Sharp, though legal, practice is eroding consumer trust

I was not the slightest bit surprised to see the Advertising Standards Authority censure Tesco last month for misleading consumers in a price promotion on beer.

The supermarket claimed the price had been halved from what it was charging three weeks before but the ASA counter-argued that although the beer had been double the price for three weeks, it had been at the ‘sale price’ for the six months before that.

Tesco was actually operating within the rules of sales promotion, which state that to claim a sale price the product must have been at a higher price for three weeks prior to the promotion. Yet the ASA believes this was not enough to clear Tesco: this was about trust, and Tesco had breached that trust as the supermarket had merely put up the price to take it down again. This is where our profession is going wrong.

The banks that fine you for going a few pounds overdrawn; the insurance companies that rely on inertia and charge loyal customers more than new ones; the train companies that force you to guess which train you will be on, even though the cost to them is the same whether it’s the 22:08 or the 22:38; the energy companies that put up prices when the wholesale market is falling. Even some of the trusted stalwarts like John Lewis and Marks & Spencer have small print to make price comparison difficult.

Business needs to be open about what is the real cost to manufacture, promote and deliver a product or service and what is an acceptable profit margin to offset the risk they take in delivering at that price.

The problem is that over time it has become much easier for customers to compare prices, and at the same time brands have become much more short-termist and mercenary as barriers to entry to their markets have lowered. They are worrying less about image and more about delivering returns for their shareholders.

Whose fault is this? Consumers want lower prices through competition but that forces brands to look elsewhere to make money. Wherever the fault, it is the bond of trust that is suffering and marketers face the long-term fallout from that.

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