The FTC on Deception, Disclosure, and Endorsements - Brokerblogger

Naive consumers (click on animated cartoon) don't realize that institutional marketing campaigns can motivate you to buy things that may not be needed (like the "Super Size" version of chips), and can even be harmful to you in some ways.  That is why the Federal Government sometimes has to get involved to protect unwitting consumers (no clear, conspicuous, complete, and comprehended disclosure of of all material facts given to them).

There are many different kinds of intentional and unintentional deception (being mislead) in this world with many "grey areas" within the details of the circumstances.  John Wanamaker said "Any seeming deception in a statement is costly, not only in the expense of the advertising but in the detrimental effect produced upon the customer, who believes she has been misled."  Let's look at the word "advertising" ("The activity of attracting public attention to a product or business,..").  Deception can be in all forms of marketing, and these "Basic Definitions: Advertising, Marketing, Promotion, Public Relations and Publicity, and Sales help clarify where it's possible.  Let's see what the FTC says.

The Federal Trade Commission has a "FTC POLICY STATEMENT ON DECEPTION" regarding their "enforcement policy against deceptive acts or practices."  Notice, this is NOT just for the more traditional forms of "advertising".  The summary goes on to say "First, there must be a representation, omission or practice that is likely to mislead the consumer."  I guess they assume these to be intentional.  Notice, though, that it leaves out "errors", since this implies being misled unintentionally.  This document gives the spirit of the FTC's stand on deception, and they hope it "...will provide guidance to the public."

How does this apply to "Buzz Marketing", "Viral Marketing", "Guerrilla Marketing", and overall "Word Of Mouth Marketing"?  Well, it is my belief that if there is an OMISSION of disclosure anywhere in the "downstream" of institutionalized buzz marketing that "magically" converts to everyday, naturally occurring "WOM" (Word of Mouth), there needs to be complete disclosure from beginning to end in that downstream. 

Besides the reasons I gave in my last post, Dave Balter did a presentation, as captured by Benjamin Pfeiffer (aka "Phoenix") at the 2/27/06 "Blogs, CGM, and Buzz" session of SES N.Y., about which Ben says Dave said something to the effect:  "People will come out in order to bash the product or support it.  People who spread word of mouth: "influentials, mavens, trendsetters, alphas, bees."  Ben goes on to say:  "Sometimes he (Dave Balter) said they look at different groups, such as the hip trendsetter, super loyal people (who don't want to share the brand), the mavens (specialized people who share opinion, but one small word of mouth potential), light loyals (the people who drove all the returns, and those that only go to the restaurants once a quarter). The light loyals where the people, the everyday people that make the returns back the restaurants. He ends saying. You cannot control your customers."    These terms and concepts imply a sense of power (possibly derived from "inside-cool information) that can be used to motivate less influential people to buy (or just talk about and continue the "downstream") things they may not need, understand, or even really want, in my opinion. 

These "trendsetters" (or just everyday "bees") can be really good at doing what this "top 10 BuzzAgent" does "...really finding out what made the product great and how to connect it to the target's needs and experiences." (Pg 18 of "Sales Pitch Society II").  Wow! If there is one thing I know really well, it is recognizing one possible approach and definition of "sales" when I hear it!  That "top 10 BuzzAgent" was learning the "art of persuasion".  To me, this is totally different than everyday, naturally occurring word of mouth opinions.  This quasi sales approach could also imply that this particular "top 10 BuzzAgent" was trying to be perceived as giving an "Expert endorsement" of the buzzed product. 

The FTC has their "FTC GUIDES CONCERNING USE OF ENDORSEMENTS AND TESTIMONIALS IN ADVERTISING " with section 255.3 that relates to "Expert endorsements".  Section 255.5 relates to "Disclosure of material connections" which says:  "When there exists a connection between the endorser and the seller of the advertised product which might materially affect the weight or credibility of the endorsement (i.e., the connection is not reasonably expected by the audience) such connection must be fully disclosed."  It is my opinion that the downstream "endorser" has a traceable "upstream" right back to the seller.  Therefore, that "connection" should be disclosed throughout the complete downstream.

In this ""PR Communications" 10/4/05 blog post entitled "BuzzAgent Aims For Transparency", it has a comment by Joe Chernov (PR Director of BuzzAgent) that says "Disclosing affiliations does not, as the professor in the AdAge article says, damage credibility. Rather, it is the key ingredient of credibility."  If this is really true for the start of the downstream buzz, then why shouldn't it be true for the entire downstream from beginning to end?  It seems to me that if the only control that was used in telling trendsetters, influentials and downstreamers what to say and PASS ON was to make sure to disclose initial affiliations with the product seller each time the positive or negative buzz was passed on, it would help everyone's credibility factor, while avoiding any ethical related complaints from people who may feel deceived (if they found out "after the fact").

To be fair to WOMMA, I like their definition of "Word of Mouth Marketing" and their "Unethical Word of Mouth Marketing Strategies", but I wish they would stress the power of clear, conspicuous, complete (from beginning to end), and comprehendable DISCLOSURE more, as I found that word only used once under the definition of "Schilling" on both those pages.  WOMMA should be talking about what their members should be doing, just as much as what they shouldn't be doing.

5/29/06 Postscript:  Update - I just found this "Word of mouth: Mostly offline and positive" blog post by Jackie Huba.  I believe it is incredibly relevant to my response to Joe Chernov's comment on this blog post.

