BBB Small Business Advice: How to Avoid Six Common Advertising Offenses
Small business owners often have to add the title of Advertising and Marketing Director to their long list of duties and may not be aware of the various laws regarding common advertising claims. Creating an effective advertising strategy isn’t just about where and when ads are placed, but also what claims are being made and Better Business Bureau is providing guidance about some advertising phrases that can be misleading if not used properly.
According to Ad-ology research, 97 percent of small business owners in the U.S. are concerned about the economy but, regardless, 60 percent plan to spend the same amount on advertising in 2009 as in 2008 and 26 percent plan to increase advertising spending. Perhaps these businesses have been doing their research; a McGraw-Hill study found that during the economic downturn from 1980 to 1985, firms that advertised aggressively had sales that were 256 percent higher than companies that cut back.
“Small business owners recognize that advertising and overall marketing are not the ideal categories for budget cuts in a rough economy,” said Steve Cox, BBB spokesperson. “Advertising regulation issues though, are not necessarily something small business owners have time for, but ignorance of truth in advertising laws is not a defense and any business owner engaging in advertising should familiarize themselves with BBB’s guidelines to help avoid inadvertent violations.”
Following are six examples of commonly used phrases and tactics in advertising that are often misleading when not used properly:
The word “free” may be used in advertising whenever the advertiser is offering an unconditional gift. If the shopper has to purchase an item in order to receive the free gift, the advertiser must clearly and conspicuously disclose the conditions. Also, an advertiser may not increase the price of the purchased item, nor decrease quantity or quality in conjunction with the free offer. Additionally, free offers should not be advertised when the item to be sold is customarily a negotiated-priced item such as an automobile or home.
“Save up to…”
Price reduction claims that cover a range of products or services should state both the minimum and maximum savings without a misleading emphasis on the maximum savings. Also, the number of items available at the maximum savings should comprise typically 10 percent of the items being sold unless local or state law requires otherwise.
“Lowest price in town…,” “Our prices can’t be beat…,” etc.
Prices for products and services fluctuate regularly and it can be extremely difficult for an advertiser to claim with certainty that their prices are lower than their competitors. Such claims should be avoided unless the advertiser can provide substantiation.
“Best,” “Most,” “Tops,” and other superlative claims.
Superlative claims can be objective, based on fact, or subjective, based on opinion. Objective claims relate to tangible qualities and performance which can be measured against accepted standards. When making objective claims, an advertiser must be able to substantiate all claims.
Obvious use of puffery, such as an advertiser stating they think they offer the best customer service in town, may not be subject to truth-in-advertising standards. However, advertising is all about trust from the consumer’s perspective and businesses should be vigilant against making subjective superlative claims that are misleading.
“Factory direct,” “Wholesale prices,” “Direct from the maker,” etc.
Claims such as these imply significant savings from the actual price being offered by retailers. These claims should not be made unless the implied savings can be substantiated. Furthermore, claims such as “factory to you” or “factory direct” should not be used unless the advertiser actually manufactures the merchandise or owns the factory where the advertised products are made. Similarly, an advertiser cannot falsely claim to be a wholesaler, nor can an advertiser claim to offer “wholesale prices” or items “at cost” unless the items are being sold at the same price as would be purchased by a retailer for resale.
*Use of Asterisks
Asterisks can be used in advertising if they offer additional information about a word or term that is not inherently deceptive. However, an asterisk or similar reference symbol cannot be used as a means to contradict or substantially change the meaning of the statement. The information referenced by the asterisk should also be clearly and prominently disclosed.
For more guidance on advertising, see BBB’s Code of Advertising at: http://www.bbb.org/us/code-of-advertising/. Small business owners and consumers can file a complaint regarding questionable advertising claims with their BBB at www.bbb.org.