Business development · 11 June 2018

How to keep your price promotions and discounting strategies within the law

price promotions
If your promotion is not factually correct you will be in immediate breach of the law

To help small business owners keep their discounting strategies on the right side of Trading Standards, Grid Law founder David Walker offers a legal context to three different price promotions with advice for avoiding the common pitfalls.

We all love a bargain, so price promotions are a great way to increase sales during a traditionally quiet time. For most businesses, planning a price promotion is a job for their marketing department but they need to be very careful with what they say.

It can be a delicate balance between making an offer seem as appealing as possible and not crossing the line into illegality.

If a business gets the balance wrong, they can be committing a criminal offence and risk prosecution by Trading Standards. If found guilty the business can be fined and in the most serious cases the directors can even face up to two years imprisonment.

So, how do you ensure your marketing department stays on the right side of the law?

In most cases, there isn’t a clear answer to this question. Staying on the right side of the law is a judgement call based on experience. To help you with this, I’m going to look at three common scenarios and give you some suggestions to think about when planning your next price promotion.

(1) 10% off everything

Discounting products is usually the simplest and the most straight forward form of price promotion. When you take a certain percentage off (assuming you’re discounting a genuine price, which I discuss further below), it should be quite clear what the original price was and what it is now.

Customers can then make a relatively easy assessment of whether this is a good deal or not.

Where discounting can become unclear is when you make statements such “10% of everything”.

When you do, what do you mean by “everything”?

Does the discount apply to everything in the store, everything in a specific category of products or everything on a particular shelf?

When promoting this offer, you must make it clear what the discount applies to. For example, you mustn’t imply that the discount applies to everything in store simply to get customers through the door. If you do this and then your customers find out that the discount only applies to a limited number of products you will be misleading them.

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(2) Was £50, now £25

When making “was / now” type offers, it can be very tempting to inflate the original price to make the discounted price appear even more appealing. This is an extremely risky strategy and not one I condone.

However, I know it happens and I know that when considering a price promotion such as this, marketeers often struggle with the following question:

“How long must the product be on sale at the higher price before it can be offered at a discount?”

There are no definitive rules here.

To increase the chances of this type of price promotion being considered fair, the product should have been on sale at the higher price for at least as long as the sale period and preferably longer.

Also, it’s not just the length of time that the product has been available at the higher price that’s important when assessing the fairness of such a promotion.

The product should also have been on sale at the higher price in the same store as it is now being discounted. If the product was only available at the higher price in another store that the customer is unlikely to have ever visited (because, for example, it’s in a different part of the country), the discounting is less likely to be fair.

However, probably the most telling indicator is the number of products sold by the retailer at the higher price. If the product has been on sale for an inflated price of £50 for a reasonable period of time, in the same store as it is now being discounted, but nobody bought the product at that price (or sales were particularly poor compared to the genuine, £25 price) it’s highly unlikely to be seen as a genuine reduction.

(3) 50% cheaper than [competitor]

As I have said in a previous article, the rules on comparative advertising are complex. But even when you’re confident you have complied with all the rules, there are still risks with this type of price promotion.

When you’re comparing prices, it’s essential to keep a close eye on what your competitors are doing. This is because a campaign that’s legal one minute can suddenly become illegal without you doing anything wrong.

For example, if you’re advertising your product as being 50% cheaper than a competitor’s product and then they match you on price (or even just reduce their price a little so you’re now only 45% cheaper) you will have to amend your promotion or withdraw it altogether.

If you don’t, your promotion will no longer be factually correct. If your promotion is not factually correct you will be in immediate breach of the law, even though the promotion was legal to start with.

If you’re running a price comparison promotion online it will be relatively easy to update your website. However, if you have printed materials in store, it could be a very expensive exercise if you suddenly have to have everything reprinted.

As you can see, there are many potential pitfalls when running a price promotion but, in most cases, complying with the law is common sense. The laws are there to protect your customers so if you approach the promotion with a genuine intent of offering your customers a great deal, you shouldn’t go far wrong.

Having said that, if you’re unsure about what you can or cannot say, you should take professional advice.

If you have any questions about keeping your price promotions legal, please feel free to email me at editors@businessadvice.co.uk and I’ll happily answer them for you.

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ABOUT THE EXPERT

David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry – advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.

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