Archives for September 2011

Stop Obsessing About Your Competitors

Focus on Your Customers and How Your Web App Solves Their Problems First.

I wanted to continue with the Competitive Pricing theme of the last post.

You know when you go to the marketing site for a SaaS app and there is a “how we compare to our competitors grid?”

How often do you discover a new competitor of theirs that you hadn’t seen before, or realize that one of their competitors has a feature you didn’t know about?

I think too often as Web App vendors we assume our potential customers already know our competitors and are actively comparing the features of our product and the other guys.

This occurs because we are both paranoid about the competition and WE are focused on our competition so we assume everyone else is.

While some SaaS startups say “we have no competition” – which is a major problem – an even greater number can tell you every single competitor, SaaS or not, even down to the smallest open source project or tiny piece of shareware that hasn’t been updated since 2004.

So it just makes sense that we need to show everyone a chart of how we compare with those other guys, right?

Sure, and in the process you’ll INTRODUCE the the potential customer to a competitor they didn’t even know about!

You might get them to start second-guessing their choice to use your app.

So, know what your competitors are doing, but leave it at that… don’t help your audience find new alternatives to your offering that they didn’t already know about.

Just help them solve their problems!

But what if they ask “how do you compare to XYZ App?”

Well, it all comes down to positioning and promotion.

Both of those come down to one thing… knowing your customer.

What problem does your customer have and how can you solve it faster and better than what you’re displacing.

The keyword there is “displacing.”

If what you are displacing is an entrenched market leader; that might require a differentiation campaign where you lead with features (but maybe not, too).

If what you are displacing is a low-tech, high cost (labor, perhaps) solution… you probably don’t need to mention competitors, right?

Just some food for thought.

BTW… the folks on my mailing list got to benefit from this article a few months ago.

Make sure you get on the list so I can send you awesome messages like this.

Competitor Pricing… Does It Matter?

“Wait… what about competitor pricing?” you ask.Who Cares About Competitor Pricing?

I recently published a post where I had the audacity to suggest that value pricing required only two inputs:

  1. The Customer’s Willingness to pay (value perception)
  2. The Customer’s Ability to pay (how, when, why, where, how)

Since I got a number of emails with the same question – “how does competitor pricing figure in?” – I thought I would let you know… well… how competitor pricing fits in.

Now I believe I said there were about a million variables that go into those two inputs to come up with a pricing model for your SaaS or Web App, so I stand by my simplification of Value Pricing.

What competitors are doing is just one of those million variables.

The key thing to remember is that competitor pricing is NOT a main input; it is just a variable.

Value Pricing, which I talk about at length in the two FREE How to Price Your SaaS or Web App: Basics and Advanced videos, is all about the customer.


That means that when you’re gathering info to develop those main inputs, what comes out the other end might differ greatly from the what the competition is doing.

Does that mean you shouldn’t do it, then?

Of course not!

But you have to know what your competitors are charging, how they’re charging, etc.

You have to know if the customers already have a certain bias; an expectation due to market forces on what pricing to EXPECT.

If you are going up against an entrenched market leader or if there is no clear leader but everyone in the market has the same pricing model and similar prices, you will need to know what everyone else is doing so you can defend your different model IF asked.

I say IF because if you’ve done a good job aligning your pricing with the value perception of the audience, creating a high willingness to pay, they won’t question it since it just makes sense.

And it might make MORE sense than the nonsense they’ve had to deal with for decades in their industry.

You might be the first to come along who “gets it” and is willing to upset the status quo.

Or you might find that your pricing model is right in-line with everyone else and that your pricing will have to be similar to what is there.

In that case I would challenge you to figure out how to differentiate up-market (hopefully) to set yourself apart.

Why just create another me-to product?

I hope this helps clarify a bit where “competitors” fit in when developing your pricing – and marketing in general.

Focus on your customers, add tons of value, and move forward.

Don’t focus on your competition.


BTW… the folks on my mailing list got to benefit from this article a few months ago.

Make sure you get on the list so I can send you awesome messages like this.


Price Objections are Value Objections

It’s not your price that they object to… it’s the value they don’t like.

Lamborghini Aventador

There are times where the price – the number – is so out of whack with the reality of the market that no matter how valuable you make your offering seem, they simply cannot afford it.

