What should we do if a major competitor suddenly lowers their prices or runs a big promotion? Should we respond by lowering ours as well or maintain our pricing and emphasize other differences?

Based on the guidance in our saas pricing book, Price to Scale, here's how you should think about the situation:

• Instead of immediately cutting your list price across the board, start by segmenting your customer base. Evaluate which customer cohorts are most sensitive to the price changes and which ones might value other aspects of your service more.

• Consider offering creative and proactive alternatives. For example, you might:
– Offer a better option (such as an upgrade) for the same price,
– Provide a discount with specific conditions (like a commitment to a longer contract or additional add-ons),
– Develop a new pricing tier or package that differentiates your product from the competitor’s offer.

• By maintaining a structured pricing strategy—with conditions and differentiated offerings—you can avoid simply becoming a price competitor. This approach not only retains customers by meeting their value expectations but also reinforces your overall market positioning and product quality.

In summary, rather than lowering your prices across the board in response to a competitor’s promotion, use segmentation and tailored alternatives to address price sensitivity while emphasizing your product’s unique benefits. This strategy, as discussed in Price to Scale, allows you to maintain profitability while effectively reducing churn.