The Ultimate Competitor Takeaway Playbook: Pricing Incentives

How to win competitors’ established customers using pricing incentives

The B2B SaaS market is a battleground. With more players than ever, cutting through the noise to win over customers requires an even more strategic approach.

One powerful growth strategy is to run a Competitor Takeaway Campaign, as detailed by Mainsail’s Brian Russell and Michael McEuen in a recent post. In a Takeaway Campaign, you can efficiently gain a competitive edge and win more new business by targeting your competitor’s customers. These leads are high-quality but complex to capture, requiring an informed approach.

A key tactic in any Takeaway Campaign is to implement pricing structures and strategies that can help drive the sale. To do so effectively, you must be sure that the benefits of switching will outweigh any price-related challenges that may come with the transition. These are known as “switching costs.”

In this guide, we’ll cover effective competitor takeaway pricing incentives, address the common pricing challenges associated with switching costs, and present strategies to overcome these challenges.

Unlocking the competitors’ arsenal with pricing benchmarks and targeted price strategies

More than likely, your prospect already has a unique relationship with their current vendor. They might be totally content and have no desire to switch. Or, even if they are only partially satisfied, they may hesitate to switch simply due to cost, effort and perceived risk.

The first step is to understand the pricing approach of your competitors. Research their pricing structures using a blend of primary and secondary research. Then, create a competitive analysis battle card to empower your Sales team. Examples of primary research include interviewing existing customers (can be done informally during discovery calls), mystery shopping, or conducting competitor product trials. Examples of secondary research include culling through the competitors’ websites, social media and marketing materials or reading industry news and reports. It’s possible this cost comparison has already been published by someone else and if not, don’t hesitate to lean on AI for some initial research.

Once you’ve analyzed the competitive pricing landscape, segment your prospects. By grouping based on factors like company size, industry, or specific pain points, you can:

• Craft targeted pricing offers: Develop pricing strategies that resonate with specific customer needs and budgets.
• Customize messaging: Tailor communication to address the switching costs and concerns most relevant to each segment.

For example, smaller companies with limited resources might be more receptive to switching if you waive implementation fees, offer a free trial, or present a transparent pricing model with predictable costs.

When marketing to enterprise companies, you might have more luck focusing your pricing strategy and messaging around the ROI you deliver across multiple teams, showcasing your product’s ability to scale alongside the prospect’s continued growth.

If in your segmentation you come across companies with specific pain points related to their current product, your price strategy should include specific use cases, targeted discounts or price-reduced features that directly address these pain points.

In every case, ask for and listen to prospect feedback so you can continue to tailor and improve your pricing messaging.

Understanding the switching cost hurdle

As you work to attract customers from the competition, keep in mind the costs associated with switching from one vendor to another, also known as “switching costs.” There are two primary types of switching costs:

• Actual costs include expenses associated with data migration, integration, configuration, training, overlapping contracts and early termination fees.
• Perceived costs are the unknowns that come with switching products: the fear of wasted time and effort, disruption, and potential performance issues with a new solution.

Even if you have a better product, sales process, and customer support team than the competition, switching costs can stop a takeaway conversation before it even begins.

Help your Sales team overcome these potential obstacles by addressing uncertainty head-on. Ask yourself: “What are all the reasons a customer would say ‘no’ to purchasing our product?” Then, be able to address every one of those reasons.

Address “actual cost” hurdles with customized promotional pricing (but, with a caveat)

In our experience helping SaaS companies strategize pricing models, we have found that promotional pricing is typically the most effective way to attract customers from competitors. The initial value proposition rewards their leap-of-faith and secures more predictable revenue for your company.

However, in your conversations with prospects, you will find that one size does not fit all. Your pricing strategy needs to address the needs of your ICP and align with the goals and capabilities of your business.

Consider these options:

• Limited-time introductory pricing: Alleviate hesitation with an up-front discount. Be sure to combine this offer with longer contract terms and/or multi-year rates to maximize Customer Lifetime Value (LTV).
• Early contract buyout discounts: Motivate customers nearing renewal with discounts to break free from existing contracts.
• Backloaded subscriptions: Subsidize remaining payments to the incumbent vendor, making the switch more attractive. This is especially effective when a customer’s renewal date is approaching.
• Delayed fee charging: Defer software fees until full implementation is complete.
• Time-bound free trials: Create a sense of urgency with limited-time free access to your platform.
• Waived implementation costs: Streamline the switch and reduce upfront costs for select segments. We recommend this incentive for streamlined implementation with predictable costs.

A word of warning! Make sure you establish clear operational processes to approve and manage these special pricing promotions, so you don’t end up with potential revenue loss. Define your “promotional” versus “standard” pricing terms and set clear contractual expectations with your teams and customers.

Address “perceived” switching costs and build trust with commercial flexibility

Past experiences with competitors — both positive and negative — might make prospects hesitant to commit to new contracts and payment terms. Prospects are likely to have perceived risk in switching to an unknown and untested provider.

Here are some common “perceived costs” and where maintaining commercial flexibility can be beneficial:

1. When the prospect feels the competitor product was over-promised and under-delivered
2. If the prospect has recently experienced issues with the competitor’s product or service
3. If the prospect feels nickel-and-dimed for additional features, capabilities or changes
4. If the prospect is unsure about their product needs and exact value prop

Incentives to employ to address these perceived cost concerns: 

• Overage grace periods: Consider waiving user or usage overage fees during the initial contract term but explain how overages will be handled moving forward. This strategy alleviates concerns about unexpected costs while encouraging product adoption.
• Extended cancellation periods: Demonstrate confidence in your product’s value by offering extended cancellation windows with no penalty.
• Performance-based Service Level Agreements (SLAs): Tie fees to measurable performance metrics like service availability and business results. This incentivizes delivering value and builds trust with prospects.

Measure the metrics that matter to see how your strategies pan out

To know what’s working and where to double down on your pricing strategies, you need to measure the results. If you measure nothing else, measure Customer Lifetime Value (LTV). This is the most important metric to track in this campaign because it allows you to analyze the long-term revenue generated from acquired customers.

Track the cost of acquiring new customers by measuring Customer Acquisition Cost (CAC) through your takeaway pricing incentives so you can understand the overall impact on the business.

Finally, review the overall revenue generated from acquired customers.

Competitor Takeaway potential, unlocked

When strategically implemented and carefully measured, the pricing element of your Competitor Takeaway Campaign can have positive ripples beyond just customer acquisition. It can unlock new customer segments and fuel sustainable growth.

Ideally, effective pricing incentives can deliver a multi-faceted positive ROI in your campaign: lowering CAC, reducing churn and increasing brand advocacy — all while generating revenue from newly acquired customers.

In the beginning, pricing incentives are critical to luring away new business. Incentives should be informed by research and tailored to fit the needs of your prospect as well as your company roadmap. At the same time, it’s important to prioritize long-term profitability for your company by building in checkpoints to right-size the contract once the promotional period expires. Think about switching cost discounts in isolation, as a time-bound incentive to make the switch that still minimizes the impact on recurring revenue.

Then, start selling.