Federal Regulations and Full Disclosure about Advertising
The FTC (Federal Trade Commission) is introducing new rules about the use of testimonials.
The gist is: From now on you can’t just quote the happiest and most successful testimonials, you have to disclose how “everybody” does and what “average” is.
Some people are very, very concerned about this.
I happily confess that when I get emails with glowing success stories I ask for permission to use them and post them on the website.
When we get bitter complaints and gripes I do not ask for permission to use those complaints and we do not post them on our website.
In some of our coaching programs we hold contests for students who achieved the greatest results. They compete by submitting reports of their progress. We award prizes for the very best success stories. We find that sometimes people will work harder to win a Macintosh computer than they will to increase their income by $10,000 per month. Kind of an interesting way to trick people into succeeding.
I have never taken a survey to find out what my customers’ average increase in Click Thru Rate is; I do not know what the “average result” is. But I can give you a pretty darn reasonable estimate, based on some 80/20 math.
In the interest of full disclosure, here is the entire spectrum of my own customers’ success and failure – from bottom to top:
-The bottom 20% do NOTHING. Like, they buy the ebook or the mp3 or the bookstore book and it goes on the shelf or in a folder on their hard drive. They do not read it, they do not listen to it, they do not benefit from it. Some of them may put it under their pillow in hopes that some of its contents will leak into their brains as they sleep. The number of people who do NOTHING may be more than 20%. It may be 50%.
-60% do little. Maybe listen to a little bit, maybe skim through, maybe pick up some pointers. I do believe that these people get some benefit from that. For example they may buy one of my courses on Autoresponders, not read the course, but because they spent the money, write 2-3 AR messages anyway, and get some benefit from it.
That, I believe, is what the TYPICAL customer gets.
-Which brings us to the top 20%. This is the group of people who really takes the education process seriously. 20% of my customers read, learn, and apply. They learn about “peel and stick” or negative keywords or split testing their ads and they open their Google Adwords account and go to work. They read at least a few chapters of the book and I would estimate that this group of people increases their CTR by 50% which is equivalent to saving 33% on their clicks. Their investment of $16.47 or $49 or $97 or $197 easily pays for itself.
-10% make it a habit. They don’t just do this once, they do it every few days or every few weeks and over a period of months begin to see very significant improvements. They divide their keywords into narrow ad groups; they separate search from content; they peel and stick; they adjust their landing pages. They’re almost always on the first page of Google results, they pay half or a third of what their competitors pay for the same click, and their online business WORKS.
-5% are truly students of the process. They do all of the above but in addition they truly attempt to get “inside the mind of their customer.” They develop different landing pages for different product offerings; they split test items on their website; they build lead generation and nurturing systems for people who aren’t ready to buy yet. They track conversions. Their Value Per Visitor is 2-3X what everybody else’s is. I get LOTS of testimonials from these guys and gals.
-2% Do all of the above but do it obsessively, and if they don’t know how to do something they find out how. They figure out how to write great copy and autoresponders. They figure out how to do testing and tracking and they do it regularly. They do market research (it’s not terribly difficult but most people just never get around to it) and they dominate their markets. They avail themselves of every educational opportunity and they have the attitude that they only need to learn and implement ONE solid idea from a seminar or coaching program and it will pay for itself several times over. I get LOTS of testimonials from these guys.
(More disclosure: just because you’re a top 10% or top 5% or top 2% or 1% implementor does NOT guarantee success. Even the best students of marketing fail from time to time. Some may fail as much as TWO THIRDS of the time. Wrong market, wrong timing, wrong USP, takes too much money to penetrate the market, the reasons are endless. BUT: They look at unsuccessful projects as TESTING and not FAILURE. We learn to not take it personally.)
-1% Embrace total mastery. It is not enough for to just have a great business, they want to BE THE BEST. They are not just respected in their markets, they are revered. They don’t just understand their customers; they KNOW their customers in some ways better than the customers know themselves. The fanatical, raving testimonials with 300% and 500% and 1000% growth stories come from these people.
