Social media forums are awash with “cloaked endorsers,” or paid advertisers logging on as anonymous Internet posters. These paid advertisers seek appropriate online forums–a blog, a Yelp.com review page, Facebook page or Twitter account–to drop in “helpful” recommendations or testimonials under the guise of unpaid, satisfied customers.
The Federal Trade Commission (FTC) has taken notice.
Since social media's infancy, small businesses have been manipulating them for a competitive advantage. A cornerstone application for bakeries has been the word-of-mouth endorsement: a customer's positive experience with a bakery's products or services is used as a testimonial to the quality of the bakery. No higher praise exists than the word of a satisfied customer; that is, unless, that customer is being paid for his or her testimonial.
Social media forums are awash with “cloaked endorsers,” or paid advertisers logging on as anonymous Internet posters. These paid advertisers seek appropriate online forums — a blog, a Yelp.com review page, Facebook page or Twitter account — to drop in “helpful” recommendations or testimonials under the guise of unpaid, satisfied customers.
The Federal Trade Commission (FTC) has taken notice. For the first time since 1980, the FTC has updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising in order to better address endorsements by consumers, experts, organizations and celebrities, as well as the disclosure of important connections between advertisers and endorsers.
These “connections” are where bakeries could get into trouble. Of course, few bakery owners have the time or inclination to hire people to troll the Internet posing as happy customers. But the “connection” goes beyond monetary payment — it includes freebies. Not long ago, restaurants were known to offer a free dessert in exchange for a positive Yelp review. Now, a bakery offering so much as a discount in exchange for a social media testimonial is treading into “cloaked endorser” territory.
According to last month's FTC news release, “the revised Guides also add new examples to illustrate the long standing principle that ‘material connections’ (sometimes payments or free products) between advertisers and endorsers — connections that consumers would not expect — must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other ‘word-of-mouth’ marketers. The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.”
Also, under the revised Guides, advertisements that feature a consumer's positive experience and depict it as typical or usual when it isn't, will be required to clearly disclose the results that consumers can generally expect. The previous version of the Guides allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer, such as “results not typical,” but now the actual typical experience needs to be spelled out.
Social media channels are still the Wild West of the advertising and marketing campaigns, but it was only a matter of time before organizations like the FTC arrived with an aim to regulate. For more information about the revisions, visit www.ftc.gov.
Negative reviews unchecked
While businesses are facing greater restrictions on how positive testimonials are used online, consumers are using the Internet and social media websites to register complaints and post negative reviews more than ever.
The fourth annual Customer Experience Impact (CEI) Report, a Harris Interactive study sponsored by RightNow® Technologies Inc., found that consumer expectations are very high and that delivering a great customer service experience is critical to businesses such as foodservice restaurants and bakeries.
In fact, 86 percent of consumers have stopped doing business with an organization after a bad experience, up 27 percent from four years ago.
The 2009 CEI report showed that if consumers' expectations aren't met, they have multiple avenues to express their dissatisfaction, and with social media tools at their disposal, the reprecussions can be enormous.
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82 percent of consumers indicated they would tell others about a bad experience, up 67 percent since 2006.
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As many as 36 percent of consumers who have a bad experience share their experience online by posting a negative review on the company website (23 percent), Facebook (7 percent) or a blog (6 percent).
