Ask HN: Copy & Undercut. Should I do this?

Don't do this.

Your job is to provide something people want that you can scale. 99.99% of the time somebody will be able to point at what you are doing and say "That's already been done!"

People who say this have no idea what they are talking about.

A business is about a hell of a lot more than some unique, creative idea. In fact, I think it's almost a reliable metric to reverse this thinking: what's been done to death that other hackers wouldn't like? To me if you want some kind of system for ideas, that's where I'd go.

But the big-picture ideas are almost always worthless because the devil is in the details. The "why the hell would anyone use my service" is spot on. The answer will never be something like "I have a unique idea" -- it'll be a lot more complicated than that.

I consume a lot of things, and I never make consumption or purchase choices based on who actually came up with the business concept or how many other folks are doing it.

1). No customers, visitors, or social proof.

2). No marketing strategy.

Sure, you can announce to an uncaring world that your clone is cheaper. So what? People don't buy Github because it is the cheapest option. They buy it because it is Github.

To the limited extent that cheap is itself compelling, cheap compels terrible customers to use you... Until someone undercuts you, at any rate. Pray that that day is soon, because the pathological customers attracted by Lowest Price Here are like dementors with keyboards. One glance at a support mail and your soul will get sucked out of your very eyes.

There are gigantic swathes of the human experience where startups are not as thick on the ground as "Ooh I should solve the problems of git using programmers." Go over to the BLS. Look at occupational listing. Sort by gender. If you see Engineer at top, invert sort. Pick anything now visible on your screen. Solve their problems. You'll have people laughing for years that there is any money in what you are doing.

P.S. Github's weakness on pricing, to the extent it exists, is that there exist customers for whom it is too cheap to take seriously.

P.P.S. Feature parity is unnecessary to sell many types of software and is sometimes actively harmful.

- design

- customer service

- aim for hardcore users

- aim for entry-level users

- velocity of improvements

- tone (is your competition "enterprisey"? be more friendly and mainstream)

etc. this is not an exhaustive list. there's always a way to differentiate.

You aren't looking hard enough. At work, about once a week we come up with another perfectly viable startup idea. We're already working on one, though, so we file those away just in case.

You're probably looking in the wrong place. You could be mainly looking at existing companies, which of course means you won't think of anything new. Or you could be paying attention mainly to the obvious parts of yourself. But since people like us make startups, the obvious things we need are already covered.

Instead, go look at other people. Really look. Be an anthropologist at the ballpark, a psychologist at the coffee shop, a sociologist at the grocery store, a short-story writer at the bar. Look at the problems people really have and ask: could I build something that would help?

If you think the answer is yes, go pick up something like "The Entrepreneur's Guide to Customer Development", or go do a Lean Startup Machine weekend. Learn how to test your ideas before you write code. When you find an idea you can't kill without building it (and find it you will) then go build it.

Of course, that depends on the features and service and price, but that's all up to you.

It's not unethical at all. It's how capitalism works.

Additionally, you'll be hamstrung from a budget point of view in terms of marketing and product dev budgets.

That said, there are magical price points and economies that technology can get you. For example, Encarta (the CD-ROM encyclopedia) gutted the door-to-door encyclopedia business because they could be cheap with a high profit margin.

So instead of trying to undercut an efficient technology startup, try to undercut someone (or a whole industry) who isn't using technology effectively.

I don't think competing on price will help you a lot: 1. People use a certain tool because they like it and they are willing to pay for it. A couple of dollar less, won't convince them to use your tool. 2. Too low prices tools makes people think there is something wrong with it. 3. You won't survice when you don't charge enough.

There is always a market for another tool. As long as you solve a problem, you'll attract users.

Find and talk to target customers and try to discern what would meet their needs best. I've been trying to take Jason Cohen's number of 30 to heart...find 30 customers who would buy your product, or tweak your offering until you do. Don't ignore the competition entirely, but don't base what you do just on what is out there.

>> I'm thinking of just copying other startups but charge less as a possible strategy. Is this a good idea?

No. As others mentioned, existing startups will be better than you are at the same problem because they've been doing it longer. As a result they can always charge lower than you.

What you can do is take an existing startup idea and aim it at a totally different class of users. For the example above, instead of recreating git, what about Google Docs with version history, and aim it at office workers? They don't use Google docs much because Word is almost better at everyway except sharing, which they do using email instead of via Google docs. From friends' anecdotes, it's because email provides crude version history, but google docs doesn't even provide that.

Just an example.

^^ The above things I said was what I learned in MKTG1001 Marketing Principles class. Business School makes sense some of the time, I think.

For example, for all of the great web-based services that exist, very few of them are actually prepared to adequately serve highly regulated/restricted markets like medical/legal/nat.security/etc.

If you made a Gitub that does a great job of dealing with compliance in any of those one fields, you just might have a niche. And it might be a niche that Github didn't want anyway. (this is just an example, for all I know, github does a great job in these areas).

The best part is that you have an opportunity to innovate....yay YOU!