This top 1% is committed to mastery – day in and day out – during plateaus and during times of great prosperity. Either way, they put themselves under the mentoring of the best people they can find and they learn with diligence.
This STILL does not guarantee success. I know really turbo-sharp marketers in some industries (like real estate) who have taken a beating during the last year or two. Some of them have gone bankrupt. Buying stuff from me or anybody else does not save you from life on planet earth. But their chops are good, they’re resilient, and they’ll be back and when they return they’ll be tougher, savvier, and better able to weather storms.
(There are some people – a lot of corporate muckety-mucks who just happened to be at the right place at the right time during the boom – who will not “be back.” They never had good chops in the first place, they were just lucky.)
I do not guarantee success. I just promise that I’ll deliver the best know-how I can, that it is actionable and shows immediate results (negative or positive) because it is testable and measurable and accountable.
The premise I live by is that you can fail your way to success as long as your failures are calculated and measurable and that you learn from them.
NOT everyone who buys from me is successful. NOT everything I tell you to do will work. And when you succeed, you don’t have to send me a check. The money is yours to keep.
Perry Marshall
P.S.: Regarding affiliate promotions – It is entirely possible that I am being compensated in some way, shape or form for recommending any particular product or service that I endorse here on my website. If in you’re doubt, and if this sort of thing concerns you, just go ahead and assume I’m getting paid and that I’m giving you biased information.
That said, I’d also like to tell you that we get INUNDATED – I mean, DELUGED – with all manner of requests to promote peoples’ products. On a daily basis. They wave money in our faces, they promise us the moon, they offer prizes, trips, and merchandise. They give us statistics and reports of their conversion rates. They send boxes and packages and brownies and dollar bill letters and $20 bills and occasionally $100 bills. And gift cards and everything else you can imagine, along with their affiliate recruiting letters.
We ignore somewhere between 90% and 99% of all these requests. The only offers I endorse are products we LIKE created by people I TRUST.
On rare occasions a problem arises and we get egg on our face. If that happens, we go to bat for the customer. But in general I won’t endorse anything for money that I wouldn’t endorse for free. So, given that most online products have affiliate programs, I figure it’s better to put the money in my pocket than to leave the money in the advertiser’s pocket. You may wish to adopt a similar philosophy.
If you have a problem with any of this, then feel free to shop somewhere else.
About the Author
Entrepreneur Magazine says: "Perry Marshall is the #1 author and world's most-quoted consultant on Google Advertising. He has helped over 100,000 advertisers save literally billions of dollars in Adwords stupidity tax."
He is referenced across the Internet and by The New York Times, The Washington Post, USA Today, the Chicago Tribune and Forbes Magazine.
Last 5 Posts by Perry
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What a very good piece of writing.
“The first person to tell the truth preempts the truth – and the truth always sells”
Perry, it is possible the FTC issue is more vast than one might at first notice. It smacks of what is coming down Dec, 09. Big and small businesses are an enormous threat to changes being forced upon all of us. It’s a sidebar to the ‘dumbing down of America.’ Listen to http://www.youtube.com/watch?v=PMe5dOgbu40
for a larger picture.
Perry, you and others of my coaches advocate customer testimonials on a website selling products or services.
I installed a WordPress Blog within my static website and e-mailed 4,000 users of our products, inviting them to share their experiences. The overall % opening the e-mail was about 18% of which about 15% actually left a testimonial; roughly 115 written responses.
The responses were 97% positive to hugely positive and the 3% which were slightly negative to negative, were answered by me on the blog.
The blog http://www.coldoneinc.com/User%20Comments/ has served as a valuable tool in several regards:
1. Visitors can see what others who bought our products think about them and our company. We think it can positively influence visitors to buy.
2. Negative comments are valuable feedback to us for areas of improvement. And allows us the opportunity to address the issue on the blog to the person making the post.
