Page 195 - DMGT554_RETAIL_BUYING

Retail Buying

Notes 3. The retailer should be careful when using a manufacturer’s suggested list price. Don’t use
it as the reference price unless it is the store’s regular price, or is clearly identified only as
the manufacturers suggested price.
4. If retailer advertises that it has the lowest prices in town or that it will meet or beat any
competitor’s price, it should have proof that its prices are, in fact, the lowest in town
before the ad is placed.
5. If the retailer advertises that it will meet or beat any competitor’s prices, it must have a
company policy that enables it to adjust prices to preserve the accuracy of its advertising
claims.

12.3.5 Bait-and-switch Tactics

Bait-and-switch is an unlawful deceptive practice that lures customers into a store by advertising
a product at lower-than-usual price (the bait) and then induces the customer to switch to a higher
priced model (the switch). Bait-and-switch can occur in two ways. Suppose customer Smith is in
the market for a new refrigerator. Smith checks the ads in the newspaper and finds a particularly
attractively priced unit. At the store, however, Smith finds that the retailer has significantly
underestimated demand for the advertised product and no longer has any available for sale. The
person begins pushing a higher-priced model that’s heavily stocked. In the second bait-and-
switch method, the retailer has the advertised model in stock but disparages its quality while
highlighting the advantages of a higher-priced model. In both cases, the retailer has intentionally
misled the customer.

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Caution To avoid disappointing customers and risking problems with the FTC, the retailer
should have sufficient quantities of advertised items. If it runs out of stock on these items,
it should offer customers a rain check. Finally, it should caution salespeople that while
trying to trade up. Customers to a higher-priced model is legal, they must sell the
low-priced item if that is what the customer wants.

12.3.6 Scanned versus Posted Prices

Advertising one price but charging another is obviously illegal. Many states and localities have
specific laws regarding accurate pricing. FTC-led studies of the accuracy of price scanning versus
posted or advertised prices have generally found a high level of accuracy, but mistakes are made
in about one out of 30 scans. In many cases, retailers lose money because the scanned price is
below the recommended price.

Notes Experts recommend that retailers adopt specific practices to ensure accurate pricing.
Most basic is the adoption of written procedures for all forms of pricing activity in the
store. Adopting procedures for immediate correction of pricing errors is important to
reduce exposure to possible law enforcement action and to ensure customer satisfaction.
Ongoing training of employees, with an emphasis on the stores commitment to pricing
accuracy, ensures that the procedures are properly implemented.
Designating one person as the pricing coordinator, with overall responsibility for pricing
accuracy, also is important. An essential component of good pricing practices is periodic price
audits. Price audits of a random sample, perhaps 50 items, can be done on a daily basis. Regular
price audits of the entire store can be done several times a year. Procedures for regularly

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