Bait and switch is the action of advertising goods for a discounted price, with the intention of selling customers a different product. Customers are “baited” into stores with promises of a good deal. However, when they arrive, the advertised goods are not available, and businesses “switch” to a lesser quality or more expensive alternative.
How Bait & Switch Works
With bait and switch, a business runs an advertisement selling a popular or in-demand product at a price well below market value. These products are also sometimes called loss-leaders, which is a viable business strategy. This tactic only becomes bait and switch when the company intentionally does not stock that product, and instead explicitly intends to sell an inferior quality product, or convince shoppers to spend more on a higher priced item.
For example, let’s say a retailer advertises a TV that typically sells at $800 for $300. That deal seems too good to be true, and it’s very likely that many shoppers will be baited by this ad and visit the store to purchase the TV.
There are several bait-and-switch advertising scenarios that could unfold, including:
- The TV is more expensive than advertised: The retailer may say that the TV in-store is a slightly different model, or offer another reason, but the price tag is significantly higher than as advertised.
- The advertised model is not available: There are different TVs available for low prices, but none that are as high-quality as the one advertised; many consumers opt to purchase one anyway rather than leave empty-handed since they made the trip to the store.
- The TV is not as advertised: The TVs available for $300 may be refurbished models, returns, or very basic models, and not what the consumer was expecting.
Legality of Bait & Switch Advertising
True bait and switch is considered fraud, and leaves businesses subject to lawsuits and charges of false advertising. However, if the business follows through on the promises made in the advertising, there are no legal issues. For example, if a business only stocks a very limited amount of the advertised product, it is still legal as long as the advertisement clearly states something along the lines of “while supplies last” or “limited quantity available.” Businesses can also offer “rain checks” and honor the sale price at a later date if they run out of stock.
Federal Trade Commission (FTC) Bait & Switch Guidelines
The FTC considers bait-and-switch advertising fraudulent and false advertising. According to the FTC, bait advertising is defined as “an alluring but insincere offer to sell a product or service which the advertiser in truth does not intend or want to sell. Its purpose is to switch consumers from buying the advertised merchandise, in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser.”
Retailers should adhere to the following advertising guidelines, according to the FTC:
- No misleading ads: Do not include any statements or illustrations in ads that can create a false impression of the quality, make, value, currency, model, size color, useability, origin, and so on of the product or may otherwise misrepresent the product.
- Do not discourage shoppers from purchasing the advertised product: Refusing to show, demonstrate, or sell the advertised product is considered bait advertising.
- Anticipate product demands: Have enough of the advertised product to meet anticipated shopper demand.
- Deliver the advertised product in a reasonable time frame: If a business cannot deliver the product in a reasonable amount of time, the customer should be refunded.
One of the most common occurrences of bait and switch is when a business advertises a product that is no longer available. Often, this is not done maliciously, but because the business did not anticipate customer demands. Businesses can avoid this by clearly stating that quantities are limited or ordering extra products.
“Most of the bait-and-switch advertisements consumers have complained to me about in 30 years of practicing consumer law are car dealers. Many will continue to advertise cars that they no longer have in stock in hopes that the consumer will buy the far less attractive deal. Such sales often violate the Federal Trade Commission’s rules or applicable state laws prohibiting deceptive trade practices. Retailers can usually comply by including a statement that quantities are limited, have a reasonable quantity available for sale, and even provide a rain check.”
– Donald E. Petersen, Consumer Rights Lawyer
Examples of Bait & Switch
Bait-and-switch advertising used to be found mainly in print ads. Now, with the internet, it is easier for consumers to spot and draw attention to that type of bait-and-switch advertising. However, there are instances of online bait-and-switch advertising that can be harder to spot.
Bait-and-switch advertising is more commonly found or suspected in these industries:
Hotel Advertising Bait & Switch
Hotel bait and switch can include misleading room photos on the hotel website or not delivering the room or experience that was promised. Aggregate hotel booking websites can be guilty of bait and switch if they advertise hotels that they have no affiliation with, or claim that a property is fully booked when it is not in order to encourage customers to book with other properties on which the site receives a higher commission.
