The Federal Trade Commission (FTC) is making the world wide web a safer place and I for one am happy about it. This is good news for those of us who do use ethical marketing practices and play by the rules. I don’t believe the FTC is out to meddle in our businesses, but rather has a big job to do – protect consumers and give them the tools to make informed decisions on their own.
 
One of the new rules that has received a lot of attention has to do with testimonials. Testimonials are usually in the form of written words, audio, or video, extolling the virtue of some product or service.

Testimonials have a firm place in advertising and can definitely accelerate your sales as it helps to add credibility and social proof. I love it when someone has used my product and attained great results, and you can bet that I’m going to use that testimonial on my website and blog. The problem, as the FTC sees it, is that this testimonial may not reflect the “generally expected results” for which a typical user can expect by using this product.

For example, someone is viewing your sales page in which you are selling an e-book. You posted a testimonial you received from a customer who claimed “I made $5,000 the first month after reading this e-book and you can too.” This person viewing the page reasonably expects to achieve the same results. But in reality, perhaps only .5% of the people who purchased your e-book achieved those results, 4.5% made a modest amount of money ($10 to $100 dollars), and the other 95% didn’t even read it.

Trust me, this is true for many marketers of information products and — talk about killing the message — the “typical” scenario is that most people don’t even read the book let alone make any money! No one is going to highlight that fact. Duh.

In the 1980 version of the guidelines, which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical,” the revised guidelines no longer contain this safe harbor.

You need to know the “typical results” and disclose what these general results are and the depicted circumstances. You cannot just throw up the best case example.

This is a problem for a lot of marketers because they may not have data to support a testimonial and realize it will cost a lot of money to obtain that data.
When using a testimonial in your marketing, you now need to:

• Verify that the person giving the testimonial has actually achieved the stated results
• Verify the typical results a consumer can expect to achieve, and state them
• Verify that the testimonial still stands if you make a change to the product being endorsed

If you cannot substantiate the “typical results” you have three options: not use the testimonial, do research to find the typical results, or use the testimonial anyway and take a risk.
 
However, there is another option.

During an interview with Jim Edwards (igottatellyou.com), FTC assistant deputy Mr. Rich Cleveland clarified that you could create a relevant sub-group for which you CAN collect the data you need in order to make the disclosure. Using Mr. Cleveland’s webinar example, let’s say you have created a “how-to product” with a program that teaches people “how to increase your sales in door-to-door selling.”

You define what the criteria is, ie., willing to go out and knock on 100 doors a day, willing to work at it for five days a week, willing to sell a product that costs at least $50.

“So, if you are willing to do this, this, and this, then based on this sub-group of 100 people (we’ve sold a 1000 of these courses) we have 100 people who have submitted their results. We’ve averaged them out, and these are the results that are average for this group.”

You are defining the criteria for the sub-group. Note that the sub-group cannot be just one person – it has to be a relevant group.

To sum it up, yes, you can use testimonials. But you should avoid using testimonials that are an extreme example instead of those that are closer to typical.

If you have these on your website right now, you can modify them and delete the “I made this much money and you can too” language, remove the testimonial entirely, substantiate the claims, provide data from a sub-group/define the criteria, or risk having the FTC in your face.
 
References and recommended reading:
http://www.ftc.gov/bcp/edu/pubs/business/ecommerce/bus41.pdf
http://www.joelcomm.com/new_ftc_rules_for_testimonials_1.html
http://www.igottatellyou.com/blog/ftc-change-interview

You see the promotional ads on the Internet: “Free 1 month trial” or “Free CD – just pay S/H only.” You say to yourself, “What an awesome deal! I can kick the tires first.” So you sign up for this supposed free trial only to find out the following month that your credit card is being charged $49 for a membership site you do not remember signing up for.

These types of “continuity programs,” which are known as “negative option plans,” are those that automatically bill your credit card on a recurring basis until you cancel your membership. This is not new. For years now, internet marketers have used this tactic (quite effectively) as a way of luring subscribers to recurring billing programs. Most of the ones I have seen use an honest approach with full disclosure, but I’ve also seen many marketers use slimy techniques.

Last year, the Federal Trade Commission announced that it would re-examine the rules pertaining to negative options after decades of no revisions to the initial rules established in 1973. What came from that was the report, “Negative Options: An FTC Workshop Analyzing Negative Option Marketing,” which provides five principles as a guideline for marketers to help them avoid deception in making negative option offers.

• Disclosing material terms in an understandable manner, without making them unnecessarily long or inconsistent
• Making the disclosures clear and conspicuous by placing them where consumers are likely to look on Web pages, by labeling disclosures (and links to them) to indicate their importance and relevance, and by using easy-to-read fonts and colors
• Disclosing the offer’s material terms before the consumer incurs a financial obligation
• Getting consumers’ affirmative consent to the offer by, for example, having them click “I Agree” and without relying on pre-checked boxes
• Not impeding the effective operation of promised cancellation procedures and honoring cancellation requests that comply with such procedures

Ok, sounds easy enough to comply with, right?

But then came the Visa/MasterCard crackdown earlier this year and hundreds of marketers were shut down, some with no notice at all. This had a huge effect on marketers, even those who are in compliance with the FTC guidelines.

You may have received a letter that included the following, “…both Visa and MasterCard are taking action in response to increases in consumer disputes related to card-not-present and direct response products and services.” And went on to inform you that the merchant could not receive applications from members who use “Marketing models that employ ‘Free-Trial,’ ‘Deferred Billing’ and/or ‘Shipping Only’” among others.

In short, the days of “free trial” or “risk free trial” are over unless you truly are offering something for free (and NOT asking for credit card information). Also, the shipping and handling offers must be fair, accurate, and reasonable; trial offers must be extended for a minimum of 10 days; and trial periods should not begin until the product is shipped to the consumer.

As hundreds of internet marketers will tell you, your membership website will be scrutinized by your merchant account if you:

- Have a free + shipping offer or trial offers
- Offer a continuity program where the radio button is checked by default

Basically, the rule of thumb here is “be transparent, be very transparent.” If you are doing business above board and following the rules, you don’t have much to worry about. But if someone is touting marketing methods that teach ways to circumvent the rules, look elsewhere – there are a lot of truly ethical marketers out there who don’t have to resort to underhanded practices that you can learn from.

References and recommended reading:

Dot Com Disclosures: Information About Online Advertising, Federal Trade Commission

Forced Continuity Meltdown: Is Your Merchant Still in Business?