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Marketing Cost Savings and Disclaimers That Should Be Used

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                           etail                                            Lay-bys— top 10 tips
A      s a retailer are you interested in knowing your
rights and responsibilities under the Trade Practices
Act? Do you want to keep on the right side of the
                                                                            Here are some tips on good lay-by practices that will put yours and
                                                                            your customers’ minds at ease.

                                                                            These tips are provided with the kind permission of Consumer and
                                                                            Business Affairs Victoria. If you want to understand your legal
Australian Competition and Consumer Commission                              obligations contact your State or Territory fair trading department
(ACCC) and your customers?                                                  or retailers association.
If the answers are yes, then the contents of this newsletter                The GST will apply to lay-bys. Contact the ACCC or check out its
are essential reading.                                                      GST website for information.
The Retail Flash is a joint production of the ACCC and the                  !    The lay-by statement you give to customers should include a
Australian Retailers Association. If you think that this newsletter              description of the goods, and in Victoria the statement should
would be useful as a regular series please let us know.                          be signed by you and the purchaser.
Email: small.business@accc.gov.au
                                                                            !    The statement should detail the price of the goods.
or phone your nearest ACCC or ARA office.
                                                                            !    The statement should include the first payment made and the
                                                                                 balance outstanding.
   Contents                                                                 !    The statement should detail when other payments are due.
   Lay-bys — top 10 tips                                1
                                                                            !    The statement should outline any cancellation charge, or how
   GST pricing information                              1                        such a charge will be calculated.
                                                                            !    The customer can cancel a lay-by before the goods are
   To refund or not to refund                           2
                                                                                 delivered, or if the goods are delivered in a damaged state
   The Australian Retailers Association                 2                        (which has not been brought to the customer's attention).
                                                                            !    The cancellation charge should be reasonable.
   How much are your customers worth?                   2
                                                                            !    The supplier should refund the money as soon as possible,
   Consumer friendly websites                           3                        minus any cancellation charge.
   How to advertise and sell — and stay honest          3                   !    The supplier can only cancel a lay-by if it stops trading, if the
                                                                                 customer breaches the contract, or if the goods are no longer
   Are you a franchise?                                 3                        available.
   Unconscionable conduct                               4                   !    If the supplier cancels the lay-by then all money should be
                                                                                 refunded and no cancellation fee charged (unless it is a breach
   Contacts and more information                        4                        by the customer).




           GST pricing
The ACCC has developed a range of
                                                                           information
                                                  Retail Price Adjustor are software packages      The series targets micro-business, but will be
publications to help you understand your          which you can use to help you identify the       a useful resource for all businesses. Topics to
obligations when adjusting prices to take         levels of savings you can expect on a range      come include: price display; adjusting prices
account of the New Tax System changes.            of business expenses, adjust your prices, and    correctly; transition to GST prices; pricing
                                                  convert your old tax system prices to New        claims; identifying savings; record keeping;
Pricing Kit for Small Business                    Tax System GST-inclusive prices. Copies of       and handling complaints.
The Pricing Kit for Small Business has three      the Pricing Kit will be available from the
components: A Compliance Guide, a Cost            ACCC's GST website and on a business card-       News for business
Savings Estimator, and a Retail Price Adjustor.   sized CD ROM. The Compliance Guide will          This series addresses topical issues, focusing
The compliance guide explains the ACCC's                                                           on industry-specific matters. Topics already




                                                                                                              1
                                                  also be available in a B5-size booklet.
guidelines on price exploitation in detail, and                                                    covered include transitional issues, pricing
provides numerous illustrations and practical     Small business GST checklists                    claims and lay-bys. Upcoming issues will
examples of the concepts in the guidelines.       A series dealing with compliance issues in a     include: road transport; travel and tourism;
It can be used as a reference manual              short, easy to apply format that will help you   cost savings to business; price points and
throughout the transition to the New Tax          tick off compliance measures as you              rounding; and pricing for jewellers.
System. The Cost Savings Estimator and            complete them.



Retailers
       Newsletter
    To      refund
          or not to refund?
                                                                    GST pricing information
                                                                    (continued from page one)
All goods and services sold by retailers, service providers and
manufacturers are covered by a Trade Practices Act statutory        Price expectation information.
warranty that can’t be limited and that provides minimum refund     The ACCC will also publish information on expected price changes
entitlements for consumers.                                         i.e. up or down, and the expected percentage change) for about
                                                                    200 major household items. While aimed at consumers, this
As part of good business practice some manufacturers offer their    information will also help businesses by giving price movement
own additional or voluntary warranty. Both must be honoured.        indications.

