Published: 17 Apr 2014
Summary: ‘Was/now’ pricing can help you attract customers, but it can also be risky in some circumstances, and it can lead to significant penalties if you get it wrong.
TITLE TEXT: 'was/now' pricing Dr Michael Schaper, Deputy Chair, ACCC
MICHAEL SCHAPER: Hi, I’m Dr Michael Schaper, Deputy Chair of the Australian Competition and Consumer Commission.
Setting prices and getting your advertisements right are always an important issue for any small business.
One of the common techniques used by many firms is to compare the price they sold their product for in the past, with the price they're offering it for now.
This is called two-price advertising and it’s a common practice amongst many firms when promoting their products in print, in catalogues, on TV, in-store or online.
We also call this ‘was/now’ or ‘strikethrough’ pricing.
‘Was/now’ pricing can help you attract customers but it can also be risky in some circumstances, and it can lead to significant penalties if you get it wrong.
If you use ‘was/now’ pricing you must take care not to mislead consumers about the savings they're going to get. Are the savings genuine?
If you don’t do this, you run the risk of breaching the Australian Consumer Law.
So let’s look at an example.
Suppose you advertise a particular car model with a ‘was’ price of $29,000 and a ‘now’ price of $24,000.
If you sell a reasonable number of cars at the old price and now offer at the reduced price, then your advertising is unlikely to raise concerns.
But there are some times when such an advertisement is likely to be misleading.
Exactly when depends on the circumstances, and there’s a range of information you need to consider.
For example, if you never offered the car for sale at the 'was’ price, then you’ll certainly be misleading customers about the savings they can make.
A second question you need to ask yourself is how long you actually sold cars for at the ‘was’ price. Did you sell them at the ‘was’ price for a so called 'reasonable period'?
What’s a reasonable period will vary in every case, but if you can’t show sales at the original ‘was’ price, then using ‘was/now’ pricing for that product is risky, because it’s likely to be misleading.
There might be some circumstances where you can show that the product would have sold at the ‘was’ price despite there being no sales, but this can be hard to prove if you regularly discount.
So above all, ask yourself the golden rule – is a typical customer likely to be misled about the genuine savings they're going to get from buying the product at the ‘now’ price?
The ACCC and state and territory Australian Consumer Law regulators receive many complaints about businesses and their advertising and selling techniques. When we investigate these, we can ask a business to substantiate any ‘was/now’ claims that they’ve made.
Remember, using ‘was/now’ pricing is a perfectly legitimate marketing technique so long as you follow the law. So when setting your prices, follow these guidelines:
- Don’t use ‘was/now’ pricing in a way that misrepresents the savings actually available to consumers
- Do keep records that show when, and for how long, you’ve offered an item for sale at various prices, and the prices you actually sold the item for, just in case you’re asked to substantiate any pricing claims.
If you’d like more detailed information on advertising and displaying prices, then please visit our website - accc.gov.au - and have a look at our Advertising and Selling Guide.
And if you have specific questions, we recommend you talk to your lawyer as the ACCC cannot give individual advice to firms.
Good luck with your sales.