We use a responsible e-mail blast program which deletes bounces, opt outs, etc from our lists so we do not continue to e-mail to visitors who do not want to receive them.
We also re-email a second follow up to e-mail address who didn’t open the first one in an attempt to increase the open rate.
Now we are doing split testing on the subject line and content to determine the most effective combination resulting in higher opening and click through rates.
Currently, less than 7% of our static website visitors visit our ‘customer comments’ page so some work needs to be done on the URLs to increase its visibility.
Within a week of mounting the ‘forum/blog’, Google placed us #1 in SERP for the 3 keyword phrases we used to tag the ‘forum/blog’.
We allow comments to be placed without admin approval.
This addition to our site is probably the most significant change we have made in 2009.
Rob Goodwin
Two Cool Inc
http://www.coldoneinc.com
“The premise I live by is that you can fail your way to success as long as your failures are calculated and measurable and that you learn from them.”
I *LOVE* this. All my life, I have really bristled at seeing people — especially those I care about — find a reason not to go ahead with something, when their only real reason is fear of failure.
You’ve hit the nail on the head. Failures are life’s proving ground. Fall back, regroup. Keep moving.
Thanks for a great post, Perry.
Great Points Perry.
I like to consider myself into the 5% and working to the 1%.
It’s a lot of work and not a whole lot of money initially.
Between my wife and I we own 4 web sites and 2 of them promote off line businesses.
I have filtered through the several wanna bees on the web who are so called ‘gurus and have weaned it down to about 5 that I listen to on a regular basis.
I like you in particular because you are a straight shooter and tell it like it is.
It’s an uphill battle initially but things do start to get easier as you do them more often.
Sales copy especially. At first I sucked, then got better, then as I made a sale or two I tweaked more and more and more.
Also, people have to realize that if you want to make yourself known then you are the one that has to ‘Go for it’ Don’t shy away from learning and don’t get discouraged because things seem to continually change, just keep learning…..they say it’s actually good for the Brain
It has taken me a little over a year to really get a grasp on a lot of things and today actually I am releasing my first book (http://www.trafficticketguru.com/how-liars-reveal-themselves.html)which will be followed shortly by my Traffic ticket defense book and members continuity site.
Take heart everyone. If a retired cop can get a handle on this stuff…..so can you.
Keep up the Great Work Perry….The FCC stuff is only going to hurt the people selling crappy products.
Larry
Your comments and statistics, Perry, are accurate not just for your particular business, but probably apply to 99% of people in 99% of businesses. That’s why I like and respect you professionally. You tell it with no BS.
Your AdWords book was the first internet marketing book I bought and it still stands the test of time against all others. The pages are highlighted, marked-up, and dog-eared but I reach for it almost daily.
Leave it to the FTC to screw up a good thing. If you have to remove your testimonials, so be it. Your skills and reputation are so good that no government agency can take that away from you, no matter how much they try. Keep up your great work. I’m in your corner, Perry!
Perry,
How much research have you done on this? The FTC’s website hasn’t mentioned it. Neither has their press office, or any of the wire services that cover them. I’m leary of information that begins with a version of, “somebody told me once…”
That’s nice, but it isn’t news, its a story. And not something I can make business plans on.
Thanks for the story. A moderately satisfied customer.
MacEwen
Seems like good legislation to me, actually. It weeds out the bad apples who make unrealistic claims. It brings people like you to the top, with a good, sound product and realistic goals.
The percentages of actual application and net results that you outline are not surprising. Only a very small number of people make significant use of any educational product, whether it’s an online course, a how-to book, or a college degree.
While it is true that the Internet marketing business is known for making ridiculous income claims, it is also true that the spirit of this FTC regulation would apply to most consumer products on the market.
Such a ruling will effectively eliminate all testimonials, but if carried beyond testimonials, would eliminate most advertising.
If Internet marketing education products are required to provide “average results” would the self-help book industry be required to survey and report the net psychological improvement of their average book buyer?
