November 28, 2014 | Business Plans
The word “free” is a very effective tool and can help Maine-based small businesses attract attention, bring customers to Web sites and boost volume. In fact, some experts say the word pulls in more business than any other term in advertising.
However, small business owners cannot use the word any way they want. Federal and state laws strictly regulate advertising that includes the word free, as well as phrases buy one get one.
To illustrate the power of the word, the Federal Trade Commission (FTC) states: “Because the purchasing public continually searches for the best buy, and regards the offer of ‘free’ merchandise or services to be a special bargain, all such offers must be made with extreme care so as to avoid any possibility that consumers will be misled or deceived.”
Basically, this means three essential things:
1. Businesses cannot try and make up the cost of free merchandise. As an example, companies can’t raise the price of a 2-for-1 item to make up for the free product.
2. Terms and conditions of the offer must be obviously placed in any advertising.
3. An introductory offer must end after a clearly stated limited time. And products offered as free, or free with a purchase, can’t be then offered at a higher price than they were originally marked as.
Some other key terms for small business owners to consider:
Regular price is defined as the price charged for the same quantity, quality and service during the regular course of business for a substantial period of time. Usually this applys to the price charged in a 30-day period.
Fluctuating price means that if prices ordinarily change, the regular price is the lowest charged during the 30-day period.
Negotiated price could be a factor if business owners usually arrive at prices by bargaining with customers, and they generally cannot claim that another product or service is being offered free with the sale. This restriction also applies to regular prices when quantity, quality, or sizes are arrived at through bargaining.
Suppliers must follow a couple of additional regulations. If a free offer a supplier is promoting isn’t being passed on to consumers or is being used deceptively, the supplier must take steps to end the deception, including withdrawing the offer. Suppliers must also make offers equally to all competing resellers.
In addition, the number of free offers a company makes is restricted, and generally should not be promoted more than three times in a 12-month period.
For more information, schedule an appointment with Filler & Associates.