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Misleading and Deception in Advertising and Selling

The issue

In today’s highly competitive, global market, companies are setting sales targets high to gain market share, increasing stock prices keeping the inventors happy. Leaders are taking a risk when they set unrealistic goals. In the challenging global environment, where everyone is replaceable, employees are tempted more than ever to break rules, regulations and even laws. Leaders in these companies must ensure the highest ethical practices and the culture acts in the same manner. In recent history, many organizations have been caught in doing “whatever it takes” to make the sale, to hit the sales target.

Selling and advertising are regulated, like any other legitimate industry. We have come a long way from subliminal ads and snake oil salesman, and many unethical practices have become outlawed. Even with regulations and laws, people and organizations still conduct business in that “grey” area and break laws such as false advertising and “bait and switch”. An example of an industry working in the “grey” area are cash advance companies. These companies prey on individuals in need of money, offering easy and quick money. What they do not openly disclose is the legal print that is about a two-font size, on the back bottom of the page that states the insanely high interest rates. The only thing they advertise and sell is that they offer easy and quick money.

With advancements in technology, misleading selling and advertising practices can reach masses of people instantly. In these technology advertisements and selling campaigns, it is hard to tell fact from fiction. Technology companies use buzzwords, like “100% money back guarantee”, “free trial” or “free software”, and so forth. I have been a victim of these tactics, sign up for a free software or app, and go through the setup process. In the process, you enter your name, address, phone, email and submit to the next stage. The next stage of the “free software” asks for your credit card number, why is a credit card required if it is free? Even if you decide to cancel the transaction, they have your name, address, phone, and email.

Deceptive advertising and selling are costly to both the brand and the industry. Look at the car industry, car salesmen are generally known for being “shady”, misleading, pushy and crooked. When companies put profits first, above people and planet, it hurts their brand. Look at Nike, when they outsourced their shoemaking to a third world country, paid minimally and provided unsatisfactory working conditions. These deceptive practices cascade down the chain of doing business. They affect the consumer, the business and the employees.

The consumers suffer first and most noticeably by these deceptive practices. When the whole truth is withheld, false pictures or facts about the product or service is presenting, the consumer is likely to make a decision that is the wrong decision. The business or organization suffers. At first glance, the profits may look great, but they will be short lived. Consumers do not like to be bamboozled and conned. Many angry consumers will retaliate with word of mouth and social media to ensure others are aware of the deceptive practices. Social media is a powerful tool that can instantly cripple a business or put them out of business. In the cascade of deceptive advertising and selling are the employees, they can find themselves bearing the effects, caught between the business and the consumer. The employees must deal with the unhappy, dissatisfied consumer and sometimes are directly blamed. The employees may leave, become disengaged and cause more challenges for the business.

How advertising and selling has changed over time

Technology advancements have played an important role in how consumers are exposed to advertisements. It started with the printing press, then radio, then television and now the internet. Each one of these innovations has revolutionized how advertisements reach consumers. The rapid growth of high-speed internet connectivity has uprooted traditional advertising techniques of buying advertising space. In today’s advertising world, anyone with an internet connection and a good product or service can create a website on Wix or another web design site and compete with large organizations. In addition to creating a website, they can make it easy for consumers to find on Google searches and use the power of social media to reach millions. Consumers are accessing information and learning about products and services in new ways and not through traditional mediums. In 2016, companies in the United States spent $15 billion more on online advertising verse television advertising (Gutierrez 2017). Spending on mobile and social media advertisements are expected to reach $55 billion in 2019, spending was $10.9 billion in 2016 (Gutierrez 2017).

The game has changed for advertising and selling, look what Amazon has done to the industry. The brick and mortar retail giants are trying to keep up with Amazon. Amazon revolutionized the industry by offering free two-day shipping to prime members, breadth of assortments, transparent pricing, convenient and unconventional return policies, and instant customer reviews.

Technology is quickly changing the car sales industry along with many others. Customers instantly have hundreds of car prices at their fingertips with their smartphone. Companies in the industry are also changing the industry by hiring non-commission salesmen and offering transparent pricing, no haggle pricing.

