accept rate. You should really accept the best question to your questions, where there are good answers. – David Mar 19 '11 at 9:57
I'm on US East Coast time- am now reviewing. I appreciate all of the feedback. – user6492 Mar 19 '11 at 12:59
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No, you've a 0% acceptance rate on all of your questions, dating back several months. – David Mar 19 '11 at 14:12
I've accepted several answers in other threads now as the accepted answer. In this thread, Andy Swan, Dave Feyereisen and Pierre 303 have all given excellent advice. – user6492 Mar 19 '11 at 17:33
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Just pick the best one and mark it as accepted. – Michael Pryor Mar 19 '11 at 18:56
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5 Answers

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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!

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Thanks- I appreciate the perspective- very useful. – user6492 Mar 19 '11 at 13:25
up vote 4 down vote

Unless your software is really supperior, doesn't need to be supported and benefit from word of mouth, it may cause slight sales drop to your compitor.

But it will be marginal. Most doctors want something that works. They are willing to pay extra bucks ($100 is nothing, just one meeting with one of their patient) to be able to get someone on the phone if something doesn't work.

So I'm pretty sure your strategy is not going to work. Especially if you can't get value from it.

If I was you, a guy with a great product and no money, I would go to the competitor's competitor, that doesn't have the product yet, and is probably willing buy your solution to enter in the market instantly.

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Thanks- hadn't thought of that approach. – user6492 Mar 19 '11 at 13:03
up vote 3 down vote

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.

Good luck!

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Thanks- very helpful! – user6492 Mar 19 '11 at 13:25
up vote 3 down vote

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.

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up vote 0 down vote

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?

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Thanks- this is definitely a different response. I think that $100 is too much; the software that we've developed really should be a standard component of a program that nearly everyone in the profession uses. I was reading a book about how to make money giving away things for free, and one key point of the book was that things like software all will eventually have free versions- like even Microsoft Word has a free "read-only" versions. Maybe I'll do a stripped-down free version, or maybe a free beta version, but charge for other versions. Would that change you answer? – user6492 Mar 22 '11 at 10:05
If a product is worth making then it is worth charging for. You need to try selling it to your market and learn how your prospects think. Some doctors will buy the most expensive product - 'it must be the best product because other people are paying this price for it'. (IMHO the people that write business books only know the business of books and conference speaking. When was the last time your doctor gave you a free session?) – james Mar 22 '11 at 13:42

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