[lsc]

The interesting part of this 'don't compete on price' advice is that in many markets (the market I am in included) marketing is often more than half what you are getting from the customer. In the example above, instead of paying $12-$15 per customer to goog, what about dropping your price by $10 and seeing what happens? If your product is comparable, it only takes one reddit article comparing you to the competition to get a whole lot of interest.

I can tell you from experience that if you can undercut the competition by half, you get a lot of slack when it comes to not having all the cool features the other guy has.

One of the things that I think many people miss about competing on price is that if you don't have the marketing muscle of the compititon, you need to be dramatic about your price. few will go with an unknown to save 10%; but if you can save 50%, well, that's a pretty good argument to go do some research on that unknown company, no?

(Overall, my position on the 'compete on price' / 'never compete on price' debate is "do what you are good at" - if you are good at selling to people with money, sure. charge a premium and take advantage of your connections and skillset. Rich people and large corporations need stuff, and there's nothing wrong with giving it to them. On the other hand, if you are good at being cheap and bad at selling, well, maybe you should think about attracting the attention of people willing to do research by lowering your price.)

[mbrubeck]

Since he politely didn't shill for himself above, I'll point out that lsc is the founder of http://prgmr.com/ which has crazy low prices for virtual hosting.