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Advertising Mistakes: Lessons Learned the Hard Way

Small-business owners spend many hours and a good deal of hard-earned money devising marketing strategies. In today's online marketplace, finding and reaching your target audience is paramount. However, the Federal Trade Commission (FTC) is watching closely to ensure that all online and traditional advertising complies with truth-in-advertising laws.

As much as you want to lure new customers to your social media page or website, take time to review the digital marketing laws. Both federal and state laws restrict how businesses can contact potential customers. There are limits to what you may say in promoting products. Deceptive and misleading advertising is illegal.

These errors are not just common small business marketing mistakes. Even large corporations with big legal departments make them. Take time to learn from their mistakes and save yourself the headaches these CEOs and business leaders made in their marketing plans.

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Email Marketing, Spam, and Fake News

Effen Ads LLC and their affiliate marketing network, W4 LLC, broke almost every rule in the FTC's book with their work-from-home scam in 2018. The FTC fined Effen Ads LLC and the owners $11.3 million and permanently barred them from marketing or selling any online work-from-home program.

Effen Ads' marketing efforts involved bulk unsolicited emails with deceptive headers suggesting the emails came from CNN or other reliable sources. Subject lines offered bogus endorsements from successful business owners and entrepreneurs. The body of the email contained news stories with links to the company's work-from-home scam. The FTC estimates as many as 50,000 consumers fell for these emails.

The Takeaway: Email marketing is legal as long as it obeys the regulations of the CAN-SPAM Act. Clear headers, honest subject lines, and opt-out links in the body are essential.

Truth in Origin Advertising

Patriotism is big business in America, and small businesses make good money marketing to the patriotic demographic. That's perfectly fine as long as everyone follows the laws.

Gennex Media LLC learned that rules are not made to be broken in the U.S. when the FTC hit it with a substantial fine and a prohibition against making any unqualified claims of U.S. origin for their products. Further, any qualified claims must include a complete disclosure of how much of the product was made or assembled in the U.S. and the nation(s) of origin or production of other parts.

Gennex Media LLC markets and sells assorted promotional items such as wristbands, lanyards, and buttons under the trade name Brandnex. They have several other companies, including Promotional Manufacturing Group of America. On the Brandnex website and social media marketing, Gennex claims they make all their merchandise in America. The FTC investigation found that nearly all the Brandnex products came from China.

The FTC has regulations detailing what products may be labeled "made in America" and under what conditions. The U.S. Origin Claims is part of the unfair and deceptive advertising rule. Advertising cannot mislead customers by fact or omission.

The Takeaway: If your business plan includes highlighting where your merchandise is from, you must ensure all your merchandise is from that location. Brand awareness is critical for small businesses. Made in America or made on Main Street, your customers want the real thing.

Deceptive Advertising and Confusing Cancellation Processes

Many new marketing campaigns are remodels of ones that went before. The existing customer base is still the same; all that's needed is an online presence and retooled messaging.

That's apparently what payday lender "Brigit" (Bridge It, Inc.) thought when they started advertising their alleged instant cash advance app. Aggressive online marketing and a social media presence ensured that many people saw the promise of $250 instantly and signed up. Unfortunately, Brigit was a modern take on the bait-and-switch scam. In 2023, the FTC levied an $18 million court order for refunds and ordered the company to change its deceptive advertising practices.

Brigit's digital marketing strategy focused on social media platforms and promised immediate cash once users downloaded their app. Unfortunately, most users found that before they could get the "instant" cash offered, they would need to pay a 99-cent transaction fee and sign up for a $9.99 monthly membership fee. This negative-option membership fee had a confusing cancellation process. The company did not reveal that all outstanding cash advances had to be repaid before cancellation could occur.

The Takeaway: If your sign-up process is easy, it cannot take a lot of time to cancel. You must disclose all requirements for cancellation before customers sign membership agreements.

Influencers and Customer Reviews

Some of the best advertising is word-of-mouth. If your ideal customer tells others how much they love your product, you don't need much else. One of today's greatest marketing tools is influencer endorsement. It's a great idea unless you do it wrong.

Google LLC and iHeartMedia Inc. did just that. Proving that even major corporations with huge marketing budgets aren't exempt from marketing mistakes, the two giants aired over 29,000 deceptive ads for the Pixel 4 phone in 2019 and 2020. The ads featured radio personalities describing their experience using the Pixel 4 and how much they liked the new phone. But none of the personalities owned the Pixel 4 before recording and airing the ads and had no experience with the devices.

The FTC's Endorsement Guides are very specific about what endorsers and reviewers can and cannot say. If an endorser has not used the product, they cannot discuss their experience with it. If endorsers receive the product in exchange for a review, consumers must know about the relationship. Any referrals or purchases through the endorsements must come from honest product knowledge.

Without admitting or denying liability, both Google and iHeartMedia entered into a consent decree with the FTC, barring them from similar deceptions and requiring them to submit compliance reports with the order in writing.

The Takeaway: If you're a startup and need endorsements, it's OK if you trade products and services for reviews. Disclose the relationship between yourself and your reviewer according to FTC rules. Follow regulations on influencer disclosures. Don't cut corners thinking nobody will find out.

Learn From Their Mistakes and Seek Legal Advice

Your content marketing strategy is not much different from any listed here. You want your customers to see your product or service and buy it. Learn the lessons these businesses did not, and protect yourself. Contact a business and commercial law attorney with any concerns over your marketing campaign.

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