Unfortunately, many retailers misuse the term “sale”. And shoppers are often persuaded that a product is on sale even when it isn’t. [For our holiday shopping tips, please click here.]
As noted in Evans and Berman’s Marketing in the 21st Century: Price advertising guidelines have been set by the FTC and trade associations such as the Better Business Bureau. The FTC’s guidelines set standards of permissible conduct in these categories:
- A firm may not claim or imply that a price has been reduced from a former level unless the original price was offered to the public on a regular basis during a reasonable, recent period of time.
- A firm may not claim its price is lower than that of competitors or the manufacturer’s list price without verifying, via price comparisons involving large quantities of merchandise, that an item’s price at other companies in the same trading area is in fact higher.
- A suggested list price or pre-marked price can’t be advertised as a reference point for a sale or a comparison with other items unless the advertised item has really been sold at that price.
- Bargain offers (“free,” “buy one, get one free,” and “half-price sale”) are deemed deceptive if terms are not disclosed at the beginning of a sales presentation or in an ad, the stated regular price of an item is inflated to create an impression of savings, or the quality or quantity of a product is lessened without informing consumers. A firm cannot continuously advertise the same item as being on sale.
- Bait-and-switch advertising is an illegal practice whereby customers are lured to a seller that advertises items at very low prices and then told the items are out of stock or of poor quality. Salespeople try to switch shoppers to more expensive substitutes, and there is no intent to sell advertised items. Signs of bait-and-switch are refusals to demonstrate sale items, the belittling of sale items, inadequate quantities of sale items on hand, refusals to take orders, demonstrations of defective items, and the use of compensation plans encouraging salespeople to use the tactic.
“Building complexity into product prices benefits retailers. It helps to cloud the transparency of online pricing, making it harder for shoppers to compare prices across chains. “’The more prices become convoluted, the less retailers will have to match lower prices offered by their rivals,’ said Simeon Siegel, an analyst with Nomura Holdings Inc.”
“And price has become a moving target. Amazon changed prices 666 times on 180 popular products sold from Nov. 1 through Nov. 19, according to Market Track, a price-tracking firm. That is a 51% increase in price volatility compared with similar products sold during the same period a year earlier. Wal-Mart Stores Inc.’s prices changed 631 times and Best Buy Co. ’s prices changed 263 times on similar products sold during the same period this year.”
Take a look at four deceptive practices highlighted by the Wall Street Journal. Click the image to see a larger view of the chart.