"Low Price" and Related Price Equalization Claims: A Shared Responsibility Between Advertisers and Consumers
A White Paper
In July 1996, the Local Advertising Review Program (LARP), a joint program of the Cleveland Advertising Association and the Better Business Bureau, convened a panel to discuss concerns regarding the use of "Lowest Price" claims, guarantees and price matching policies in retail advertising. The panel members included advertising professionals, retail advertisers, and public representatives.
In the interest of maintaining ethical advertising practices, the panel's immediate conclusion was that unqualified, general "Lowest Price" claims (or slogans or claims creating a similar impression, such as "the low price" or "the best price") were illusory by nature since, in a competitive retail market, no advertiser can be certain of having the lowest price on all items at all times. Such unlimited claims should be avoided since it is the responsibility of the advertiser to be able to prove claims in its ads in advance of their appearance in the media, and such proof would be nearly impossible for the advertiser to maintain. The panel's view reflects the 1994 recommendations of the National Advertising Review Board (NARB) and National Advertising Division (NAD) concerning national advertisers such as Wal-Mart Stores Incorporated's slogan ("Always the Low Price. Always."), and Montgomery Ward advertising claims.
The use of popular advertising claims such as "Lowest Price Guaranteed" also raises questions. When such a phrase is used to present a "price matching" policy, what are the advertiser's obligations? What are appropriate limitations to such a guarantee? Does the mere existence of such a "meet or beat" policy necessarily guarantee the lowest prices? What are the consumer's obligations to shop the competition? What is a reasonable burden to place on consumers seeking to take advantage of such a policy? The panel feels that consumer credibility--and confidence--is stretched by these claims, especially when one or more retailers in a given industry claim to have the lowest prices and policies in place to lower prices to match competitors. In essence, the probable perception of consumers regarding particular claims greatly impacted the panel's view of each type of claim.
The panel recommended as follows:
1. The use of "Lowest Price Guarantees" or other superlative pricing claims used in connection with a guarantee is strongly discouraged, even where a price-matching policy and an associated program to adjust prices storewide according to consumer responses are in place, or where the advertiser has a program of shopping its competitors and adjusting its own prices according to those shopping expeditions.
In the phrase "Lowest Prices Guaranteed," "Guarantee" is a strong term which creates both legal and ethical responsibilities for the advertiser. The implication to the average reader is that the advertiser has carefully shopped its competitors and that the prices as presented are the absolute lowest in the market. This will almost always not be the case, and the mere existence of the policy recognizes the likelihood that lower prices are available.
Further, it is the panel's opinion that such claims can negatively impact consumer confidence in advertising and deflate a consumer's interest in comparison shopping, since consumers will assume that the advertiser has already done extensive research and there is no need to repeat the effort. Even where such shoppings are routinely performed by the advertiser, there is no reason to believe that such shoppings are appropriate for use as the basis for an advertised claim expressing the absolute knowledge of the "lowest price," since a retail price changes more rapidly than it can be shopped as a matter of practicality. In fact, where direct competition exists, it is conceivable that two advertisers' shoppers could be recording information during the same period of time. The responses to each shopper's reporting could create higher or lower prices in response to information that is already changing at the competition's store. In such a market, the price becomes a moving target, not necessarily to the consumer's immediate benefit, and no matter how thorough a shopping program, there is no basis for the certainty implied by the phrase "Lowest Price Guarantee" or words of similar meaning.
2. The panel suggests that the use of such terms as "Lowest Price Policy," (or even better, a "Low Price Policy") is inherently more accurate, truthful, and substantiable than claims using such terms as "guarantee." By eliminating the "guarantee" terminology in connection with a superlative pricing claim, the advertiser lessens the obligation and lowers the consumer's expectations for an absolute "lowest price", and enters into an ethical contract of shared responsibility for maintaining low prices. In this way, the credibility of advertising is maintained and misimpressions concerning the true nature of the claim are limited. By loosening the terminology, the advertiser creates latitude for those occasions where, despite the advertiser's best efforts to shop its competitors and adjust prices, the competitor's price is lower.
Terms as "Low Price Guarantee" or "Low Price Policy" do not present these difficulties, as long as such claims are backed up by disclosures and substantiation elements as outlined below.
3. The panel recommends that any such policy be stated clearly, conspicuously, and in reasonably close proximity to the statement or banner claim. The disclosure is necessary to increase the clarity of the offer, both for the comprehension of consumers and the protection of the advertiser. A reasonably detailed statement is best and should convey the exact nature of the policy. The panel suggests that such a disclaimer should contain, in no particular order: A) The action promised should a lower price be presented to the advertiser (refund the difference, match the price, etc.); B) Any time limits on the offer; C) Any geographical limits on the offer; D) What the consumer should bring as proof that a lower price has been offered (as long as that proof does not pose an undue burden to consumers to take advantage of the policy or create a serious conflict with or contradiction to the banner offer).
Some examples of the proposed disclosure might be:
"If any item you purchased from us appears within 30 days in an advertisement for less money, bring us the ad and your receipt for a refund of the difference. Offer good only on identical items appearing in printed advertisements in Northeast Ohio."
"If you find a lower verifiable price on an identical item within 30 days of your purchase, we'll refund the difference."
4. The panel believes that any "Low(est) Price" claim expresses a knowledge that the advertiser's prices are lower than the prevailing competitive prices of retail outlets in that advertiser's area. It is the panel's intention to avoid situations where a higher-price retailer uses a "Low(est) Price Policy" to create an impression that the advertiser has low prices in general when that is not the case. A "low price" position should be substantiable.
In addition, the use of a "Lowest Price" policy increases the advertiser's obligation to provide proof that prices are adjusted as soon as possible to respond to competitor's offers brought to that advertiser's attention either by consumers taking advantage of a policy or through the advertiser's own shopping program.
5. For any type of "Low(est) Price" claim or policy to remain meaningful, the items to which it applies must be available for purchase by consumers at a reasonable number of competitive outlets. Private label products or products that, by their nature, are unique (such as through customization) should not be the subject of such "Low(est) Price" policies or claims. Such advertising may create an impression that an advertiser has low or lowest prices, which is illusory since comparison shopping may be difficult or impossible. The panel would include jewelry, eyeglasses, most home improvements as examples of industries which should exercise discretion in their use of such terms.
In summary, the panel concluded that general "lowest price" claims are not substantiable and should not appear in advertising. Price matching, or "meet or beat" policies do not constitute the basis for a "lowest price" claim, since their mere existence does not guarantee the lowest prices (and may by their mere existence admit the probability that the advertiser does not have the lowest prices). The term "Lowest Price Guarantee" or other superlative pricing claims used in connection with a "guarantee" should be avoided, since the word "guarantee" may imply a responsibility that the advertiser does not intend as well as creating a potential impact on consumer perceptions of the offer and the claim in the market. The panel suggests that terms such as "Lowest Price Policy" or "Low Price Guarantee" be used to reflect "meet or beat" or other price equalization programs. The panel reminds advertisers that disclaimers providing sufficient information in common terms should be provided to give consumers a clear understanding of the actual nature of the policy and any directions for its use by consumers. Such policies should not create an undue burden on consumers, nor should they be applied to the sale of merchandise that is, by its nature, unique and should be supported by evidence that the advertiser's prices are in fact low.