Is being the cheapest option in our category a good strategy for us to gain market share, or will pricing too low make customers perceive our product as lower quality or less capable?

Based on our saas pricing book, Price to Scale, while pricing at the lower end can help drive higher market share—especially in competitive segments—it comes with potential drawbacks that you need to manage carefully.

Key Points from the Book:

• Lower pricing can drive larger user bases: As noted in Price to Scale, pricing at the lower end of the range may help attract more customers, particularly when market share is the primary goal.

• Quality perception matters: The book warns that pricing too low can lead customers to believe your product is inferior or less capable. This negative perception can undermine the value your product offers.

• Strategic trade-offs: Your decision should consider your market segment. For instance, enterprise-focused products may sometimes prioritize margin over market share due to the higher cost of acquisition and implementation, whereas a bottom-up SaaS approach might benefit from a broader user base.

• Balance is essential: The strategy should be a balance between attracting the desired volume and maintaining perceived quality. Setting a low enough price to be competitive without devaluing the product requires a deep understanding of your customer segments and their willingness to pay.

In summary, while being the cheapest option might increase market share, be cautious—if you price too low, customers might question the product’s quality. It’s crucial to align pricing with both market conditions and the perceived value of your product. Refer to the related sections in Price to Scale for more detailed guidance on finding this balance.