Usually not. Competing on price is almost always a bad idea. There are two exceptions to this rule I can think of:

1. Your "knockoff target" is the only game in town and because of that they are able to charge a lot.

2. Their service is expensive to run because their infrastructure costs a lot (lots of servers, expensive proprietary app stack, ...) while you're able to run your service on significantly less expensive infrastructure.

The better approach is to see what their existing customers are bitching about. Where's the bitching there's a problem in need of a solution (and an opportunity to make money).

1. If someone is already charging for it and they have customers, they've already done the hard work. Now you can copy them.

2. You need to solve a problem better than anyone else. There are lots of cars, but people buy a partiuclar one because it moves heavy things better, or impresses the mother in law more, etc.

3. You should pick a problem that really sucks and charge more for it. I'm sure there is a specialized case you can solve for related to repo hosting. Solve that really well and people will gladly pay more for it than github.

If you're competing on price you'll have a much smaller margin and you'll get the worst customers.

When your competitors innovate or increase spending (on talent, marketing, etc.) you just won't be able to follow because you won't have the margins.

On the other hand if you can shift the costs of business then that can be a very strong competitive edge, as you can have higher margins at the same price point as your competitor.

So if charging a buck instead of ten bucks gets you 100 customers instead of ten, is may be worth looking into.

Think about the population of big internet sites (google, fb, etc) there will ever be. There are countless of these sites that have yet to be created as of today. Therefore, there's plenty of opportunity.

Read Henry Ford's autobiography: http://www.gutenberg.org/ebooks/7213

I mean, you also need to think about your market and what they care about. It is a given, I think, that if you are breaking into an established market, you will be forced to accept lower margin than the established competition. But some markets? lowering the price won't help you. In those markets, don't lower your price, but spend a larger percentage of your revenues on sales or advertising. In some markets, like say contracting to 'enterprise' customers, it makes sense to actually charge more and give most of that to a middleman; I've never been able to get as much money directly renting myself out as I could going through a middleman, even after you take out the middleman's cut. Large corporations are more concerned about following the procedures than saving 50%. On the other hand, small companies? they'll switch providers for a 10% discount sometimes. Individuals paying with post-tax money can be even tighter than small companies. So know your market, and know if spending more on sales/marketing makes more sense or if firing the salesman and knocking his commission off the price will sell you more.

Another thing; Even if you provide the same service as the existing player, if your prices are significantly lower, you will probably be targeting a different market. I mean, I steal some customers from slicehost, but I think most of those are older customers who joined up when slicehost was small and cheaper. These days, really, I doubt there is a lot of overlap between the sort of people who would consider slicehost and the sort of people who would consider me.

Really, I think the slicehost example is a good one; back in the day, Slicehost was seen as the only player (marketing failure, I think, on Linode's part, mostly, if I'm remembering the timeline right. Linode was UML a long time ago, which is really a different product, but I think Linode was Xen by the time Slicehost hit the market. At the time, I was also selling Xen VPSs, but I was in no way a serious player.) So, there were a lot of people on Slicehost who switched to Linode or to me as time went on, as they were individuals or small companies.

But large companies? they want the big name, and barring a buyout, Linode and I can't give them that. (Linode is earning a reputation on their own, which is great for them, and really, for me too, because they have no reason to lower their prices as fast as they would otherwise. But they are a long ways from having the name that rackspace has.)

I was doing some consulting the other day for a friend who works for a very large company. They are paying rather a lot for dog-slow OpenVZ VPSs provided by Verio. They could have gotten a better deal almost anywhere, but they had the relationship with Verio.

It's fairy straightforward to find a niche where the incumbents are operating sub-optimally.

One way to compete on price is to find something you could replicate, take their price and quadruple it. By charging 4 times as much, you can spend a lot more on marketing. Sure you'll lose some sales to people who price shop, but that's a small part of the market. It's possible that with four times the marketing budget you could bring in more than four times the number of customers of your competition. I don't know.

This might work best where your primary value add is repackaging a scalable service that is mostly offered by others.

Maybe you could copy patio11's appointment reminder service, only charge four times as much. There are a lot of businesses in the USA that take appointments... with the higher margins, maybe you can afford to send every one of them a nice packet of information.

The approach I take, though, is to do something original. Even if others have done it (and others are trying what we're trying, but nobodies really been successful) I expect we'll do ok because the opportunity is huge and there aren't that many others doing it.

But even still, I wouldn't be doing it if I didn't think that I had a really compelling competitive advantage. If the others weren't totally screwing up the opportunity, I'd be a lot less interested.

I think github is NOT screwing up their opportunity, and so that might not be a business to try and compete with... but there are lots of ideas... just find something where you can do it better than anyone else, or where you think you have a compelling advantage.... that would be the idea to pursue.

Maybe charing four times as much would give you a compelling advantage in marketing, I don't know. But that's the kind of price competition I'd go for.... otherwise, have your own spin and then use that difference to find the part of (a preferably very large) market to get for yourself.