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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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Based on our pricing strategy book, Price to Scale, new competitive entrants do warrant a careful reexamination—and potentially an adjustment—of your pricing strategy. Here are some key points directly from the book and how they might inform your decision:
• When competition intensifies, customer price sensitivity often increases. As highlighted on page 267 of our book, customers begin comparing your priced offering to lower-cost alternatives, which can put downward pressure on your premium pricing.
• A new competitor can shift the perceived value of your product. If customers see viable, lower-cost options that sufficiently address their needs, you may need to reassess the balance between pricing and the unique value-add your product provides.
• Rather than simply lowering prices, consider a market segmentation approach. The book discusses how companies sometimes create tiered offerings where advanced features justify a premium price for more demanding users, while a basic, lower-priced option can serve more price-sensitive customers.
• Finally, remember that any pricing adjustment is unique to your business context. As noted in Price to Scale, you should conduct a thorough analysis of customer behavior, acquisition costs, and the competitive landscape. This might involve running tests or "sanity checking" your strategy before committing to significant price alterations.
In summary, while you don’t necessarily have to lower your prices immediately, new competitors should prompt you to reexamine whether your current pricing is aligned with market realities and customer expectations. Adjustments might range from subtle tweaks to a more distinctly tiered model that matches evolving market conditions.