October 3rd, 2005

Is Buzz Marketing Illegal?

By Matthew Creamer
Advertising Age

The good buzz on the nascent business of word-of-mouth marketing holds that it offers a low-cost, highly effective way to drum up positive chatter around a brand. The bad is that some of its more insidious practices could lead marketers to run afoul of longstanding advertising law.

BzzAgent of Boston, one of the largest and most visible buzz marketing agencies, says it has changed its policies to require consumer brand agents to identify themselves as working for marketers.

As marketers more frequently look to recruit consumers brand agents to spread goodwill for brands, industry attorneys view buzz marketing as a likely area of regulatory involvement, especially around the issue of compensating people to participate in buzz programs when they fail to disclose their connections to marketers and agencies. While there is no legal precedent specific to word-of-mouth marketing, there are Federal Trade Commission guidelines for ads that are likely to apply.

“If the motivation for [an endorser] is to profit from his or her endorsement, that connection probably needs to be disclosed,” said Douglas Wood, chairman of advertising and marketing law at Reed Smith. “But since disclosure undermines the value of buzz marketing, advertisers are in a Catch-22.”

Misleading consumers?

An FTC official said while word-of-mouth isn’t something that the agency is looking at, disclosing commercial relationships is crucial to avoid violating the law. “The real question is whether consumers are being misled someway,” said Rich Cleland, an assistant director of advertising practices for the FTC.

$60 million business

Most big marketers have at least dabbled with ways of getting the most credible of spokespeople—ordinary, everyday folks—to speak to other ordinary, everyday folks about how great their products are. No firm data exist on how much spending on word-of-mouth marketing programs has increased, but some estimates put it at $40 million to $60 million business that grew at a rate of 100% in the last year.

The Word of Mouth Marketing Association has posted a working ethics code on its Web site, stating that the organization complies with the Federal Communication Commission‘s regulations on endorsements. The code also has a section titled “Honest ROI: Honesty of Relationship, Opinion and Identity.”

BzzAgent policy change

Not everyone agrees that disclosure hurts the buzz marketing process. BzzAgent, one of the best-known players in the space, found that its campaigns were more effective when workers revealed whom they were working for. That caused the Boston company to change its policy a year and a half ago.

“When we started the business in 2001, everything we read told us that in stealth and anonymity there is power,” said founder-President Dave Balter, whose client list includes IBM, Penguin USA and Monster.com. “Are there cases where if people didn’t disclose they would influence somebody else? Yes. But it’s not appropriate and disclosing doesn’t hurt the process.“

Comments

  1. Posted by sally moore on October 19th, 2005

    how does the company know that the Bzz agent has been successful?  does the agent have to report?  couldn’t they just take the money and not do anything? or if they advertise without telling, how are they accountable for sales??

  2. Posted by pratheesh nair on February 6th, 2006

    “If the motivation for [an endorser] is to profit from his or her endorsement, that connection probably needs to be disclosed” ------ What I fail to understand is why is this BUZZ around the whole method of WoM so hyped? For ages now, celebrities have been endorsing products and the whole idea behind even considering a Mike Jordan or a Maria Sharapova is to spread the buzz. Children and youth are any mislead to believe that their icons use the products that they endorse and this does not hold true al the time.

    No celebrity or agency makes an explicit mention that the Celebrity endorsing the product is being paid for it and may or may not actually be an end user --- then if a common man is used as a medium to endorse for WoM then I believe that it is fair. Besides, if the WoM campaign has to be successful then it should be backed by an actual expericence and somewhere down the line the WoM agent will have to use the product so unlike the Celebrities.

  3. Posted by D. Catania on April 21st, 2006

    Buzz Marketing is just the formalization and repackaging of what most companies have forgotten; customer relationships.  When I worked in a small retail store, good products and personal attention made “Buzz Agents” out of numerous customers.  Some people by nature enjoy telling others about a product that they love; buzz marketing tries to identify them and then support them with product and training.  I think a line gets crossed when 1) a buzz agent is only motivated by the payment and really does not love the product (i.e. they are now a sales agent) or 2) they do not disclose who they are working for (which makes them corporate shills).  I think that a good buzz marketing program can accelerate product acceptance in the market, which even with good service and customer communication usually takes many years to progress naturally.

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