Expedia and its sites, including Orbitz and Hotels.com, faced a class action lawsuit alleging that the company “baited” customers with deals for certain hotels that Expedia had no affiliation with. After clicking on the ad, the lawsuit alleges customers would be “switched,” as Expedia would show those deals as fully booked even though Expedia had no ability to book rooms at those properties. Customers would then be prompted to book at other nearby hotels that pay Expedia for each room they book.
Businesses can prevent a bait-and-switch experience by continually updating their websites to only show the most accurate and recent pricing and availability. Consumers can avoid bait and switch in hotel advertising by checking a variety of sources before booking, or verifying hotel availability by booking directly with a hotel or through a travel agent.
Airline & Air Travel Bait & Switch
Airline and air travel bait-and-switch advertising looks very similar to bait and switch for hotel bookings. Customers are lured in with the promise of low airfare, only to find that the ticket price is not available. Many consumers report having this experience when trying to book flights online, as reported in The Washington Post and the Chicago Tribune.
Ecommerce Bait & Switch
There are countless stories, reviews, and memes of customers ordering products online only to receive something completely different from what they expected. Often, the size of the item is much smaller than expected. This is technically only bait and switch if the product description specifically states one product dimension and the customer receives another. Typically, the true size of the item is hidden somewhere in the product details.
To avoid upset customers and excess returns, businesses should clearly state all the details of the product, including sizing and dimensions, and offer photos of the product that are to scale. Consumers should always read product descriptions, size guides, and customer reviews before purchasing. Trying on products before purchasing can also help prevent any misunderstandings. Choosing a retailer with an easy return process can also help in these situations.
Pricing Bait & Switch
Pricing that is confusing, unclear, or artificially inflated can also be considered bait and switch. In 2016, a consumer filed a $5 million lawsuit against European retailer Zara’s American unit. The lawsuit alleged dishonest pricing as the U.S. dollar amount charged for items was much higher than the item’s listed price in euros.
The lawsuit claims that Zara has “been engaged in fraudulent pricing practices across the United States. On average, consumers are being charged $5 to $50 more than the lowest tag price in euros.” To avoid deceptive pricing in your business, make sure that all consumers are advertised the same base price.
Online Apartment Rental Bait & Switch
Bait-and-switch scams are common among online apartment listings. Fraudsters advertise what seems like an attractive and affordable rental, then ask for a deposit before you view the property. Sometimes the property ends up being not what was pictured. Worst case scenario—the person disappears with your deposit.
No reputable business will do this. Consumers can protect themselves by always touring the property and meeting with the lessor or an agent in person before signing any documents or paying any fees.
Customer Response to Bait & Switch Advertising
Bait-and-switch tactics are illegal because they are considered unfair, dishonest, and harmful to consumers. If a business participates in bait and switch, at best they will lose customers’ trust, earn negative reviews, and lose sales. At worst, the business could face a lawsuit or fine. It’s not recommended that any company uses bait-and-switch advertising, or anything that could be construed as misleading. Luckily, there are plenty of honest and effective advertising strategies that can increase sales while also keeping customers happy.
Alternative Strategies to Bait & Switch
Every business wants to bring in more customers, improve profit margins, and increase sales. The good news is that any business can accomplish those things without using bait-and-switch tactics. Promotional pricing strategies, traditional advertising campaigns, and loyalty programs can effectively increase retail sales.
Promotional pricing is a sales technique where a company temporarily reduces the price of products or services to attract more customers and increase sales volume. There are countless types of promotional pricing. Some are overt, such as a free gift with purchase promotions, while other types of promotional pricing are more subtle and psychological.
Here are six types of promotional pricing and how to use them:
1. Market Penetration Pricing
Market penetration pricing involves selling products at an extremely low competitive price in order to stand out from the competition. These products are also sometimes called loss-leaders. Market penetration pricing is ideal for newer businesses that are trying to draw in customers by outpricing competitors.
This strategy usually results in initial financial losses because the business is not making money by selling at those low prices. The idea is that businesses will make up that lost revenue over time as those customers continue to purchase other products. One example of this strategy is Amazon’s Kindle. When Amazon first debuted its e-reader, the company sold the product at a loss, but it gained many loyal customers who continue to purchase e-books and replace their older Kindles with newer and more expensive models.