Would commercial vocational training companies be required to post their average drop out rate, their average graduation rate, and the average resulting employment numbers achieved by their average students?
Would diet books have to advertise the results of the average dieter? Would makeup advertising be required to show the product as it is applied by the average user? Would lingerie catalogs be forced to show their products being worn by the average consumer? How far would this go?
Needless to say, there must be regulations against deceptive advertising, but it is also only fair that advertising be allowed to portray a product’s value when it is actually used to its full potential, otherwise, why create a potentially valuable product?
Many Internet marketing materials advertise using absurd degrees of exaggeration and have understandably drawn the attention of the FTC. Should a line be drawn? We’ll see what happens.
But with advertising in general, one must assume that a reasonable person understands the fact that products are shown to their best advantage, otherwise, why advertise at all?
Or as Edison says
“I have not failed. I’ve just found 10,000 ways that won’t work.”
I posted back in November about this and when I got your email it dawned on me I completely forgot that the deadline for submitting public comments about this ended on January 30, 2009. Ugh!
It was here:
http://www.ftc.gov/opa/2008/11/endorsements.shtm
Personally, I like the direction the FTC is heading from a theoretical perspective, but the problem is for the most part it actually makes things WORSE for consumers in certain markets – weight loss, bizopps, etc. – the usual markets that the scammers flock into.
The problems are:
1) Lack of resources to enforce the regulations.
2) Often the FTC gives companies a “clean up” period before taking action. So what the less reputable companies do is while they are ‘cleaning up’ just put up new corporations (with new officers if needed), and new offers.
3) And of course scammers don’t follow rules which obviously can make it easier for them to dominate certain markets – or at least squeeze a heck of a lot of money out of them very quickly.
BUT…I still love the challenge of full disclosure in many areas – including disclosing the affiliate relationship in reviews of products I do. It’s initially annoying, but at the end of the day I feel better (in integrity) about what I’m doing which makes it much easier to move forward and help my customers.
In the business arena (as you’ve so eloquently laid out the truth here)…
Telling people that not everything will work is the RIGHT thing to do and is reality.
Telling people that they will usually lose some money on PPC when they are FIRST learning it is the TRUTH and the correct thing to tell them.
Telling people that the best they can do is increase their odds of success and minimizing their risks by applying correct knowledge is IMHO “taking care of your customer”.
Perry…
Just a quick idea…might be out in left field with it all but counldn’t you have you website hosted in Canada? or some other legal jurisdiction were you US federal rules do not apply?
The question of enforcement in the case of foreign marketers is arising a lot on the Warrior Forum, but the prevailing opinion is that the US can’t enforce ITS laws in a foreign jurisdiction.
That sounds about right to me, but is there anything to stop the US from forbidding an offending foreign marketer from doing business in the US?
Jo,
I’m not an attorney and I’m really probably the wrong guy to ask.
Perry
I enjoyed reading this story and I ask what could be next.
* Prohibition to sell products you know 80% will not use properly or use at all.
* Swaps over in other industries: Like “Disclaimer: The average buyer of this super sports car drives it with 15 mph on average, never exceeding 110 mph. Beware the horsepowers you buy might be wasted.”
Most products are backed with generous money back or cancel early guarantees. Isn’t it a shame that governments don’t have anything better to do than to protect the stupid and lazy ones. It’s the same in Europe. Actually it’s worse in Europe.
To the government of the world: “Educate people! And yes, hunt down illegal business practices, but don’t write off common sense and pollute the universe with silly rules.”
Yours
John W.
Here’s a news source discussing this:
http://www.chicagotribune.com/business/chi-tc-biz-fri-pitches-ftc-0320-mar20,0,7694262.story?track=rss
Government intervention is a funny thing. I still have over a dozen people who said that they want to write me a 3-6 sentence testimonial haven’t yet. And we have to collect varying viewpoints to present a balance perspective of our offering? That’s ridiculous. Most companies don’t have testimonials to speak of.
Great! Thank you for your post.
