Deceptive advertising

From CEOpedia | Management online

Deceptive advertising, also known as misleading advertising, is a type of marketing strategy which is defined by the Federal Trade Commission as any explicit or implicit claim that may mislead consumers by causing them to believe anything before making a purchase (Bonsu, 2020).

The goal of advertising is to raise a company's market capitalization and encourage investment and profit growth. In the United States, advertising expenditures totaled $223 billion in 2018 and are projected to reach $240.68 billion in 2019. The significance that organizational leaders place on advertising in their quest for expansion and sustainability is supported by this statistic. Businesses use clever and flexible tactics, such as creative advertising, to attract customers and boost sales in a competitive market (Bonsu, 2020).

Businesses advertising operations are unlikely to hurt customers inasmuch as they permit saving on search costs and promote a better match between tastes and consumption options when the quality of an item on sale can be checked prior to purchase. Below is reported the difference between the two main types of products:

  • search goods - for this type of goods deception advertising does not influence the purchase choice of customers as all their quality can be easily tested before the buying process.
  • experience goods - instead, in the case of such products, quality cannot be thoroughly verified before consumption as they are not physical and rely on the experience that the customer would undergo.

In these situations, advertising could have a negative side: mediocre companies might use marketing channels to persuade customers to make poor purchases (deceptive advertising). The world's antitrust and competition policy authorities are well aware of such a significant threat (Piccolo et al., 2015).

Examples of deceptive advertisement

Beauty Industry

The way that women are portrayed in advertising and the media in general is frequently questioned, particularly when young models are used, stereotypes are maintained, women are undervalued, the media is sexually provocative, and unrealistic body images are presented (Waller, 2015). As they compare and strive to meet the unrealistic ideals set by the media, these pictures may have a harmful impact on women and girls. These effect can be falling into this categories (Waller, 2015):

  • low self-esteem
  • eating disorders
  • unhealthy attitudes
  • depression
  • in extreme cases, suicide

The weight of such advertisement malpractice could be of a great toll on the mind of consumers. The ability to adapt, transform, and alter images with the use of cutting-edge graphics editing applications like Photoshop has increased in recent years, raising the already inflated expectations placed on some advertising imagery. The imagery used in magazine advertisements for fashion, fragrances, and cosmetics have become a source of worry for the UK's advertising authority (Advertising Standards Authority) in recent years. Moreover, in the United States, the National Advertising Division of the Council of Business Bureaus Claims (NAD)'s decision to prohibit a CoverGirl advertisement for "excessive Photoshopping" (Waller 2015, p.109) was viewed as a milestone verdict and a crackdown.

Snowfall Reports

In the research by Zinman J. and Zitzewitz E. on deceptive advertising made by ski-resorts, we can see how the manipulation of data on snowfall reports deceives the potential customers (Zinman et al., 2016). What was explained in their research was how apparently, in winter, the advertisement used by some ski-resorts were based on untrue data such as:

  • snowfall data
  • weather
  • skiing conditions

In particular, the peculiar and similar part to most of the resorts taken into consideration was that they affirmed that every weekend, the amount of snow reported to be at many resorts in the area of observation was around 30% higher than in any other day of the week (Zinman et al., 2016). Scientifically, it could be possible that in the weekends the precipitation of snow could be higher as it is influenced by pollution and air changes cause by the usage of transportation, however, as this phenomenon was happening in the majority of resorts it has been excluded. An interesting fact is that in the resorts where the bookings were non-refundable, the exaggeration on the weekend snowfall was higher than in the ones where it was possible to cancel the reservation, therefore meaning that, as shown above, some companies use deceptive advertising to gain more profit on people that would cancel due to the low amount of snow present at the ski-resort. Fortunately, with just the aid of an iPhone app that showed real data on snowfall, skiers could avoid getting deceived by such deceptions and in fact this practice of exaggeration on snowfall data stopped happening in all the ski-resorts that had better iPhone signal reception (Zinman et al., 2016).

Consumer Loyalty

As the majority of companies that decide to deceive consumers with this type of misleading advertisement does not take into account the loyalty of their potential clients, we can expect this firms to be providing products or service of low-value. Beside the ethics and legality of such marketing activities, the consumer loyalty to a brand or company can change the results of the future of the last one, both in a negative or positive way. In the telecommunication industry, as shown in the research by Hasan S. A. & Subhani M. I., while researching the different Pakistani communication providers they have proved how the ones that focused their advertisement on deception had less market share and profits than the ones making real claims and focusing more in the service offered (Hasan, 2011). Whenever companies decide to not take care of the opinion the consumers may have of them but instead see profit as the main goal, the loyalty is attacked, meaning that the more truthful and honest a company is, the more loyal their customers will be to them.

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Author: Claudio Mameli