Like promoting the value of a Lamborghini to Middle Class families in the United States.

They will 100% agree with you that a Lamborghini is worth every penny asked, but the price – the actual dollar amount asked for the vehicle – is so far outside of what they can afford it’s a non-starter. It’s almost a joke.

But… if your number is within a realistic range for your market – even if that number is stretching those boundaries a bit – and they say “no,” then they aren’t objecting to the price – the number – itself.

In this case, the Price Objection is a Value Objection!

[Read more…]

Wait… You Actually WANT to Be Average?

What is the Average Conversion Rate for SaaS Free Trials and Freemium?What’s the average conversion rate for free trials, pricing pages, or Freemium with SaaS or Web Apps?

There are some fundamental problems with “average conversion rate” which is why people rarely like my standard answer of: “It depends” or my more direct answer of “why, so you can be average?”

Look, if you have a 1% conversion rate right now, 2% should be looking pretty darn good to you, right?

If you have a 25% conversion rate, 26% might not be that exciting. 30% might be though!

Or if you have a 25% conversion rate, maybe 5% is what we’ll shoot for because we want more cold traffic coming through and will expect a lower rate for a little bit until we figure things out, right?

The number that Joe’s SaaS company is getting vs. Claire’s Web App doesn’t matter, regardless of what the people that have surveyed 327 “SaaS” companies to get aggregate data without context want you to believe.

We don’t even know what metric companies are basing their “average conversion rate” on and we can assume most people who talk about their numbers talk about the ones that make them look good!

But, we have been trained as an industry to look to average numbers for guidance.

So let me ask you… how can looking to averages lead to anything but average results?

When we look to average numbers to plan our businesses around, aren’t we planning on being average?

Did you create your web app just to be average?

Did you go to work for Giant SaaS Co. and seek out resources like I’ve put together so you could just be average?

Here is why “average” is damaging, aside from the whole “shoot for the middle” mediocrity problem it brings with it.

Average lacks context.

If I told you the average conversion rate for Free Trials in SaaS was 10% (and I am NOT telling you that, BTW), you’d aim for that, right?

And 10% would be a nice goal if you were currently at 5% I suppose.

But if you have an 85% conversion rate, 10% just wouldn’t make sense, right?

Even worse, it could make you think you’re doing really, really good with your 85% conversion rate and could keep you from taking corrective action.

Maybe you’d just go spend a lot to get more traffic before you realize that 85% conversion rate was an anomaly based on early-adopters and doesn’t hold-up against cold, mainstream traffic.

Look, “average” is a pointless number for so many reasons, not the least of which is…. well, that it is “average.”

You see… context is usually missing which is what the folks with the 85% conversion rate that I helped out needed to know to figure out where they really stood (and it wasn’t as good as an 85% conversion rate sounds!)

Here’s the simple way to move forward.

Figure out where you are today – something most people (including you, I bet) don’t actually know – and then figure out how to make it better.

This works whether you’re a one-person, bootstrapped shop or a tiger-team w/ buckets of VC money.

Don’t worry about what others are doing.

But then again I don’t make money selling survey results so that’s easy for me to say, right?

Look, if you’re at a 1% conversion rate, let’s shoot for 2% and DOUBLE where you are today.

Remember, that is a 100% increase over what you have now…

Isn’t a 100% increase in conversion rates hard enough to do without trying to meet some number that an analyst came up with that probably doesn’t even directly apply to your business and certainly lacks context?

You can reach 2% from 1%, right? Easy.

But if you see 25% sitting in front of you as your immediate goal – because that is the average conversion rate (it is NOT!) – that might be discouraging.

On the flip side if you have an 85% conversion rate and you feel that something is off, dig in and figure out the context. A super-high conversion rate is fantastic, but only in context.

Here’s a hint… the most important “context” for most real companies is revenue.

So the next time you pull up Google, or Quora, or LinkedIn to look for “average conversion rates” stop for a second and think about what you’re doing.

Don’t be average.

By the way, I KNOW someone is going to say “Lincoln, that makes total sense. I get it for sure. But, hey, so what is a good conversion rate number to put in the business plan?”… which is why business plans are pretty much irrelevant most of the time!