Bait and Switch – Meaning, How to identify, Examples, and More

Bait and switch is a selling tactic that is unethical and morally wrong. In this, sellers use false claims to lure customers into their store but sell them another product that is either inferior or pricier. Basically, the seller uses low prices as bait to lure customers. But, when customers arrive to inquire about that product, the store tries to switch them to a product that is either of inferior quality or is more expensive.

Apart from the low price, the bait can be a free item with the purchase, low-interest rate, and more. Generally, the switch product is the one that holds less value for the buyer, or the buyer doesn’t want it, but it is more profitable for the seller.

It will not be wrong to say that the seller tries to mislead customers in bait and switch selling. This is because the seller has no intention to sell the product that they advertised or used as bait. If a customer asks for the advertised product, the seller usually gives excuses. The excuses could be the product got damaged, it is out of stock, etc.

For this tactic to be successful, it is very important that the bait of low prices is lucrative enough that potential customers can not resist. Another critical factor is the ability of the salesperson to convince a customer to switch from the advertised product to the product that the seller intends to sell.

Bait and Switch are Anti–competitive

When any seller resorts to such a tactic, it results in taking customers away from the honest retailers. Moreover, it may also result in honest retailers losing their loyal customers, as well as new customers not entering the store.

Several countries have regulations in place against such selling tactics. However, one must be clear that such similar occurrences may not lead to bait and switch fraud. If a seller can prove that non-availability of the advertised product was due to circumstances out of their control, then it does not bait and switch selling. In other words, when the seller is able to prove his honest intention and some genuine circumstances that prevent him from selling the advertised product, then it may not fall into the category of bait and switch frauds.

Also, in many countries, such a selling tactic is legal if the seller mentions that the stock of the advertised product is limited. Or the retailer offers a rain check if the product sells out. Like first come, first serve or first 100 customers, and so on.

Also, the seller uses several techniques to avoid the fraud charges even if the bait and switch tactic is illegal in their country. One such technique is that they will keep just one unit of that product in the store, such as on display. However, they don’t intend to sell it; instead, they keep it as safety if any customer really insists.  

Also Read: Predatory Dumping

Another way is that they keep one item in the store and tell customers that the product is out of stock. But, if someone investigates, they will get the item from the store saying that the salesperson made a mistake.

Another way to carry this selling tactic is by placing the ad strategically. In very small print, the ad will carry the words “limited quantities available” or “till supplies last.” So, if any customer inquires or investigates, the seller will say that they revealed everything in the advertisement.

Examples of Bait and Switch

Surprisingly, bait and switch selling is more common in the mortgage market than in retail. In a mortgage market, a company will advertise offering mortgages at very low rates. They do this even when knowing that very few customers would qualify for this rate.

Auto seller uses a similar strategy in auto purchase financing. In this, they lure buyers with a promise of a 0% interest rate. But, very few buyers qualify for a 0% interest rate.

Real estate agents also use such a selling strategy by advertising properties at very reasonable prices. Sometimes hotels also advertise very low rates, but when guests check in, they levy hidden fees. Also, recruitment agencies may post attractive but fake jobs to collect resumes.

Bait & Switch

Sellers of computers and other high-tech items also use bait and switch selling tactics. Since not all users are tech-savvy, so when they enquire about the advertised product, the salesperson tries to confuse them with technical details and sell them another product.

How to Identify?

A customer needs to watch out for the following red flags to identify such selling tactics:

  • If an online seller shows eagerness in enquiring about a customer’s payment details, it could be a red flag.
  • If a company advertises a product at a massive discount without any conditions or terms, then it may be a red flag.
  • In case a seller gives excuses that the product is out of stock, or is damaged, then it could be a red flag.
  • Suppose a seller claims that the product in the ad is part of a bigger product. And that the customer will have to buy the complete product to get the discount. This may also be a sign of bait and switch.
  • If a seller hesitates to provide the buyer with all the details the buyer is asking for, then it could also mean an unethical selling strategy.

However, there are situations that seem like a red flag, but in reality, they are not.

One such situation is a pricing error. This is one of the most common mistakes a seller makes. In this case, the seller makes a genuine mistake by advertising the wrong product price. Usually, such mistakes are easy to catch because the price in the ad is incredibly low. For instance, a seller incorrectly labels the price of a 60-inch LED TV at $70. In this case, the price is so low that the mistake looks obvious, and it would be easier for everyone to understand.

Another case is when the seller advertises the product at a discount but also mentions that it would be available to the first 50 or 100 customers or that the stock is less. This is not a bait-and-switch strategy because the seller has made things very clear in the advertisement.

Final Words

Bait and switch tactics are unethical and morally wrong, but it has given phenomenal returns for many sellers. However, even if a company uses these sales tactics, it should not rely on them for too long. This is because customers will soon realize that the company is duping them. Thus, the company will start to lose customers and its reputation.

Frequently Asked Questions (FAQs)

What is bait and switch?

With bait & Switch, the seller uses low prices as bait to lure customers, and when customers arrive to the store, the seller tries to switch them to a product that is either inferior or pricier.

Mention some examples of bait & switch.

A few instances of bait and switch include:
a. Mortgage market
b. Auto seller
c. Real estate agents
d. Hotels
e. Recruitment agencies

How do you identify bait and switch?

Following practices of a seller may act as a red flag:
1. Online seller shows eagerness in enquiring customer’s payment details.
2. Advertising a product at a massive discount without any conditions or terms.
3. Seller giving excuses of the product being out of stock or damaged.
4. Seller hesitates in providing the buyer with all details the buyer is asking for.

Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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