5/29/06 Postscript:  Update - I found that Jackie Huba blog post through a link on BusinessWeek.com's "Blogspotting" blog in a 5/23/06 post called "P&G, Online, and Word of Mouth" which has to do with the same subject of offline WOM being predominant over online WOM.  This is not unusual to me as most people feel it's easier to talk than write, and they prefer NOT to be put on written record for positive or negative reviews of anything, in my opinion.  This only goes to prove that institutionalized WOM works best when there is no "paper trail" of disclosure or non-disclosure.  I also believe that a certain (slightly larger) percentage of the population believes that "if you don't have something good to say about something or somebody, then don't say anything at all."  Therefore, besides the reason I gave in my response to Joe Chernov's comment here, I believe that most people will feel more at ease in openly spreading the "good news" vs. the "bad news".  However, this depends on how much of a "loss" the initial WOM person felt when the WOM process started.  Why?  Because, if the initial person felt a personal loss of some kind, that negative WOM could spread faster and wider than positive WOM depending on the perceived severity of the loss.

In that "P&G, Online, and Word of Mouth" blog post it has a link to another Blogspotting post:  "I Sold It Through The Grapevine ".  In that, it says that "Without such disclosure (from marketer to "connector"), Commercial Alert Executive Director Gary Ruskin sees the danger of the basic "commercialization of human relations," where friends treat one another as advertising pawns, undercutting social trust."  I totally agree.

12/14/06 UPDATE - The FTC responded to Commercial Alert's petition, and Gary Ruskin posted "FTC Gives “Giant Christmas Present” to P&G, Word of Mouth Marketing Industry".  Further discussion on this is at ProBlogger's "Will Affiliate Disclosures Become Required by Law?"

Animated image courtesy of www.artie.com.

Comments

[jchernov]

Bill,

This is Joe Chernov, BzzAgent's director of public relations, writing. I found your insights into this topic to be thorough and enlightening. I believe your well-thought blog provides a valuable service to your readers.

I am writing only to point out an incident where the metaphoric game of "telephone" appears to have broken down, resulting in an unstable foundation for your otherwise sound arguement.

In your post on the FTC and Disclosure, you write, "Dave Balter's own words, as captured by Benjamin Pfeiffer (aka 'Phoenix') at the 2/27/06 'Blogs, CGM, and Buzz' session of SES N.Y., describe the Buzz Agents he contracts with as 'influentials, mavens, trendsetters, alphas, bees'."

This assertion gives way to your reasonable conclusion that there is something "unnatural" (paraphrasing) about the WOM that occurs in the BzzAgent model.

I am not sure if Mr. Pfeiffer's blog inaccurately restated Mr. Balter's presentation, or if you misread his blog (I cannot locate the post to which you refer); however, I can say without equivocation that the slide to which Mr. Pfeiffer refers states that BzzAgent's system does NOT target influencers, mavens, bees, etc. Our system is based on the fundamental belief that WOM is most successful when brands empower the everyday consumer rather than cherry pick those that algorythms prioritize.

I am very interested in knowing if this shift in message would affect the conclusions you draw. Additionally, I am open to discussing this topic with you further, as I very much admire the thinking behind your posts.

Kindly,
Joe Chernov
Director of Public Relations

[Brokerblogger]

Joe, thanks for the compliment. I found your use of the phrase: "the metaphoric game of 'telephone' appears to have broken down" to potentially be true, so I've changed my post to be more fair and potentially accurate (IMO). I also find that same phrase to be analogous to what happens in WOM, as a postive or negative message can get distorted and embellished as it is passed along in different telephone conversations throughout the "downstream".

By the way, I've always had a link to Ben's (aka "Pheonix") post ("Blogs, CGM, and Buzz") as he is a staff writer for "Search Engine Roundtable" (see attribution at the bottom of his post).

As for your use of the word "unnatural", thanks for adding "(paraphrasing)", as I never used that word. What I said was "Well, it is my belief that if there is an OMISSION of disclosure anywhere in the "downstream" of institutionalized buzz marketing that "magically" converts to everyday, NATURALLY occurring "WOM" (Word of Mouth), there needs to be complete disclosure from beginning to end in that downstream.

"NATURALLY" occurring WOM is not "institutionalized" as Kate Kaye says. It has no prizes to be potentially won by anybody. It does not need disclosure throughout the entire downstream that the original buzz was started by someone who has been recruited by a marketing firm that gets paid money by the manufacturer or service provider, since that is not true.

You say: "Our system is based on the fundamental belief that WOM is most successful when brands empower the everyday consumer rather than cherry pick those that algorythms prioritize." It is my belief after over 30 years in sales, marketing and advertising that the "everyday consumer" can easily be classified as any one of the terms Ben said that Dave used in his presentation. In fact, the "everyday consumer" can have the most motivation to try to become "those that algorythms prioritize." So, there is no difference to me.

I think the best proof of what I just said is the fact that I asked Shawn Gold (founder of MySpace.com) why so many young people participate on his site. He said the three top "core needs" that MySpace fulfills are: 1.self-expression 2.Discovery and 3.Recognition (in that order). These are strong motivators for the "everyday consumer" to want to do a "good job" in posting good content on MySpace, or being a good BuzzAgent. Some BuzzAgents may find these motivators fill their needs so well that they don't even try to redeem their earned points for prizes, and they certainly don't want to spread too much negative WOM. Why? Because their common sense tells them that the companies that hire marketers on a consistent, persistent basis would not keep doing that, if more than 50% of the time, potentially "sales damaging" things were being buzz'd downstream.

Thanks for your good comment, and please feel free to respond again.