When the competition runs off with your customers

"I can get it cheaper" came the reply.  "It's not that you don't do a good job, because you do, it's just that I can save $20 a week". 

Dave was stunned.  He had been undercut in a big way by his competition.  What he couldn't understand was how his competition were able to undercut him by so much.  Then he found out why.

Why Dave was losing customers

Dave had run his gardening service for 5 years and had always felt that his prices were very competitive.  He believed he understood the needs of his customers and so had devised various maintenance packages at different price points to meet every household budget.  But now his competition were undercutting him by $20.  He realised that those customers no longer using him were part of his premium maintenance package.  Those on his standard package seemed to remain loyal.  So Dave investigated what his competition were doing.  When he found out he was horrified.  The reason his competition were able to undercut him by so much was simply because they weren't providing the same service as Dave.

Why the customers were fooled

The service being offered to Dave's premium customers by his competition was more like Dave's standard maintenance program.  Since customers were out of the house when the gardeners came, they couldn't really see what was being done (or more importantly, what wasn't being done).  On a cursory look, the gardens seemed much the same as when Dave had maintained them.  But on closer inspection it would reveal that corners were being cut.  What annoyed Dave was that he could have offered a similar maintenance program at a similar price, so why were these customers swapping over?  That was when he saw one of his competition's flyers.

What the flyer said

In the flyers his competition were making a direct comparison between Dave's premium maintenance service and their maintenance service.  The flyer emphasised the $20 saving, but said nothing about what their service comprised.  In Dave's mind, it was like comparing apples with oranges and Dave felt the advertising was unfair.  Fortunately, the law says something about comparative advertising.

What is comparative advertising?

Comparative advertising is where one business compares their product or services to their competitors in their advertising.  For some time, any form of comparative advertising was illegal, because to use another business' trademark in your advertising would be trademark infringement.  However, comparative advertising is now legal, but is monitored by the Advertising Standards Authority through their Code for Comparative Advertising.

For comparative advertising to be legal it must be fair.  That means that if a comparison is being made, it should be clear what comparison is being made.  A comparison cannot be made on price if the product or services being compared are different.  In addition, the advert must be unambiguous, so that the consumer understands the comparison being made.  The advert must not discredit the other person's product or service, or even their business.  Failure to comply with these conditions would be a breach of the Code for Comparative Advertising.  In this case, Dave felt that his former customers had been duped into believing they were getting the same service for a cheaper price, when really that wasn't the case.

What could Dave do?

Dave decided that he needed to take action against his competitor, both as a matter of principle and to stop any more customers falling for their tricks.  he didn't however want to start expensive legal proceedings for trademark infringement so he decided upon a two-prong form of attack.  The first was to educate his customers better about the service he was offering.  This would include a general warning (without necessarily naming any names) of other gardeners who may offer inferior maintenance services at a cheaper cost.  The second prong of attack was to make a complaint to the Advertising Standards Authority about the flyers.  Both these measures had the desired effect: the flyers stopped and eventually Dave got his customers back.

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