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How to Discount Without Being Deceptive

Discounts are one of the oldest tricks in the inventory problem-solving book. It’s definitely a great feeling to see your sale promotions receive positive feedback, but to accomplish it by deceiving shoppers is a big no-no. Retail giant J. C. Penney has recently been hit by a class-action lawsuit for its years-long promotions that some say are deceptive and contain fraudulent advertising. J.C. Penney’s case serves as a warning for retailers. To help you stay out of trouble, here’s how you can discount without being deceptive.

What Is Deception in Retail?

So how do you know when you’re crossing the line? According to the Federal Trade Commission’s (FTC) Deception Policy Statement, an advertisement is considered deceptive when it contains or omits information that can potentially mislead consumers who are acting reasonably under the circumstances. This means that it would be considered deception if you have certain information that you know could affect a shopper’s purchase decision and decide to not disclose it.

 

According to law firm Goldberg Segalla, a major fashion retailer was recently sued for “deceptive discounting” because a shopper was intrigued by a promotion he saw in their window. When he tried to purchase the items that were claimed to be discounted, he was informed that the store wouldn’t sell some of those promoted items for the discounted price. He claimed that the promotion lured him into the store, but the retailer failed to honor their promotion. The FTC has also found deception in cases that have to do with misleading price claims, pyramid schemes, and failure to fulfill promises.

How to Avoid Deception

When making discount claims or advertising promotions, you need to be aware of the laws regarding deceptive advertising. You must be certain that everything you are saying is accurate and concise. For example, if you are having a sales promotion on last season’s products, make sure all aspects of your advertisements only promote those items; don’t confuse shoppers with images of products from this season. To ensure that you’re staying on the right side of advertising, here are some things to keep in mind when planning your promotions.

The Three P’s

To ensure that your claims are truthful, it is best to always include disclosures in your advertisements. According to law firm Klein Moynihan Turco, the FTC advises retailers to consider the following three factors when evaluating whether or not a disclosure is clear and concise: placement of the disclosure in the advertisement, proximity of the disclosure of the applicable claim, and prominence of the disclosure. It is also important that you consider whether the advertisement’s design distracts the shoppers from the disclosure. Here is a full description of what you’ll need to keep in mind to keep your disclosures in line:

  • Placement & Proximity – Be sure that the disclosure is placed right next to or in close proximity to the relevant claim because it is essential that your shoppers are able to view the whole disclosure. Retailers tend to place them underneath the advertisement. However, there may be times when this could cause issues due to long disclosures. To solve this, you should explicitly instruct online shoppers to scroll down to read everything like “see below for important instructions for discount,” instead of a simple “see below for details.” It is advised to have explicit instructions because shoppers would be more receptive to clear instructions. Due to the importance of the proximity, you must ensure that the disclosure is close to the relevant claim. You can use hyperlinks to communicate disclosures, but any vital disclosures to the promotion should be located right next to it. For example, if there are extra costs that apply to a transaction, you should place that directly next to the promotion.
  • Prominence – It is your responsibility to make sure that the disclosure captures the shopper’s attention. Be certain that the disclosure isn’t lost in the design of the advertisement. It is important that your disclosure is easy to find. You can place your disclosure in multiple locations to guarantee that it reaches the shopper.

Providing a disclosure is not enough; your shoppers need to understand it as well. Use clear and concise wording. If the disclosure confuses the shopper, it may be considered deceptive.

Have Sufficient Quantities

When advertising your sales promotion, your inventory should be stocked appropriately. If you don’t think that you’ll have enough, it is important that you claim that the quantity is limited. According to law firm NOLO, certain states have laws that require retailers to stock an advertised product quantities to fit the expected demand, unless the ad states that the stock is limited. For example, California requires this of retailers. Prepare for the volume of your sales promotion and get informed about the laws pertaining to it.

Discounts are a great marketing tool retailers can use to promote their business and speed up slow-moving inventory. But you should also be aware of the deceptive advertising laws to avoid getting in trouble with the FTC. When promoting your discounts, be sure to consider the three P’s and have sufficient inventory.

Contributing Writer: Don Dao

Min-Jee Hwang

Min-Jee is the former Director of Marketing at Wiser. She has extensive experience working with SaaS companies and holds a BA from Carnegie Mellon University and an MBA from NYU Stern.

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