Responsibly setting expectation levels is a *very good thing* for both the provider and consumer.
The main issue I’ve found people in forums discussing about is the “interpretation”. Many believe it’s very vague in certain parts-and that we’ll only know about its true nature once we look at some “sample cases” after the regulation is in effect.
It could be good or bad news. But at times, I feel it really insults the common sense of people.
All we can do is wait and watch (Has the fireworks begun?)
Here is the ruling itself:
http://ftc.gov/os/2009/10/091005endo…esfnnotice.pdf
And here rulings excerpted and discussed:
http://www.warriorforum.com/main-internet-marketing-discussion-forum/132203-ftc-thread-you-really-should-read.html
The excerpts are quoted, which doesn’t mean that they can’t be taken out of context, but I don’t think they are. From what I read there, this is all much ado about nothing–IF you are a responsible marketer. I suggest that you read this post first, then the FTC ruling to confirm it. I haven’t read it yet, so I can’t honestly give an opinion.
I hope the FTC cracks down this hard on political advertising.
They will not crack down on ANY political advertising because in the US it’s not commercial speech, it’s free speech. In the US you can run a political TV commercial that is blatant lies and the TV stations HAVE to run it. Not so with commercial advertising, which has to be truthful. Perverse.
Very nice P.S. Perry.
Some affiliates are very worried about products recommendation and promotion when the new FTC rules kick in.
But I guess is like what you have mentioned, as long as we don’t endorse anything for money that we wouldn’t endorse for free, then we have nothing to fear if we need to disclose that the links are affiliate links.
Once again, nice post Perry.
Cheow.
I was working on writing my own disclosure for my consulting and full service clients…but I think I’ll just link to this page instead. Very well written.
You missed an important segment.
A certain percentage are “perpetual data collectors.” They take the information, devour it, possibly even memorize it.
They may know the information better than the author does.
But they do nothing with it.
They can spit out facts and figures, identify the common elements of a good marketing piece or campaign, but have never actually produced one, or haven’t fixed the glaring errors in their own output.
Having spent the money and book-learned material provides sufficient satisfaction for this group.
And they keep coming back for more….
You know…I tried to do a similar post on my blog about the FTC hoopla, but somehow, it just doesn’t have the zing yours does. (Yes, I have writer’s envy).
Perry, as always…great stuff. Thanks
Brian
Prime Example of combining DK “clicks on the dial” for huge effect:
Using the “Who this is not for” list – not by itself but as a segue to answer two additional hugely pressing questions:
Why should I buy from you? – “Because I’m honest and “I’m going to be eating stake tonight whether you buy or not.”
and
If this is so great – then why haven’t I heard of it before, or why isn’t everyone doing it? “Sorry buddy but it’s because most people are losers – are you? No – Good I didn’t think so. Yes – good, then we both know we’ll never have a healthy capitalistic relationship and we can part ways now before anything gets dirty.”
Three birds with an incredibly honest stone. The kind cut out from the mountain without hands – without compulsory means.
As usual – the greater lesson is not in the content, but in the untangling web it weaves.
Awesome.
Make claims and results more transparent is good for the online industry.
If we hold ourselves to a higher standard we will all benefit in the long run.
Truth in advertising is good for business.
Thanks for another great post Perry. It might seem like much a do about nothing to some but like a great man once said ‘I pity the fool’ who doesn’t take the time to make sure their Is are dotted and their Ts crossed in this area.
Sheesh, I can’t help it if all our testimonials are raving fans. Are we supposed to mess up for a client so we can get a ‘balanced’ set of testimonials?
I like the tongue in cheek disclaimers I’m seeing around lately, including yours, Perry.
How about:
WARNING: Your business may experience tremendous growth if you work with us. Your ROI may be off the chart. I’m just sayin’ — hope you don’t have a problem with that.
Becki
All true Perry. I’ve always enjoyed the way you explain the 80/20 rule!
