For an enterprise B2B company, is underpricing to gain traction a good strategy?

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JASON LEMKIN

Yes, to some extent — once a category is well established and there is a subset of functionality that is commoditized.

Brands matter. They matter in B2B and SaaS as much or even more than anywhere. You’re buying a solution to run your livelihood on. What you need is what works, what you can trust. Not what’s $0.60 a month cheaper.

But … then a time comes when a category is very well established, so well established that a subset of the functionality becomes a bit like water. An element of it does become a quasi-commodity.

Now, buyers that look at multiple vendors … a subset will chose the lowest-cost solution that meets their minimum spec. Period.

And, on a related note, as the winners in a category get really big … they tend to go upmarket. And raise pricing further. This creates a constant stream of Room at The Bottom. More on that here:

Don’t Confuse Room at the Bottom with Disruption

But in most deals, until the category is very well established and a portion of the functionality is a commodity — lower pricing won’t win you the deal. Brand and Trust will, 9 times out of 10.

So lower pricing can work. But what usually works better is being the dominant brand in a category. And if there’s already a dominant brand or two — think about owning just a piece of the category, and winning that small piece. Instead of simply going low.

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Published on January 5, 2017
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