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Marketing

01 Mar 2009

I wish to run a promotion offering customers a "Free USB memory stick". All they have to do is either enter their details online or write to us. Customers must also pay $10 to cover postage and packaging. Is this ok?

In running any promotion a "Free" item must really be free. The cost of $10 to cover postage and packaging sounds substantially higher than the cost of posting a USB memory stick.

In the UK, promotions which offer "free" products or services are required to provide a "free entry route". A recent decision to come from the UK's equivalent to New Zealand Advertising Standards Authority (ASA) has ruled that an offer should only be described as "free" if consumers pay no more than: a) the minimum, unavoidable cost of responding to the promotion (ie standard postage, telephone, SMS text message, or email charges); b) the true cost of freight or delivery; and c) the cost incurred if consumers collect the offer. Whilst New Zealand doesn't have specific rules governing the entry route for free offers, the ASA is likely to look at this decision and follow suit.

Over inflating the 'cost' of the postage and packaging is likely to be seen as misleading and deceptive conduct and may result in both breaches of the Advertising Codes of Practice and also the Fair Trading Act 1986 (FTA). Remember breaches of the FTA can result in fines of up to $200,000.

So, if you want to advertise something as "free" make sure it really is free. Don't over inflate the standard costs such as postage, handling or phone costs associated with it.