2. Psychological Product Pricing
Have you ever walked into a store and noticed that almost all of the prices ended in 99 cents? That is psychological pricing at work. Psychological pricing is when a store prices a product at $199 instead of $200 or $4.99 instead of $5. The theory is that customers put more emphasis on the first digit of a product price, so $199 seems like a much better value than $200, even though the actual price difference is very small.
3. Bundle Pricing
Bundle pricing is a promotional tool that lumps together multiple products to sell as a single unit. For best results, include an expensive but slow-moving inventory item along with a popular item you can discount. The final package looks like a great deal for shoppers, and helps retailers move more products.
4. Free Gift With Purchase Promotional Pricing
Gift with purchase (GWP) promotions involve giving the customer a free item with either a minimum dollar purchase or purchase of a specific (usually high-ticket) product. These promotions are popular around holidays such as Mother’s Day and Valentine’s Day. Retailers also use them around the beginning or end of a season to help sell through seasonal items.
Victoria’s Secret does a lot of successful GWP promotions with high-quality tote bags. Depending on the specific promotions, shoppers receive a tote bag valued at $50 to $85 for a store-wide purchase of a slightly higher value. GWP sales help increase average spend per shopper and leave the shopper feeling like they received a good deal.
5. Buy-one Get-one Free Pricing
Buy-one get-one (BOGO) promotions involve shoppers receiving a second product for free or at a deep discount with the purchase of one product. This strategy cuts deeper into your profit margins than other types of promotional pricing, so it should be used sparingly to increase store traffic and to clear out merchandise.
6. Scarcity Pricing
The perception of scarcity increases the presumed value of a product. If a product is limited quantity, almost sold out, or only available through your business, customers are willing to pay more and are more likely to buy impulsively. Advertising limited stock or limited availability of a certain item encourages the shopper to purchase right away, instead of procrastinating or searching for a better deal.
This technique is also used by service providers to fill up schedules. They can configure their online booking software to only show a few available appointments, when in reality there are many more open spots. The appearance of scarcity encourages people to book their appointment before the available spots are taken.
Scarcity pricing is also effective for online retailers. Many shoppers will fill up online shopping carts without purchasing those products for days, weeks, or without purchasing at all. Showing when a product only has a few items left in stock motivates shoppers to actually make the purchase.
Influencer Marketing Campaigns
Influencer marketing campaigns utilize popular social media accounts or personalities to promote product sales. Influencer campaigns allow businesses to reach a wider and different audience. They also serve as a kind of third-party endorsement, as many followers trust their favorite influencers to partner with brands they would actually use themselves.
These types of promotions can work several different ways, but generally the influencer receives a unique promo code to share with their followers for a percentage off their order (typically anywhere from 10% to 50%). The code is typically shared in an Instagram post or Story with a link to purchase. Influencers are then paid per post or per purchase with their code.
Types of Influencers
The exact type of influencer you want to partner with depends on your product and your goal. Generally, the influencer’s audience should match your target audience. Once you have that narrowed down, choose specific influencers based on your budget and desired outcome.
Influencer types include:
- Celebrity influencers: Household names that have millions of followers; good for building brand awareness.
- Mega-influencers: Social media-famous individuals with follower counts rivaling those of celebrities; also good for building brand awareness.
- Macro-influencers: Social media personalities who have hundreds of thousands of followers; good for building brand engagement.
- Micro-influencers: Accounts with less than 100,000 followers but high engagement rates and loyal fans; good for actual conversions.
Working with accounts that have millions of followers will cost a lot more than working with micro-influencers. Large accounts are good for quickly spreading brand awareness. Smaller micro-influencers are better for directly increasing sales, although their promotions will reach a much smaller audience.
Email marketing may seem old-school compared to influencer campaigns. However, email remains one of the most effective marketing tools. Most of your customers have email accounts that they check regularly. Plus, shoppers actually want to hear from their favorite brands. Forty-nine percent of customers surveyed recently said they want brands emailing them weekly. And the proof is in the pudding; for every $1 spent on email marketing, you can expect a $32 return on investment.
Here are three popular and effective email marketing tactics:
1. Personalized Email
Emails containing any of the promotional pricing offers discussed above will help boost sales. You can make your email marketing even more effective by personalizing the content. For example, email with personalized subject lines (such as the recipient’s name) have a 50% higher open rate than non-personalized emails.
2. Abandoned Cart Emails
Abandoned cart emails are an effective tool for online retailers that involve sending automated emails to customers after they leave the website with items in their shopping cart that have not been purchased. Oftentimes these emails will include a discount code or coupon. However, sometimes a simple reminder email can also be effective, especially if the items the shopper has in their cart are low in stock, or the sale price is about to expire.
3. Video Emails
Static emails with pictures are fine, but your email can be even more engaging with video—as in increased click-through rate (CTR). Including videos in your emails can improve CTR up to 300%. Videos can be how-to tutorials for using or styling items, a sneak peek tour of new products, or information on sales or events.
Referral Campaigns & Loyalty Programs
For most retail businesses, 80% of your sales will come from 20% of your customers. In addition to bringing in traffic with sales and promotions, focus on the customers you already have. Loyalty programs are an effective tool for engaging customers and rewarding their patronage. Most point-of-sale (POS) systems have digital tools to manage loyalty programs, so no one has to keep track of punch cards or stamps.
Using a POS system like Vend makes it easy to track your customers and identify frequent shoppers and top spenders. Vend also has a built-in loyalty program tool that allows retailers to create a custom program that incentivizes shoppers with rewards and discounts. Visit Vend to start a free trial.
Bait & Switch Advertising Frequently Asked Questions (FAQs)
Bait-and-switch advertising is deliberately misleading and can cause confusion, frustration, and disappointment for shoppers. For retailers, using this tactic can erode trust and tarnish your brand name. It’s a tricky topic that can often walk a fine line.
Is bait & switch illegal?
Yes. In the United States, bait and switch can be considered false advertising and a type of fraud. The Federal Trade Commission monitors advertisements and enforces laws that prohibit false advertising. Consumers who are victims of bait and switch can file lawsuits against the marketer or company for false advertising.
What is predatory pricing?
Predatory pricing, also known as undercutting, involves a business pricing a product so low that they eliminate all other competition. Typically, this low price means the company is selling the product at a loss. Companies that use predatory pricing are usually larger corporations that can absorb that loss over a long period of time, forcing smaller companies that cannot match the price out of the market. This kind of market manipulation does violate antitrust laws.
However, low prices are generally considered good for consumers, so a company that prices a product below cost is not necessarily violating any laws. It is only an antitrust violation when courts rule that the company’s below-cost pricing strategy is part of a larger effort to control the market. For example, publishers have accused Amazon of predatory pricing on books. Taxi companies have accused Uber of predatory pricing.
What is false advertising?
False advertising is using misleading, untrue, or unproven information to market products to consumers. The Federal Trade Commission has a Truth in Advertising Policy which states, “When consumers see or hear an advertisement, whether it’s on the internet, radio, or television, or anywhere else, federal law says that ad must be truthful, not misleading, and, when appropriate, backed by scientific evidence.”
What does bait & hook mean?
Bait and hook is another way of saying bait and switch. It is a dishonest sales tactic where companies advertise one low-priced item, but encourage shoppers to purchase a higher-priced or lower-quality item when they are in the store.
Can I sue for bait & switch?
Yes. Bait and switch is a violation of consumer protection laws. If you are a victim of bait and switch, you can sue for damages. Sometimes bait-and-switch lawsuits turn into class action lawsuits if many shoppers have been affected. Competing businesses that have suffered as a result of another business’ bait-and-switch tactics can also sue.
If you’re a business or retailer trying to navigate the difference between what is bait and switch and what is regular advertising, you can avoid bait and switch by advertising products that are in stock and at accurate price points. There are plenty of promotional pricing strategies, personalized marketing, and advertising campaigns that are both legal and effective.
Creating effective marketing campaigns is easier when you have the right tools. A point-of-sale (POS) system like Vend accurately tracks inventory in real-time, automates customer rewards and loyalty programs, and has a feature to export contact information to send out promotional emails. Visit Vend to start a free trial.