A competitive-response case. Tests whether you diagnose before reacting - how they fund free, which segments are actually at risk - and respond with structure.
Interview prompt
Your product costs $10/month. Your main competitor just made theirs completely free. How do you respond?
What interviewers evaluate
Do you resist the instinct to panic-match and diagnose first?
Do you ask HOW the competitor funds free (bundle, ads, VC burn) and what that implies about durability?
Do you segment your exposure instead of assuming all customers are at risk?
Do you lay out response options with tradeoffs and pick one with tripwires?
Do you show strategic literacy - price wars favor the structurally-lower-cost player?
A framework to structure your answer
Diagnose their move - free is a strategy, not a price: bundling, ads/data monetization, or VC-funded land grab? Each has different durability.
Diagnose your exposure - churn and win-loss by segment; price-sensitive light users vs customers buying reliability, support, compliance.
Watch before acting - set explicit tripwires (churn, trial conversion, competitive-loss rate) over a defined window.
Options - match free / segmented free tier / double down on differentiation / attack their monetization weakness.
Decide - pick the option set that defends the funnel without destroying revenue; define the escalation trigger.
Play the long game - if they're structurally lower-cost, move the competition from price to value.
Strong sample answer
Try structuring your own answer first, then reveal a strong worked example.
Common variants
A big platform just bundled a free version of your product. Respond.
A competitor cut prices 50%. Do you follow?
An open-source alternative to your product is gaining traction. What do you do?
Pitfalls to avoid
Panic price-matching before diagnosing funding, durability, or actual exposure.
Treating all customers as equally at risk instead of segmenting.
Ignoring how the competitor funds free - the key to predicting whether it lasts.
Responding with a 'free tier' so generous it cannibalizes your own paid product.
No tripwires - either overreacting immediately or underreacting forever.
Likely follow-ups
Three months in, churn among SMB customers doubles. Which lever do you pull?
Your board asks you to match free 'to stop the bleeding.' Make the counter-argument.
How does the answer change if the competitor is an open-source project, not a company?