A refund is required when the goods:

!   don’t meet a basic level of performance, taking into
    consideration the price and description;
!   don’t perform the intended purpose;                                                               The (ARA)
!   don’t match the description or sample; and                       Australian Retailers Association
!   have hidden defects that affect the quality or performance.     The Australian Retailers Association (ARA) is the national voice
                                                                    representing the retail industry. Its 12 000 members operate over
A refund is not required when the fault was caused by:              40 000 retail outlets across the nation, making it one of the
                                                                    largest employer/trade organisations in Australia. The members
!   something the customer failed to do;                            transact an estimated 75 per cent of the nation’s retail sales and
!   the problem could have been expected given the quality,         employ about three-quarters of the retail workforce.
    age and price of the goods;                                     At least 90 per cent of our members are small businesses,
!   customers simply change their minds or find they can get the    employing less than 20 staff. ARA offers a variety of services to
    goods cheaper elsewhere;                                        members including advice on wages and employment conditions,
                                                                    assistance with workplace agreements/enterprise bargaining,
!   there is a fault that was brought to the customer’s attention   advice/consultation on retail legislation, tenancy, GST, staff
    before purchase; and                                            training, the Internet and more. We also monitor laws and
                                                                    consumer advice on refunds, tenancies, lay-bys, credit and
!   a manufacturer’s reasonable instructions have not been          product safety laws.
    followed or the goods have been misused.
                                                                    We are there for the retail industry and will help you work on
                                                                    your business rather than in your business.




Tips
                                                                    National contact details
                                                                    Canberra                                02 6283 5200

                                                                    Brisbane                                07 3251 3000

                                                                    Sydney                                  02 9290 3766
      Establish clear refund and warranty policies, and
      make your staff aware of those policies. Check that           Melbourne                               03 9326 5022
      they meet the minimum requirements above.
                                                                    Adelaide                                08 8419 2222
      Ensure that your staff do not offer refunds beyond
                                                                    Perth                                   08 9365 7695
      your store’s refund policy (for example, if your store
      does not offer refunds if customers simply change             Hobart                                  03 6234 2800
      their minds, then your staff should not tell your
      customers otherwise).                                         Darwin                                  08 8981 5755

      Make sure store signage does not mislead customers            or visit                             www.ara.com.au
      about their right to a refund.

      Draw product defects to your customer’s attention,
      and note the defects on the sales docket.                     How               much


                                                                                                              2
      Ensure the product is suitable for what the customer             are your customers                             worth?
      intends and they are aware of care instructions and
      performance expectations.                                     Calculate how much each customer is worth to your business —
                                                                    ($ turnover against the number of transactions multiplied by
                                                                    average gross profit). Would you give away even a single
                                                                    customer to make an additional 1 cent profit?



    Retailers
           Newsletter
                                                                                 How to
                                                                           advertise and sell — and
                                                                                                  stay honest
How much are your customers worth?
(continued)

Although it’s been 10 years since                                      !    The Trade Practices Act and similar legislation in each State
                                           1&2 cents rounded down
1 and 2 cent coins were removed from                                        and Territory set out laws about advertising and selling. Here
                                           to the nearest 10
circulation, the guidelines for rounding                                    are some marketing essentials to help you understand the
transactions haven’t changed.              3&4 cents rounded up             principles behind the law.
                                           to the nearest 5
Cheques, credit cards and point-of-                                    !    Make sure that you, your staff and your representatives don’t
sale electronic funds transfer should be   6&7 cents rounded down           mislead or deceive customers. It doesn’t matter whether the
to the exact cent on the total sale.       to the nearest 5                 misrepresentation is deliberate or accidental; it’s the
                                                                            impression left in the customer’s mind that counts.
Cash transactions should be rounded        8&9 cents rounded up
to the nearest 5 or 10 cents on the        to the nearest 10           !    Don’t make false or misleading representations about a
total sale, not individual items.                                           product's value, price, quality, place of origin or impact on the
                                                                            environment.
Perception is reality
Customers who experience poor rounding practice often equate           !    Speak up if you think that your customer needs to know
it to poor service. Poor service equates to less return business,           something more about your product or service so that they
less profits, and bad word of mouth.                                        won’t be misled.

Customers still complain when businesses round up on each item         !    Seek legal advice if you think a competitor is making
rather than on the total. You may not hear the complaints and               damaging and unfair comparisons with your product or
don’t know how many never return, but bad rounding practice                 service, or is engaging in other forms of misleading conduct.
will damage your business.                                                  You have rights too, and you may be able to stop the
                                                                            competitor’s conduct.
On top of all that you may well be misleading or deceiving
customers because individual rounding is illegal.                      !    Focus on the overall impression you give your customers,
                                                                            especially when you use techniques such as asterisks and


Consumer
                       friendly                                             associated fine print. Disclaimers should be specific, clear and
                                                                            highly visible.
                             websites                                  !    Advertising, shop tickets and signs using price comparisons
Is your business developing an on-line presence? If it is you should        must be realistic. The prices you use must be genuine and
be doing whatever you can to overcome consumers’ concerns                   relevant. You must have made the goods available at the
about buying over the Internet by displaying information that               pre-sale price for a reasonable period before using this
reassures them of your integrity and security measures.                     technique.

