
Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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Join companies like Zoom, DocuSign, and Twilio using our systematic pricing approach to increase revenue by 12-40% year-over-year.
In today's complex business landscape, understanding your competition extends far beyond monitoring direct rivals offering similar products or services. Increasingly, SaaS executives are discovering that their most significant threats come from unexpected places—alternative solutions that customers might choose instead of their offerings. This phenomenon, known as indirect competition, can silently erode your market share while you're focused elsewhere.
Indirect competition occurs when businesses offer different products or services that fulfill the same customer need or solve the same problem through alternative approaches. Unlike direct competitors who mirror your business model, indirect competitors may operate in entirely different industries or utilize completely different technologies.
For SaaS companies, indirect competition might include:
According to a 2023 Gartner study, 64% of B2B buyers consider alternative solution categories before making purchasing decisions—a 27% increase from just five years ago. This shift demonstrates why identifying non-traditional threats has become crucial for business survival.
Non-traditional competitors often disrupt established markets through fundamentally different pricing approaches:
Perhaps the most challenging indirect competitor is the "free" option. Whether it's open-source software, freemium models, or companies offering your core functionality as a minor feature within their broader platform, zero-price alternatives create psychological barriers to your premium pricing.
Research by the Harvard Business Review found that introducing a free alternative to a market can reduce willingness to pay for premium solutions by up to 40%, even when the paid option offers demonstrably superior value.
Enterprise software companies increasingly find themselves competing against platforms that bundle similar capabilities as add-ons. Microsoft, Google, and other tech giants frequently incorporate features as "free additions" to their core products that smaller SaaS providers charge for as standalone solutions.
Salesforce exemplifies this strategy by continually expanding its platform functionality, transforming what were once distinct software categories into features within their ecosystem.
Some indirect competitors don't just offer alternative solutions—they reframe the entire problem, making your offering seem obsolete rather than simply inferior.
When Slack entered the market, it didn't position itself as "better email" but as a fundamentally different way to communicate. This approach made traditional communication tools appear outdated, regardless of their actual utility.
To identify and respond to non-traditional pricing threats, follow this systematic approach:
Rather than narrowly defining your market by product type, examine all the ways customers might solve their underlying problems:
"Companies that define competition based on product similarity rather than problem-solving similarity miss 70% of their competitive threats," notes Clayton Christensen of Harvard Business School.
Understanding how customers perceive value across different solution categories requires looking beyond feature comparisons:
Monitoring indirect competition requires different signals than tracking direct competitors:
Once you've identified your indirect competition, consider these strategic responses:
Instead of competing on features or even direct benefits, elevate your messaging to focus on outcomes that alternative solutions cannot match:
Traditional pricing models may be ineffective against non-traditional competitors:
Zoom successfully employed this strategy by offering a genuinely useful free tier that outperformed many competitors' paid offerings, creating a natural pathway to paid plans as users' needs grew.
Consider strategic partnerships or expanded offerings that counter bundled alternatives:
Many alternative solutions appear less expensive on the surface but carry hidden costs:
The distinction between direct and indirect competition continues to blur as technology evolves. Today's indirect competitor may be tomorrow's direct rival—or acquisition target. This fluid competitive landscape requires continuous monitoring and strategic flexibility.
According to McKinsey, companies that systematically track and respond to indirect competition achieve 23% higher growth rates than those focused primarily on traditional competitors.
For SaaS executives, the imperative is clear: expand your competitive analysis beyond traditional boundaries. The most significant threat to your business likely isn't the competitor you're watching—it's the alternative solution you haven't noticed yet.
By developing robust processes to identify, monitor, and respond to indirect competition and non-traditional pricing threats, you position your company to defend against market disruption and potentially become the disruptor yourself.
Join companies like Zoom, DocuSign, and Twilio using our systematic pricing approach to increase revenue by 12-40% year-over-year.