←back to thread

801 points tnorthcutt | 2 comments | | HN request time: 0.445s | source
Show context
jcampbell1 ◴[] No.7526346[source]
If you run a high margin SaaS business where much of the technology is open source, you are going to get cloned. Once you get cloned, you can be crushed by people much better at marketing and sales.

If you stick to low margin / cost plus pricing, it effectively poisons the well for your competitors.

The "poison the well" strategy has worked very well for Craigslist, and the Siracha hot sauce guy.

I'd do everything patrick suggested, but stick to the cost plus pricing and not worry about extracting consumer surplus for the value you create.

Once you have a $500/month enterprise plan that is popular, you are going to have competitors that offer more for $400/month, and VC's will be plowing them with money to hire salespeople to go after these $40,000 LTV customers. All the sudden, your product will no longer be the best solution for your own customers.

replies(6): >>7526638 #>>7526833 #>>7527341 #>>7527530 #>>7527584 #>>7529076 #
1. ForHackernews ◴[] No.7526833[source]
I like how you present Craigslist as "poisoning the well" for other business rather than "providing maximum value for consumers".

I wish all businesses operated on tiny margins. That's how capitalism is supposed to work: competition eats up surplus.

replies(1): >>7527310 #
2. jcampbell1 ◴[] No.7527310[source]
You are right, the two things are just different sides of the same coin.

Jeff Bezos and Craig Newmark are both "providing maximum value" and "poisoning the well of competitors". I'd say both ended up in the same place yet have completely different business philosophies.

When discussing the merits of different pricing strategies, it is best if the argument stands without being clouded by notions of altruism.