When there's a lot of money to gain, many brands have trouble giving up questionable practices. And in the case of the online marketing case now in the Senate, many retailers came out this week with statements that indicate they're putting profits ahead of their customers.
Last week the Senate held a hearing investigating the practices of online marketing companies that work with many retailers online to unwittingly enroll customers in loyalty programs that end up costing a lot of money.
Multiple retailers have severed ties with the companies in the following week. But not all. Many companies, from Priceline to Classmates.com, FTD, Shutterfly and Orbitz, think they've done nothing wrong and it's up to customers to read the fine print.
But by enrolling people in these programs without asking for additional credit card information, the retailers breached the trust of their customers. For some retailers — especially those known for questionable deals at absurd prices — that might work. But for most, earning revenue from confusing customers is bad business.
The enrolment practices of marketing companies Vertrue, Affinion, and Webloyalty were described as "scam," "robbery" and "theft" in the Senate last week. Essentially, the companies worked with retailers to get access to customers (and their credit card information), usually at the point of purchase. Customers were presented ad pages that asked for email addresses after they completed transactions. But many of the people who filled out the information though they were still interacting with the retailer, getting a $10 cash back reward for shopping with them. It was especially confusing because they were never asked for credit card details — a common occurrence when transacting with a new company.
But often unbeknownst to them, consumers joined a membership program by sharing their email. And were charged by the marketing firms a monthly fee that usually ranged between $10 and $20.
Rather than denounce the marketers' methods, many of the retailers in question have stonewalled the matter this week.
United Online, which owns FTD and Classmates.com, is estimated to have collected $70 million through the three marketers, and said: "We believe that our marketing practices provide clear disclosure. We do not transfer our customer's credit or debit card information to third parties without our customer's consent." Meanwhile, Priceline said the terms of the deal were "clearly and fully explained."
As many as 30 million consumers say that they had no idea they'd be billed by the companies. These claims are given more weight by the fact that the companies knew they were tricking consumers.
The Senate Commerce committee found that a Vertrue employee wrote that "cancellation calls represent approximately 98% of call volume" to the company's customer service operations. An email from a Webloyalty employee said that "90% of our members don't know anything about the membership.""
According to CNET:
"Prentiss Cox, a former assistant attorney general and now a Minnesota law professor, says that in his decade-long experience studying the marketing practices employed by Affinion, Vertrue and Webloyalty, it's clear to him that those that voluntarily sign up for the loyalty memberships run by those companies is less than 5%."
The marketers are obviously going to claim that their terms are available for anyone willing to look for them. But for retailers, taking the side of the marketing companies over their customers is a faulty strategy. While it could be a slippery slope to let users dictate business practices when they are written out somewhere, it's important to avoid deliberately confusing customers.
For rock bottom retailers, consumers may continue to transact with them despite the possible effects on consumer trust because they offer the cheapest prices. But for most retailers, sacrificing trust for a few more dollars is admitting a lack of confidence in their own business and an inability to bring in customers directly.