Effects of varying web-based advertising-substantiation information on attribute beliefs and perceived product quality

Academy of Marketing Studies Journal, July, 2007 by Kathy L. O'Malley, Jeffrey J. Bailey, Chong Leng Tan, Carl S. Bozman

ABSTRACT

In this paper we explore the effects of advertising substantiation information on consumers' attribute beliefs and judgments of product quality. We provide a brief background on the Federal Trade Commission's Advertising Substantiation Program. Secondly, we describe an experiment designed to examine the effects of a level of advertising substantiation information made available over the Internet on consumer evaluations of advertised products. This included testing the effects of varying levels of advertising substantiation information for two products on: 1) a claim-related belief (attribute discussed explicitly within the ad), 2) an inferred belief (attribute not discussed within the ad), and 3) overall judgments of brand quality. In all cases, consumer beliefs and judgments were measured in comparison to a major rival brand. We found that the series of attribute beliefs and judgments of quality differed significantly between the information-level treatments. Finally, we discuss implications for facilitating usage of advertising substantiation information via the Internet.

INTRODUCTION

The Guide to the U.S. Federal Trade Commission (FTC) states: "The Federal Trade Commission (FTC) works to ensure that the nation's markets are vigorous, efficient and free of restrictions that harm consumers. Experience demonstrates that competition among firms yields products at the lowest prices, spurs innovation, and strengthens the economy. Markets also work best when consumers can make informed choices based on accurate information." Companies provide advertising both to help inform consumers, and to encourage them to make purchases of their brands. Consumers often rely heavily on advertising as a major source of information about products. Unfortunately, the claims made in advertisements are not always backed by adequate substantiation (Wiseman & Rabino, 2002).

For the past 35 years, the FTC has been interested in helping consumers obtain accurate information upon which to make informed choices. The FTC's Advertising Substantiation Program, launched in 1971, focused on deterring companies from making claims that could not be substantiated. Specifically, the FTC aimed to "assist consumers to make rational choices" by being assured of a priori independent testing of product attributes which served as the bases of advertising claims. The 1971 resolution requires advertisers, upon request, to submit to the FTC the results of a priori tests, surveys, and other data that purport to substantiate advertising claims (explicit or implicit) relating to product safety, efficacy, performance, quality, or comparative price. As such, the FTC strives to provide consumers with accurate and non-misleading information from the claims made in advertising.

In this paper we address the idea of making advertising substantiation information available to consumers via the Internet. There would be minimal additional company cost (compiling, preparing, posting, and managing information) associated with posting ad-substantiation information on a website. This is because companies that are complying with the FTC Advertising Substantiation Program are already gathering substantiation information prior to releasing the related advertisements. The benefits associated with better informed consumers would outweigh the marginal costs associated with making the information available via the Internet. In the pages that follow, we will discuss the Advertising Substantiation Program, describe our experiment, report the results, and discuss issues associated with alternative means of sharing the substantiation information.

ADVERTISING SUBSTANTIATION AND INFORMED CONSUMERS

In a 1984 policy statement on advertising substantiation, the FTC reaffirmed its commitment to the general requirements concerning advertising substantiation. Advertisers must have a reasonable basis for their expressed and implied claims. A reasonable basis for an advertising claim depends on the "type of claim, the product, the consequences of a false claim, the benefits of a truthful claim, the cost of developing substantiation for the claim, and the amount of substantiation experts in the field believe is reasonable" (FTC, 1984). The FTC states that "a firm's failure to possess and rely upon a reasonable basis for objective claims constitutes an unfair and deceptive act or practice in violation of Section 5 of the Federal Trade Commission Act" (FTC, 1984). This statement, clearly, continues to require that advertisers have substantiation information before the related advertisements are disseminated. Yet, many direct marketers continue to underestimate the quantity and the quality of the substantiation evidence expected by the government (Hailey & Knowles, 2005).

The scope of responsibility for substantiation is broad. An advertising agency which creates an unsubstantiated advertisement may be held liable, as may a celebrity endorser in the advertisement. Also, television stations have the right to reject almost any advertisement submitted for broadcast if the station is attempting to protect consumers from potentially false or misleading claims (Abernethy & LeBlanc Wicks, 2001). A retailer who disseminates unsubstantiated advertisements can also be held liable.