August is school holiday time in the UK. Many parents will already have searched and reviewed travel websites to plan the family holiday in time for the summer break. The travel industry is dynamic and competitive, with a good record of offering consumers choice and value. But over the last few weeks, the ASA published a selection of rulings on travel deals that flag up the dangers of savings claims that can, unintentionally or not, mislead consumers.
The problem we found related to the practice of ‘dynamic pricing’, an approach that’s gradually becoming the norm as technology allows holiday providers to update their prices easily and regularly. Now most of us know that prices of the various elements of a package fluctuate in response both to changes in suppliers’ costs and demand in the market. Those price movements aren’t, in themselves, the problem; indeed, they benefit us when they let us buy a product when the price is low. The trouble arises when ads for dynamically-priced products include notional ‘discounts’ that can’t be proven. The UK Advertising Codes - the rules we administer and enforce - require advertisers to hold documentary evidence to prove all claims that are capable of objective substantiation. That holds true even when pricing information is provided by a third party. So how can you prove that the pre-discounted price is a genuine selling price when prices offered are constantly changing and the elements of your holiday are provided to you from different sources?
Package holidays are a great example, given the number of moving parts: hotel rates change according to the number of vacant rooms; flight costs move as seats are bought up; agents’ commission rates vary. The job of the travel company is to pull together the ingredients into a single package, with added profit margin of course, and then advertise that to the prospective customer. But because the costs of the component parts of the holiday can move up and down, and because operators tend to respond quickly to those changes, it’s not uncommon to find that the overall package cost that’s communicated to the punter changes several times in a single day. After all, one of the advantages of the internet age is the speed and ease by which such changes can be made.
Last month, the ASA published rulings against both TUI and Jet2 because their package ads used wording like “includes £180pp discount”. While we felt consumers generally appreciate that holiday pricing is fluid and that prices can fluctuate, our investigation found that the advertisers hadn’t done enough to prove there was a meaningful saving. In the absence of further information about the basis of the comparator (or pre-discounted) price, the holiday providers were unable to prove the discount was genuine. The ads had to be changed or withdrawn.
So where’s the mischief here? Well, if we buy a package on the basis of a discount that can’t be substantiated, we’re attributing value to a saving that might well not exist. In effect, we’ve been misled into thinking the package is better value than it is. And that can cost us in our pocket by carrying with it a ‘less shopping around’ penalty. Particularly if the discount is time limited and we therefore feel rushed into buying.
These issues may well extend beyond the travel industry. We expect to see them become more prevalent as dynamic pricing becomes the norm. And it’s not just limited to the internet: electronic shelf labels might soon bring dynamic pricing to a supermarket near you. As this more flexible form of pricing gains ground, advertisers will need to satisfy the ASA that they can substantiate discounts, or risk being on the receiving end of an upheld ruling and facing an ad ban.
So how can advertisers stick to the rules? Included in last month’s ASA travel rulings is a good example of a successful approach, courtesy of another TUI case. On this occasion, the company used a discount code to provide a genuine and self-verifiable saving. As part of the transaction, customers were invited to use the code ‘SALE100’ at the check-out to apply the discount. That approach meant they could make a simple comparison between the pre-discount price and the post-discount price payable after inputting the code. The saving was there for the customer to see. Provided the advertiser could show they hadn’t simply put all the prices up by £100 that day – something easily proved to the ASA by sharing the pricing history – we’d be satisfied that consumers had not been misled.
Other approaches include making provable claims like “cheapest this month!”. Once again, the pricing history should be enough to substantiate the claim. Another formulation that could work would be to compare online prices with instore brochure prices, though the advertiser would need to satisfy the ASA that a reasonable proportion of packages had been sold at the brochure price.
There are, of course, other approaches to making provable claims. And no-one is saying these issues are easy. They’re powerful examples of the challenges that emerge from the changing nature of pricing in an increasingly fast-moving, connected world. Changes that ask questions like: when is a price a promotional price and when is it simply the new price (for now at least…)?
Advertisers have a duty not to mislead, whether intentionally or by accident. And we’re here to help them as well as to call out those who’ve got it wrong. The ASA’s sister body CAP (the body that writes the advertising rules) offers a wealth of advice and training to help companies get their ads right in the first place, for example on how to back up price claims. So my message to those dipping their toe in dynamic pricing is to make sure you seek our help in thinking it through first. You really don’t want to get back from your hols to find an ASA investigation in your inbox. And my message to prospective holiday makers looking for the best deal? Ask questions about the basis of any discount. Be clear that you should be treated fairly. And if you spot something that doesn’t look right and you’re getting no joy out of the advertiser, don’t be afraid to get in touch with us.
*An abridged version of this article appeared in City AM on Friday 18th August
Guy became Chief Executive of the ASA, the UK regulator of ads in all media, in 2009. Responsible for executing the ASA’s strategy to make UK ads responsible, he oversees all functions of the ASA system. Read more