By Kayleigh Alexandra, MicroStartups.org
Getting ahead in the software world is tougher than ever before. This is largely due to huge competition plus massive rises in standards stemming from shared libraries and design philosophies. Current technology can only achieve so much, and the more we rely on the internet to get things done, the more rapidly the possibilities are exhausted.
This means that every software company needs an edge of some kind that goes beyond the innate quality of its products. But what should that edge be? Some companies will aim for pricing, believing that undercutting their rivals will put them ahead — but it’s a bad move. If you want sustainable growth, then support is the USP you need. Allow me to explain why.
Price Wars End Up Hurting Everyone
Here’s the main issue with trying to squeeze out your competition by offering essentially the same thing at a lower cost: if it works at all, it won’t work for very long. As soon as they notice what you’re doing, they’ll lower their prices in response. They’ll have to, however much they hate the idea, and however much they hate you for doing it.
And they should hate you for doing it if you’re relying on outrageously-low pricing, because that approach damages the entire industry by lowering the perceived value of what you do. Once everyone else lowers their costs to match yours, you’ll need to lower yours again to get back in front, and this will continue until you’re all losing money.
Small Cost Differences Aren’t That Compelling
You might think that you can avoid a price war by having your prices only slightly lower than those of your rivals — not so much lower that they’ll feel obliged to match them. But if you do that, you won’t see meaningful results. It’s possible that you’ll pick up a few more customers at the budget end of the market, but you may even lose some at the premium end.
Why? Because dedicated professionals will care far more about the quality of the service they’re getting than the exact cost. Are you really going to notice the difference between $14.99 per month and $16.99 per month? Would being able to save $2 per month present enough of a difference to make up for any differences in quality?
Great Service Generates Recommendations
Instead of pricing, then, it’s best to go with support as a USP, and the biggest reason for this is that it’s a sustainable long-term strategy that helps businesses grow. Cutting costs sends you down a slippery slope and won’t bring you much new business (if any) — after all, it’s very unlikely that anyone will recommend your software purely on the basis that it’s marginally cheaper than comparable options.
But nail your customer service — do your absolute best to help your customers with everything they’re trying to achieve — and you’ll establish a reputation that will precede you. Delighted with the level of quality, and eager to support your business in return, you’ll find that people will readily recommend you to their friends, family members, and acquaintances.
As Your Reputation Grows, You Can Even Charge More
Over time, your superb support will set your business apart as an industry leader. You’ll be chosen over competitors with lower prices (and possibly even more features) because customers know that they can rely on you. Just look at the top SaaS companies. Does Slack offer anything that other team communications tools don’t, or does it dominate through brand recognition? Is it Shopify’s innovation that has made it an e-commerce standard, or is it the much-vaunted 24/7 support and an emphasis on community engagement?
Because of that, you’ll have less pressure to implement innovative functions, and you’ll be able to charge more. Only to a certain extent, of course: if you raise your prices significantly, you’ll be perceived as greedy, which will rapidly see your good reputation tarnished. But you can confidently charge enough to not only scrape by but also profit without feeling the need to argue your case — your sterling reviews will argue it for you.
About The Author
Kayleigh Alexandra is a content writer for MicroStartups.org, a site dedicated to supporting startups and small businesses of all shapes and sizes. She’s curious to see what skills will be required for the workplace of tomorrow. Visit the blog for entrepreneurial tips and follow along on Twitter @getmicrostarted.