In the dynamic landscape of small businesses, pricing and advertising are like two sides of the same coin. Entrepreneurs often employ various strategies to attract customers and increase sales. A widely used tactic is ‘was/now’ or ‘two-price’ advertising. It can be a powerful tool but comes with its fair share of complexities and legal implications.
The Appeal of ‘Was/Now’ Pricing
‘Was/now’ pricing, also known as ‘strikethrough’ or ‘two-price’ pricing, has an inherent appeal. It’s designed to highlight a product’s previous price (‘was’) and its current discounted price (‘now’). This strategy serves several purposes, such as creating a sense of urgency, showcasing value, and enticing consumers to purchase. A classic example might be advertising a coaching course with a ‘was’ price of $3,000 and a ‘now’ price of $2,000. At first glance, it seems like a fantastic deal that will engage buyers.
If you’ve genuinely sold some coaching courses at a higher price and then offered a reduced rate, you are generally in the clear with using this pricing strategy.
However, if you never actually sold the product at the ‘was’ price or can’t demonstrate sales at that price for a ‘reasonable period,’ it’s a risky move that is misleading customers and is likely to land you in hot water. Demonstrable sales at the higher price is essential to the ‘was/now’ pricing strategy.
The Legal Landscape
Here’s where things get tricky – and legally sensitive. The use of ‘was/now’ pricing can lead to significant problems if used incorrectly. Even if unintentional, misleading consumers through false pricing is an offence under Australian Consumer Law (ACL). Yes, you read that right – it’s an offence, irrespective of intent. The ACCC is clear about business obligations for was/now pricing, which you can read more about here.
Relying on Regular Retail Pricing (RRP
A misconception often associated with ‘was/now’ pricing is the belief that the ‘was’ price is the Recommended Retail Price (RRP). This is an incorrect and dangerous assumption. The RRP is merely a suggested price by the manufacturer or supplier and may not reflect the actual price at which the product was typically sold.
Consider a tech gadget with an RRP of $499. A retailer might advertise it as ‘was $499, now $399.’ However, if the product was regularly sold in their store for $399 or even less, this pricing strategy could be misleading.
The Grey Area: What’s a ‘Reasonable Period’?
One of the central questions surrounding ‘was/now’ pricing is determining what constitutes a ‘reasonable period’ during which the product was sold at the ‘was’ price. Unfortunately, there’s no one-size-fits-all answer. The ACCC (Australian Competition and Consumer Commission) evaluates each case individually, considering various factors.
Let’s revisit the coaching example. If you sold a reasonable number of coaching programs at the ‘was’ price and then offered them at a reduced rate, it’s less likely to raise concerns. However, if you never actually sold the coaching program at the ‘was’ price, you could be misleading customers about potential savings, which is very risky.
Genuineness of Savings
In the world of ‘was/now’ pricing, the golden rule is simple: Ask yourself whether a typical customer would genuinely benefit from the savings offered at the ‘now’ price. Transparency is key. If the price history suggests that the ‘was’ price was more of a placeholder than a genuine offering, it’s a red flag.
In addition to the legal considerations, there’s an ethical dimension to ‘was/now’ pricing. Customers are savvier than ever and can quickly recognise when a discount is genuine versus a marketing ploy. Over time, if consumers perceive a pattern of misleading promotions, it can erode trust in your brand. Maintaining transparency and ensuring that your promotions genuinely benefit your customers will help to preserve your reputation in the long run.
Remember, in the age of online reviews and social media, a single disappointed customer’s voice can resonate loudly, potentially deterring others from doing business with you.
Navigating the ‘Was/Now’ Price Game
‘Was/now’ pricing can be a legitimate and effective marketing strategy for small businesses, provided it’s done in compliance with the law. The legal landscape surrounding this practice is intricate, and unintentional missteps can lead to legal consequences.
As a small business owner, it’s vital to tread carefully when employing ‘was/now’ pricing. Ensure your advertising accurately reflects the savings available to consumers and maintain meticulous records of your pricing history. By doing so, you can harness the power of this strategy while staying on the right side of the law.
Remember, pricing transparency is a legal obligation and a cornerstone of trust in the business world. Balancing attractive promotions with honesty and integrity is the key to building lasting customer relationships and a thriving business.
If you’re still not sure what to do and would prefer not to risk a significant fine, book a complimentary call to set things straight: