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Bait and Switch

The practice of advertising goods at an incredibly low price with the aim of substituting them with inferior or pricier alternatives later on

What is Bait and Switch?

Bait and switch is a fraudulent activity whereby a company advertises goods at an incredibly low price with the aim of substituting them with inferior or pricier alternatives at the time of purchase. Just like the maggot at the end of a fishing rod, companies use lower pricing to lure customers to their offers. However, instead of getting the item initially advertised, the company attempts to sell the consumer an entirely different product.

 

Bait and Switch

 

In many instances, the item the retailer is trying to sell is either of inferior quality or more expensive than the advertised product. Either way, it is an act of fraud that is punishable in a court of law.

 

How a Bait and Switch Scam Works

It starts when a company advertises a product at a price that is well below its current market price. For instance, a new 10-inch Android tablet being advertised for $100 when its actual pricing is $400. Even though most of the deals are usually too good to be true, a considerable number of consumers fall for them. Unfortunately, once the customer visits the store, he is confronted with one of the options below:

  • The tablet or advertised product is out of stock although there are other options for a higher price. For instance, the vendor may try and sell the customer a much smaller tablet that is inferior in every aspect and one priced at $100. Having gone all the way to the store, a majority of consumers often end up buying the substitute to avoid leaving the store disappointed and empty-handed.
  • The tablet is available, but it costs more than the advertised price. In an attempt to persuade the customer to purchase, the vendor will come up with excuses. The buyer will be told that the available product offers better features and works better than the initial product in the ad, or that the advertised product was only available to the first ten customers.

 

Offers that Don’t Fall Under the Bait and Switch Category

Buyers should be wary of sellers that employ the bait-and-switch tactics. However, they should also be capable of identifying situations that are not bait and switch in nature.

It is because a consumer who falsely accuses a vendor or company of using such a strategy can find himself facing devastating legal consequences. Here are situations that are not considered bait-and-switch tactics:

 

1. Pricing Error

Pricing errors are one of the most common complaints that customers falsely classify as bait and switch. A pricing error is a genuine mistake made by a vendor who lists the wrong product price. Fortunately, the situation is easy to figure out. Imagine a brand new 60-inch LCD TV that goes for $50. No retailer would ever sell a television set for that price.

In such a situation, a customer may be able to purchase the product at the insane deal. However, once the seller discovers his mistake, he is likely to follow up the matter by sending an email and canceling the order. He may also issue a refund if the customer already paid for the item.

 

2. Few Units Available

Another instance where buyers cry “bait-and-switch” when the tactic doesn’t really apply is when there are limited quantities of a particular product. A retail store owner could offer a product at a discount but also state that the offer would be available to the first ten or fifteen customers. Afterward, the product will be sold at its usual price. The event cannot be classified as a bait-and-switch strategy as the seller initially gave clear details regarding the offer.

 

Warning Signs of Bait and Switch

To correctly identify a bait-and-switch scam, watch out for the following red flags:

  • A vendor who makes inquiries about the customer’s payment details too early. If the online retailer starts asking for payment details even before the customer can clarify specifications of the product, it can be a sign that the seller is not genuine.
  • A company that advertises products or services at highly discounted prices without any strings attached. It’s important for a buyer to read the fine print before deciding to pay for such products.
  • A seller who gives excuses for the advertised products running out of stock or being more expensive than as advertised.
  • A seller who claims that the advertised product is merely an element of a much larger product or service and that one must purchase the complete package.
  • Poor communication – If an individual is planning to buy a highly discounted product, he shouldn’t shy away from making inquiries regarding the product. The buyer should then assess just how truthfully the seller is responding to his inquiries. If the seller is reluctant or ignores the buyer’s concerns, then the buyer should give it a second thought.

 

Summary

Using a bait-and-switch strategy to lure buyers into deals is not only wrong but also unlawful. Consumers need to be wary of deals that seem too good to be true. If an individual falls prey to such companies, he has a right to report the offending party to the relevant authority.

 

Additional Resources

CFI offers the Financial Modeling & Valuation Analyst (FMVA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:

  • 5 P’s of Marketing
  • Beachhead Strategy
  • Caveat Emptor (Buyer Beware)
  • Market Positioning

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