The Pit - IMI Trust

NO NO NO NO!  It is incredibly frustrating to see how people compete on price.

The number one reason companies compete on price is because they are poor at marketing.  It is the worst way to try and grow a business, as your marketing plan seeks to eliminate your own profits and the more aggressive you market the slimmer your margins are.

If your marketing appeals to your target market correctly then it is unneccesary to compete on price.  A well-known Australian Bank split-test a marketing campaign recently.  To a sample of 10,000 people they sent two separate credit card offers.

1. One offer with an interest rate of 12.5%
2. One offer with an interest rate of 16.5%

Clearly, credit cards that have the lower interest rate should be more popular.  Which offer do you think would be the most successful? Remember this was the same company, going to the same client client base.

To their sample, the interest rate of 16.5% was easily the most successful.  So what was the difference?

On the 16.5% offer there was a photograph of an attractive, healthy, female on the letter. Marketing and appealing to your target market wins over low prices.  In this case, just one photo encouraged credit card prospects to take an offer 33% more expensive.

There is so many frontlines in business in which the war can be won.  If you are trying to win it on price… ask yourself if this is really your best strategy