We were comparing two SaaS applications. One gave us a better quote, so we asked the second if they would match it. They wouldn’t, but their founder, wrote us an email explaining:
- Why their software is better
- How their software would save us a lot of money and time
After reading it, we immediately picked the more expensive choice. I thought the email was so compelling that I wanted to share it as a great example of how to position a product for value vs. cost. I've anonymized the company:
Subject: Re: demo follow upNo worries... short answer is no, we aren't able to compete on price against FooCorp.The FooCorps's of the world have spent a couple decades now in a the race to the bottom and it shows. I have no doubt you can get their product (or a whole raft of others) for a few bucks cheaper than us.Our product, Acme, is different. We're designed to help improve your'e company's performance in the critical area of XYZ. The ROI on doing that is enormous.Now, not every organization sees the value in investing in XYZ. I get that. But if yours does, Acme is one of the most leveraged investments you can make.Assume HelloSign does 5-6 transactions in the [XYZ field], that's going to run 300-600k per year (so figure this is a $1-2MM investment over 3 years). The value of each transaction will be maybe 2-5x that if they're done well, whereas a bad one we know can actually destroy value.On the cost side, great transactions churn over at less than half the rate of low performing ones - which means if you do a better job at XYZ, you'll save 10's of thousands in new transaction costs as they stay longer. And on and on....So ultimately if you think Acme will help you do this better - even just a little bit - the whole thing is peanuts. The cost difference between our product and the others, even less.Look, FooCorp's customers are switching to Acme in droves because we're investing heavily in great customer service and innovation. Those things cost money but, as we see above, they drive tons of value so the market is happy to pay.We'd love to have HelloSign on board as a customer and I'd be happy to have another chat with you or them if you think it would be useful. Let me know!Regards,Acme CEO
The point is, instead of doing a price cut, it may be worth explaining why your product is worth more. This email will probably be worth millions of dollars over the lifetime of their company.
Either way, he was right. The minor different in price was worth it. The product is amazing.