Offering Gifts, Prizes As Enticement
This week’s article is about sales promotion and offering gifts and prizes. Sales promotion is one of the aspects of the promotional mix. (There are other promotional mix such as advertising, personal selling, direct marketing and publicity/public relations.) Media and non-media marketing communication are employed for a pre-determined, limited time to increase consumer demand, stimulate market demand or improve product availability. Offering of gifts and prizes are a common form of sales promotion employed by local business to increase sales and consumer demand for a good or service and is often found during festive seasons and during certain promotional sales period.
Examples of sales promotional offers include contests, coupons, freebies, loss leaders, point of purchase displays, premiums, prizes, product samples, and rebates. The Commerce Commission Decree 2010 (CCD2010) recognizes the importance of offering gifts and prizes in the stimulation of consumer demand, but prohibits its use for deceptive purposes.
Common forms of Gifts and Prizes
Money-off ’ schemes These are schemes under which a manufacturer or a distributor or wholesaler redeems a moneyoff voucher, issued in his/her name, which has been accepted by a retailer as part payment for the supply of goods or services.
‘Cash-back’ schemes These are schemes under which a manufacturer or a distributor or wholesaler undertakes to refund cash to a retail customer on the making of specific purchases. The customer sends a voucher back to the manufacturer (indicating proof of a qualifying purchase) and the manufacturer sends money to the value of the voucher directly back to the customer.
Gift vouchers and tokens The chargeable amount in the case of goods or services supplied in exchange for tokens is the amount stated on the token as well, of course, as any money paid in addition to that amount. This is the most common mode used by retailers to promote business in Fiji.
Vouchers - Cross Border The existing special rule for vouchers being supplied to businesses for re-sale is confined to supplies of vouchers to businesses that are established in the State. Cross Boarder vouchers refer to those supplied which extends to other States apart from where the voucher originated.
Vouchers Sold at a Discount In some cases, a supplier of goods may sell vouchers at a discount to companies who purchase them to distribute them free to their staff, or to resell to the public. The supplier undertakes to accept a voucher in full or part payment of goods purchased by a customer who was not the buyer of the voucher.
Replacement goods Replacement goods supplied free of charge are sometimes used as warranties or guarantees on the original goods.
In consumer theory, substitute goods or substitutes are products that a consumer perceives as similar or comparable, so that having more of one product makes them desire less of the other product. There is certain condition to which this method of replacement is applied.
How is offering of gifts and prizes become a concern to the Commission?
Normally we have found that these gifts and prizes are not available by the retailer. Other lower value gifts and prizes are offered to customers’ complaints received by the Commission in regards to gifts and prizes that are offered to customers by business. In order to safe guard the consumers FCC has a Section on offering of gifts and prizes to consumers
Section 85 clearly states –
A person shall not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services, offer gifts, prizes or other free items and does not provide them as offered shall be guilty of an offence.
It implies that businesses are free to offer gifts and prizes in their promotions, but so long as they are actually available to customers in the terms and conditions being promised. Anything less than that promised and which adversely influenced to the customer’s choice would be deemed a breach of this provision.
Offering gifts and prizes has become a common sight in today’s promotions for goods and services, particularly during festive seasons and promotional sales.
It adds attractions and appeal to goods and services in demand for such events and consumer’s choice can be greatly influenced as a result. Whilst it is encouraged and is recognised as an important trade innovation, using it for deceptive purposes is strictly prohibited under the CCD2010.
Offering such gifts and prizes as an enticement for customers with the intention of not providing them amounts to an offence and the Commission can take legal action against those in breach.
As such, it is important for businesses to trade with fairness and be accountable to their customers. For compliance to this requirement is not only beneficial to business but is also enduring. Furthermore markets run best when both buyer and seller have equal access to information so that every consumer can participate to take advantage as well as for business. Thus consumer issues for unfair trading practices and anticompetitive trader conducts should be properly addressed in terms of offering of gifts and prizes.