Your website needs to comply with the Trade Practices Act in the       !    You must reveal the total cash price to your customers before
same way that any other advertising and selling practices do.               purchase, not just deposit and instalment amounts.
Your website should:                                                   !    Special offers to draw customers to a store should be made
!   provide clear information about who you are and                         only if they have a fair chance of purchasing the advertised
    your location;                                                          goods. It’s a good idea to offer rain checks if demand
                                                                            exceeds your expectations.
!   provide clear explanations of policies on refunds,
    warranties, complaints handling and delivery arrangements;         !    Don’t accept payment if you know, or should know, that
                                                                            you can’t provide the kind of goods or services promised.
!   provide a clear and accurate description of the goods
    or services you are selling;
!   provide a plain explanation on how you will treat their personal
    information;
                                                                           Are you a                franchise?
                                                                       If you are you should be aware that the government has
!   provide a simple explanation about the security level              introduced a Franchising Code of Conduct that has the force of
    of your site for on-line transactions; and                         law; it outlines the rights and responsibilities of franchisees and
!   if you are using framing, linking or disclaimers — ensure that     franchisors.
    consumers are able to make fully informed decisions about          It applies to a franchise agreement entered into, renewed or
    entering into on-line transactions by making reference to the      extended on or after 1 October 1998.
    above information at all stages. For example, disclaimers
    should be compulsory viewing.                                      If you are not sure if you are a franchise you need to look




                                                                                                                   3
                                                                       at your business relationship to see if you have a franchise
Your website should not assume that consumers will follow every        agreement.
link and read every page. If important information such as terms
and conditions of a contract or disclaimers are buried deep, your      The definition of a franchise agreement is found in clause 4 of the
site may risk being misleading about the nature of your goods or       code. For your agreement to be classified as one it must contain
services.                                                              the following four elements.
are you a franchise ?
(continued)

1.        You must have an agreement (which may be written,            If this fails find out if the other party has a complaint handling
          oral or implied).                                            process. If not, then suggest a mediation service. Most major
                                                                       cities have mediation service providers and you can find them in
2.        There must be evidence of a system or marketing plan         the yellow pages. Mediation is a quick and cheap way of dealing
          that has been suggested or is controlled by the              with matters that can help to keep relationships intact.
          franchisor or an associate in your business.
          Examples of a system or marketing plan may include           Victims of extreme business behaviour may be protected by
          specific instructions from the franchisor on how to          section 51AC of the Trade Practices Act and an option to resolve
          advertise and sell goods or services.                        the matter is to take it to court.

3.        Your business must be associated with a symbol or a          It’s advisable to remember, though, that the courts may not agree
          trade mark (which may include the franchisor’s logo          the behaviour is unfair or unconscionable. A court may decide
          or trade name).                                              that it’s legitimate commercial behaviour, given all the
                                                                       circumstances.
4.        You must pay a fee or agree to pay a fee to the
          franchisor of the type prescribed in clause 4 of the
          code. (Examples of fees include up-front franchise fee
          or royalties.)                                               For more information
The code does not apply to a franchise agreement are when:
                                                                            contact any ACCC office
!    an overseas franchisor uses only one franchise or master
     franchise in Australia; or
                                                                             Canberra                              (02) 6243 1111
!    the agreement is covered by another mandatory code; or
                                                                             Brisbane                              (07) 3835 4666
!    sales under your franchise are likely to provide no more
     than 20 per cent of your gross turnover for the first year              Townsville                            (07) 4771 2712
     of the franchise, and you have been supplying the same
                                                                             Sydney                                (02) 9230 9133
     goods and services for two years immediately before
     entering the agreement.                                                 Tamworth                              (02) 6761 2000
If you meet all four requirements and do not qualify for any of the          Melbourne                             (03) 9290 1800
exceptions then you are a franchise and the Franchising Code
applies to your business.                                                    Adelaide                              (08) 8205 4242

                                                                             Perth                                 (08) 9325 3622

                                                                             Hobart                                (03) 6234 5155

                                                                             Darwin                                (08) 8943 1499


Unconscionable                                                               All publications mentioned are available,
                                           conduct                           or will be when they are published:

... and how would you handle it?                                            !    from any ACCC office;
Unconscionable conduct is extreme behaviour where a business
                                                                            !    on either the ACCC’s main website
takes severe advantage of its bargaining power over a smaller
                                                                                 http://www.accc.gov.au
party with which it has a commercial relationship.
                                                                                 or its dedicated GST website http://gst.accc.gov.au
How to assert your rights and continue
                                                                            !    the ACCC’s GST hotline on 1300 302 502 or
the relationship
If you are yet to sign the contract and think the terms are too             !    from your local representative organisation.
harsh then don’t sign. If you’re in doubt, seek independent expert
advice.                                                                     Business associations can contact the GST hotline to join
                                                                            the Business Information Network that provides free
If you already have a contractual relationship and a dispute arises:
                                                                            copies of GST publications. Some are available in hard
!    discuss it with the party involved — don’t delay or let                copy and some in electronic.




                                                                                                                         4
     problems worsen;
!    make it clear what action you require to settle the dispute;
     and
!    put your concerns in writing to the other party.

				
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