Examples of misleading and deception in advertising and selling

Deceiving the public may pay off in the short-term but will be costly in the long-term. Companies come out with claims that are not true about their product such as “scientifically proven”, “money back guarantee” or “guaranteed results”. With social media and television media that seems to only feed on negative stories, they will exploit and convict guilty in an instant, around the world, causing damage to that companies’ reputation.

Volkswagen reputation was negatively affected when they falsely advertised environmentally friend diesel cars. In March of 2016, the Federal Trade Commission filed a lawsuit against Volkswagen, which claimed that the car company had deceived customers with the advertising campaign it used to promote its supposedly “Clean Diesel” automobiles. While investigating Volkswagen they uncovered that in 2015, Volkswagen was cheating on their U.S. emissions tests for the last seven years. The FTC alleged that “Volkswagen deceived consumers by selling or leasing more than 550,000 diesel cars based on false claims that the cars were low-emission, environmentally friendly.” Volkswagen could have to pay $61 billion for violating the Clean Air Act, this is not including potential fines and penalties for false advertising (Heilpern 2016).

Dannon’s Activia yogurt was another company accused of deceiving their consumers. Activia yogurt advertised as being “clinically” and “scientifically” proven to boost your immune system and able to help to regulate digestion. In 2010, Dannon found themselves in a $45 million-dollar class action settlement and was ordered to remove “clinically” and “scientifically proven” from its labels (Heilpern 2016).

In 2010, Kellogg’s popular Rice Krispies cereal was accused of falsely claiming it could boost your immune system. The Federal Trade Commission ordered Kellogg to halt all advertising that claimed that the cereal improved a child’s immunity with “25 percent Daily Value of Antioxidants and Nutrients — Vitamins A, B, C and E,” stating the claims were “dubious” (Heilpern 2016). When you thought Kellogg learned their lesson from Rice Krispies, the cereal company falsely claimed that Mini-Wheats improved “children’s attentiveness, memory, and other cognitive functions.” The advertisement campaign claimed it could improve a child’s focus by nearly 20%. Kellogg agreed to pay $4 million for false advertising, in addition, to pay consumers five dollars per box, with a fifteen dollar maximum per customer.

One false advertisement claim that I cannot believe even made it to court was a class action lawsuit against Red Bull. I do not believe they did anything wrong, but leaders must be very careful and consult their team of lawyers when making advertising decisions. Red Bull advertised it could “give you wings.” A consumer that regularly bought the product said he used the product for 10 years and has not developed “wings”. Red Bull settled the $13 million-dollar class action lawsuit and paid ten dollars to every U.S. consumer who bought the drink since 2002 (Heilpern 2016).

The Federal Trade Commission (FTC) wants AT&T to pay $3.95 billion for misleading DirecTV advertising. In 2015, DirecTV used a common trick by advertising one rate without making it clear that the consumer is signing a two-year contract, with a significant price increase in the second years. The FTC claimed DirecTV did not properly disclose the terms and conditions to 33 million customers between 2007 and 2017.

Shockwaves were sent through the banking industry by the Wells Fargo case. Unrealistic goals and unrelenting pressure from leadership led to employees opening accounts for customers who did not want or need them and without their knowledge. I know several people in the banking industry, this is the unfortunate reality in banking, Wells Fargo was caught. In 2016, Wells Fargo fired 5,300 employees and admitted in opening millions of fake accounts (Egan 2018).

5-Hour Energy was ordered to pay $4.3 million for deceptive advertising. The company advertised: “that doctors recommend the product”; that users would experience a “no crash” energy boost; and that “the combination of ingredients provides a benefit that is superior to just drinking coffee” (Morran 2017). The company is fighting the lawsuit, stating the trial court incorrectly applied the law. A court with a similar lawsuit ruled on the side of 5-Hour Energy, concluding that nothing deceptive with the “Ask your doctor” advertisement and the language used did not present it as being “scientific or unbiased”.

