How not to run a price promotion (and what to do instead)
For his latest Business Advice article, Grid Law founder David Walker explains the?legality behind running a price promotion, before outlining the best ways to legally market product offers. Special offers and discounts can certainly boost sales, but occasionally they can seem too good to be true. I often attend business seminars and conferences and sometimes watch in disbelief as the ?experts? and ?business gurus? sell their products and courses from the stage. I sit there, confused, thinking ?Is this a good deal or not?? This ?experts industry? is rapidly growing in popularity so I?m going to use it as an example of how not to run a price promotion. At the moment, it seems to be one of the worst industries for flouting the rules and if they?re not careful, they will face a heavy clamp down by the ASA (Advertising Standards Authority). If you haven?t been to one of these events, this is typically how a presentation will unfold. After giving a talk for an hour or so, the ?expert? will start a sales pitch along the following lines: ?If you like what you?ve heard and would like to learn more, then I have this course on offer. It?s the number one training available on this subject and usually it?s ?10,000. But, just for today, I?m going to make you a very special offer.I?m going to throw in two, free bonuses. The first is another course I teach worth ?5,000 and the second bonus is a one-to-one coaching session with me.My high-end coaching clients regularly pay me ?25,000 a day for my advice, but you?re getting access to my 20 years of experience for a fraction of that price. If you add everything up, I?m giving you an amazing ?40,000 of value.However, if you?re one of the first 100 people to sign up, all of this is yours for just ?2,000. That?s 95 per cent off! But, you have to hurry. This offer is only valid right now and it?s not going to be repeated. When the places are gone, they?re gone.? What a bargain! When the speaker has finished (sometimes even before they have finished) there?s a stampede to the back of the room. Everyone is pushing and shoving to make sure they don?t miss out which fuels the buying frenzy even more. When they?re finished, the ?expert? has pocketed a cool ?200,000. Not bad for a morning?s work, but is this actually legal? I?m not even going to consider the quality of the product ? that could be a whole other article. What I?m interested in is the way the price is set and how the sales pitch unfolds. (Please note that these figures I?ve quoted are just an illustration, but they?re not far from the exact pricing given by one particular ?business guru? I?ve seen speak several times.) So, let?s break this down, point by point. Who says this is ?the number one training?? Based on what? Is it the most popular or does it get the best results? Compared to who? Unless these claims can be backed up with evidence, they shouldn?t be made. Are the bonuses really free? If the price of the package has been inflated to cover their cost, they?re not free. Also, do these bonuses ever sell on their own? Are they genuine, stand-alone products and services, or does the package only really work when all of the elements come together? If they?re not truly independent products, they?re not a bonus. Next, let?s look at the price. Is what?s being offered really worth ?40,000? Possibly. Who knows? Everyone is free to charge however much they like. The important question to ask is whether the expert has actually sold any of these packages (or its individual elements) at this price. It?s not enough to advertise them on a website for ?40,000 if they never sell. If they are only ever sold at these business events for ?2,000, then the true value of the package is ?2,000, not ?40,000. Therefore, you?re not getting a 95 per cent discount, you?re paying the full price for the package. The terms of the offer are also unclear. Unless you?re really concentrating (and remember that on stage this sales pitch will be much longer than the paragraph I have summarised above) you may think you?re getting a day?s one-to-one consulting as part of the package worth ?25,000. You don?t know if you are. All that?s on offer is ?a consulting session?. There?s no mention of a full day, this is only implied by the total value of the whole package. Next, this is a limited offer. It?s only available to the first 100 people and they must sign up right now! Scarcity is a huge driver for sales, especially when people think they?re going to miss out so you must not mislead them. If this ?expert? is on the speaking circuit, giving this presentation and making the same or a very similar offer on a regular basis, there isn?t really any scarcity. If you miss out this time (which is probably unlikely depending on the size of the audience) all you have to do is find out where he?s speaking next, pop along to see him and get ready to lead the next stampede. So, is what our expert doing legal? Well, it all depends on whether he can back up his claims. If he can?t back them up with real, verifiable evidence, he could face legal action from disgruntled customers wanting their money back. He will suffer bad publicity and his personal brand and reputation will be severely tarnished. It will be harder and harder for him to get speaking gigs and without these, his income will start to dry up. And this is before the ASA and trading standards get involved. So, if this is one of the worst examples of a price promotion, what should you be doing instead to stay on the right side of the law? As always, your advertising must be legal, honest, decent and truthful. It mustn?t be misleading or confusing, and if you?re making any claims, you must be able to back them up with documentary evidence. (For more information on this, please see my previous article: Promoting your business ? the line between impact and illegality.) If you?re offering something for free or at a discount, make sure this is a genuine reduction based on previous sales. If there are limits on your offer, they must be real and you must stick to them. And finally, be very clear about what you?re offering. Your customers need to understand the offer and know whether or not they?re getting a good deal. As always, if you have any questions about price promotions or any other business legal questions, please feel free to email me at firstname.lastname@example.org and I?ll happily answer them for you.Catch up on the rest of David Walker?s marketing series:
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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