How to keep your price promotions and discounting strategies within 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 isnt 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, Im 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 mustnt 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.
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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