Personal experience

I have had personal experience on both sides of the deceptive advertising and selling, both a victim and unfortunately have been part of the problem. In the DirecTV example above, I was a victim. I was deceived in signing a contract, having no clue it was two-years with an auto-renewing contract. I did not know until I called the company about my bill, thinking it must have been a billing mistake due to the $48-dollar monthly increase. I was told that is was not a mistake, the “promotion” ran out and that was the normal cost. I requested to cancel my service and was told I had several months before my contract was up if I wanted to cancel it would cost hundreds of dollars in fees and penalties. This deceptive practice not only negatively impacts DirecTV, but the entire cable/satellite industry. They all play the same game in offering low prices and significantly raise the monthly service after usually 12 months. This is the reason millions are “cutting the cord”, canceling traditional pay-television services. The company eMarketer is predicting to hit 33 million consumers canceling cable or satellite television by the end of 2018 (Spangler 2018).

I have both friends and family in the banking industry. They tell me stories of the high-stress goals that are flow down from corporate. They have asked for my help and I have helped them by opening a new account, having to put in $300 dollars. No, they did not work for Wells Fargo, this is unfortunately how the industry is and hopefully, with the Wells Fargo case, the industry will change.

I have also sold product and services in unethical and/or deceptive ways. I was a sales representative in two different industries, selling wine and spirits, and in selling municipal solid waste and recycling services. The pressure in both industries was significant to hit the quotas and a “whatever it takes” mentality culture. In the wine and spirits industry, my vice president would buy the restaurant their menus, in turn for 100% of the wine and drink list, and their well and call brands. This practice is illegal, and our company had to pay a $300 thousand-dollar penalty for this unethical practice. The same individual paid to get wine displays in a high-end grocery store. He offered the individual tickets to sporting events and bought him tickets for the NHL Winter Classic in Boston, these high demand tickets were $1,500 each. After he made these unethical deals, I would get called into his office. He said that he had to go and get the sale done and that if I cannot make the sale, he will find someone that can. The next experience I had was with a company that sold municipal solid waste (trash) and recycling services. I would sell services to companies, such as Jacksonville University or Mayo Clinic and have them sign a contract. The contract was a five-year, auto-renewing and could adjust (increase) the price at any time for any reason. This was stated in fine print on the back of the contract if you wanted to make the sale, this was not brought up in the discussions. I found myself thinking about the customers, this is not how I conduct business. I would manually cross out the five-year contract along with the auto-renewing and would write in a two-year agreement. I was truthful and transparent with my customers and gained their trust. These ethical acts of doing business were not taken lightly by leadership within the organization and I found myself abruptly, without notice getting fired. This was a difficult time, I had never been fired before, I was out of a job with two young children. I stood by my core ethics and values, I made the right decisions and have no remorse for my actions. I treated my customers as I would expect to be treated, treated fairly and given all the facts.

What should be done

Leaders need to have a moral compass because employees emulate their behaviors, both ethical and unethical. An ethical culture must be promoted through companies and ethical practices displayed by the leadership. The start of an ethically sound culture is for the company to recruit and hire well. This is not an easy task, I believe the interview process is a game of charades. Careful, methodical hiring processes are key to hiring the best candidate for the company. After hiring the right people, educate them about the culture and what’s at risk if they do not comply. Companies cannot just give a nod and a wink to unethical behavior, it must be handled directly and swiftly. Leaders must have strong core ethics and values. Legal should not be the litmus test. Leaders need to ask themselves their core value questions, such as; What would my friends and family think? If this was on the front page of the newspaper, would I make the same decision?

In addition to having strong core ethics and values, leaders must embrace situational leadership, be flexible. Every situation and individual are different, requiring a different leadership style. Years ago, the leader was the boss, in today’s world, leaders no longer lead based on positional power. There is a quote about situational leadership by John D. Rockefeller: “Good leadership consists of showing average people how to do the work of superior people.”

Another perspective “Whatever it takes”

There are many books, seminars, and trainings on the market on what makes a great sales person and how to do it, they all say to have a “whatever it takes” mentality. I know the books, seminars, and training always talk about it in a legal, ethical and moral way, but people take it the wrong way. Cultures that embrace this “whatever is takes” mentality, whether it is ethical or unethical are destined to underperform or fail. Using this tactic might result in a sale or two, but the little that was made on the sale(s) will be lost on customer service costs, lost customers and litigation. Competition is getting more challenging and cut-throat than ever. Every company is fighting for more market share and profit. Companies that take the high road, and never compromise their integrity, values, and morals may not win every battle, but they will win the war. There is a quote about ethics from Warren Buffett: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

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