All this FTC ruling does is give people another reason to NOT be accountable for their own actions or failures. “Of course I wasn’t successful with that program, neither were most other people!”
Hey you know what, go to any real estate office, stock brokerage, IT consulting firm (which I worked at for 10 years as a sales executive) or any other business that has a salesforce that works on mostly commission, and you will find this: About 1-5% of the reps are making the big money, and more than 50% can barely pay their bills or cover their draw. The rest are mired in mediocrity, headed the wrong way.
But do those businesses have to post disclaimer saying this? I wonder why.
Love ya Perry. Stay warm in Chitown.
Best to you,
Jim Rodante
@Referral_Pro
Well said,
‘Nuff said.
Some will, some won’t, so what…
Great post, Perry.
Gogo
P.s. Is this your new standard disclosure?
Yes, for now anyway.
I’m loving this.
I know exactly where I’m at: right at the bottom of the top 20%. To be fair to myself, I’m chewing away at various skills one at a time. Currently mastering daily blog posting, can get a weeks worth out in about a day and half. Leaves the rest of the week for creating product. Watching WP stats right instead of analytics… probably should change that habit.
Perry, 2 comments.
The 80/20 rule is definitely at work for success, as well as why the FTC had to bear down. There are so many hooligans online, that decent small businesses have a tremendously difficult time standing out. The quit smoking niche is a good example of some really horrible charlitans in the niche. The busines opportunities market, however, is what really promted the FTC to draw the line. Incredible claims, hype and mediocre results.
Testemonials are a murky subject. I’ve been in sales over 20 years, and very few people will just send you a glowing testimonial, even if you are excellent. So there’s a little assistance required.
I noticed you top internet marketers would shill for each other, didn’t bother me to see you testimonialing on Joe Vitale’s site and Joe Vitale on your site. Even if you do have an affiliate partnership, the bottom line is, you are each staking your reputations on each other. So there is still a lot of credibility.
As usual, you are ahead of the curve with your candid full disclosure here. Many of us who don’t YET have your good reputation can’t be so ballsy, but it is what makes you garner so much respect and trust.
A note of Thanks,
I just wanted to express my appreciation for addressing my concerns to the Google Cash administrators (Mr. Art Simpson and Mr. Chris Carpenter). They were very responsive and conciliatory.
Thank you very much!
Edgar Duntley
I was always wary of any testimonials that I saw online as they only ever seemed to be postivie ones and as you mention Perry, the negative ones never get published. This is why I feel the Facebook type comments are much better ways to gain credibility as people can scroll through and see the negative as well as the positive. Ultimately the positive should be a lot higher and so you still gain the credibility whilst being totally transparant with your users feedback.
I noticed on a t-shirt site that we own, that once we added an independent testimonial company (sales jumped). I believe that people know that every company is not going to be perfect. I know that when I look at a companies complaints, I want to see some negative ones and if they responded to them, or if they happen often (i.e. slow shipping, poor customer service, etc.). Great article.
I suspect that the new FTC guides are a direct attempt at supporting corporate business models, as opposed to small business models, you have done a nice job of developing a decent non disclaimer, (as you know disclaimers are no longer enough) Hopefully all these attempts at regulating the internet will subside once these people, realize they are no where near as smart as they think that they are, until then just about all a smart marketer can do is to attempt to do all he or she can do to make it work, then deal with any issues as they arise.
The FTC Rule on Testimonials is simple, but many are missing the point.
You cannot do both of these things.
1. Use extraordinary testimonials.
2. Disclaim the extraordinary, unless you have kept records of what is ordinary and made them available.
The basic psychological point the FTC is trying to raise that that you cannot unfairly anchor a potential customer to an unrealistic expectation. A disclaimer will be legally ineffective in those cases.
I was reading this disclosure and seeing how positive it is in so many ways .. It’s wonderful a dose of reality, common sense, and good old fashioned “feet on the ground” talk.
Hey, it’s refreshing – just like so many of things things you teach and write.. thanks for being a solid example.