Competing with promotions not prices

Competing on price is always tempting, particularly when the competition is getting tough. But we all know it leads to a downward spiral of reduced profitability, reduced capability, more reduced prices, and so on. So what are the alternatives?

Using promotions can be a much more targeted way of competing commercially, on terms that deliver benefits rather than just reduced margins. Firstly, promotions can be used to reward the behaviour we want to encourage, like topping up with large values. So, 'top up $10 and get free texts this weekend' is a better option than 'cheaper texts', as it maintains the base price, time limits the offer, and encourages increased usage, as well as achieving the primary aim of growing a profitable customer base.

However, promotions need to be treated carefully, they too can become devalued. If every customer gets every promotion, they will become 'promotion weary' and see your offers as unattractive as email spam. You'll also have customers taking up costly promotions with no top line benefits - customers who were going to top-up and spend anyway will take all the offers you were intending for those whose usage had declined. So effective business intelligence and campaign management is essential to focus on the primary targets, where incremental revenues can be gained, churn can be prevented, and loyalty can be increased.

Competing with promotions is a more intelligent approach than just using price, but competing with intelligent promotions is best of all.