Monday, May 10, 2010

Hyundai: Tell the truth about your pricing

Once again, a company is making disingenuous claims about the pricing of its products. In a Hyundai television ad, the actor Jeff Bridges says, "We believe a safety feature like electronic stability control is too important to charge a premium for." So, is Bridges saying that Hyundai cars would cost exactly the same if they didn't have electronic stability control? It sure sounds like they are... but that can't be true.

The truth is that Hyundai, instead of offering electronic stability control as an option, has made it standard. As a result, the base prices for Hyundai's cars are higher. Don't believe me? Well, imagine if Hyundai decided to make gold-plated steering wheels standard, too. Do you think its base prices would be higher then?

No premium, my foot.

Tuesday, April 20, 2010

The New York Times: Can you be more specific?

My former employer, The New York Times, is airing television ads for its "weekender" subscription in which an actor states, "The best journalists in the world work for the Times, and there's no debating that." This is a pretty strange remark coming from a company that depends on freedom of speech for its core business. Can there really be no discussion of this apparently crucial selling point?

I think there can. Does the Times mean that the very best journalists in the entire world work there? If that's true, then all the best journalists in the world must be very good at writing in English. Or does the Times mean that all of its journalists are among the best in the world? If that's true, then you'd have a hard time explaining the not-so-distant scandals related to former Times writers. How does the Times qualify journalists as being the best, anyway? It may have won more Pulitzer prizes than any other news organization, but those awards are available only to media based in the United States... and two of the aforementioned scandals revolved around Pulitzer winners Judith Miller and Rick Bragg.

I'm always a little offended when I hear absolute statements that can't be defended. An advertiser that uses them seems to assume that consumers will accept its claims on faith. They shouldn't.

Monday, March 29, 2010

Allstate: Trying to fool investors?

In a new ad for Allstate, the actor Dennis Haysbert scoffs, "These days, money market funds are paying less than two percent, so forget return on investment. Let's talk about return on insurance." He goes on to say that Allstate will pay you back up to five percent of your premium at the end of the year. So insurance is a better "investment"?

Come on now. Do money market funds ever offer a big return, relative to other options? They typically pay just a couple of points above the short-term interest rates set by the Federal Reserve, because they're very safe investments. That means when the Fed's rates are low, so are money market rates. But the reverse is also true.

So, if the Fed had short-term interest rates at 6 percent, and money market funds were paying 8 percent - much more than Allstate's end-of-year "return" - would Haysbert change his tune? Actually, his comment wouldn't be any more relevant. If money market funds are paying 8 percent, corporate bonds are likely to be paying 10 percent or more. That means money market funds don't stack up any better in terms of "return on investment", whether the Fed sets rates low or high.

Allstate's "return" is actually a way to charge different premiums to people at different risk levels, ex post. If you don't have an accident, you pay less. Sound familiar? That's exactly the kind of "lemon-dropping" that was just made illegal for health insurance companies by the new health care reform.

P.S. One other thing - a certain company called Allstate Bank offers money market accounts of their own... and they only pay 0.35 percent.

Sunday, March 28, 2010

Cash4Gold: The deception continues

Now Cash4Gold has a new pitch (see my earlier indictment of their advertising here). They're offering a $50 "bonus" to anyone who sends in their old jewelry for a cash payment. A bonus over what? They don't tell you how they appraise the jewelry they receive. It seems very unlikely that they've actually changed the relationship between the amounts they pay and the prices of the precious metals they harvest. Rather, they've probably just decided to call the last $50 of each payment a "bonus", hoping that people who were on the fence about sending in their jewelry will now do so. Cynical.

Saturday, March 20, 2010

Sonic: No free tater tots!

It's an old economic chestnut that there's no free lunch. Anything that's worth something generally costs something - even if it's just the effort that it takes to pick an apple off a tree. And one of the most common deceptive practices in advertising is the idea that you can buy something and then get something else free. The word "free" usually doesn't belong.

A current exemplar of this unfortunate phenomenon is the fast-food chain Sonic, whose television ads are offering a "free" medium order of tater tots with the purchase of a double cheeseburger. The fact is, anyone who takes advantage of this deal is still paying one price for two items; Sonic simply decided to charge a lower price for this combination during the promotional period. In principle, that's fine - advertising based on price is one of the forms of publicity that actually provides useful information. But the word "free" is unnecessarily deceptive. Just try ordering the "free" tots on their own, and see how far you get.

(By the way, does anyone actually prefer tater tots to fries, even if they are delivered on roller skates?)

Thursday, March 18, 2010

The Hartford: Start making sense

The Hartford has joined the parade of insurance companies claiming that people who switch to their car insurance will save lots of money. For an explanation of why such claims are completely disingenuous, see my earlier post on Allstate here. But The Hartford's new television commercial has another problem: it raises more questions than it answers.

The ad makes the big savings claim first, but the supposed clincher comes later. If you switch to The Hartford, the ad says, the company promises not to "drop" you. Of course, the actors in the commercial don't bother to specify under what circumstances or for how long this promise applies, but the really bizarre part is the context. At the very beginning of the commercial, an offscreen voice asks several actors how long they've had their current insurance. The actors say eight to ten years, or so long that they can't remember. But if that's true, are these make-believe people really in danger of being "dropped"? Their current make-believe insurers certainly don't seem to think so. I have to ask, why does The Hartford even need to make this claim? Is the company notorious for dropping people after they have accidents? That's something real customers would probably want to know.

Wednesday, March 10, 2010

Cisco Systems: What if the MAYOR is a fake?

If you've read my previous post, then you already know that I'm concerned about people posing as experts and endorsing products. Add another category of deliberate deception: people posing as authority figures and endorsing products. Cisco Systems is running a television ad in which the actress Ellen Page supposedly returns to her hometown of Lunenberg, Nova Scotia. The "mayor" greets her and enthusiastically shows her the small town's new police department, which consists of a room with one officer and a Cisco-supplied system of electronic surveillance.

The problem is, he's not really the mayor. The real mayor of Lunenberg is the Rev. Lawrence Mawhinney, a Presbyterian minister who has worn the mayoral hat since 1979. So, does the real mayor actually endorse Cisco's products? Does he know that a younger, bald man is impersonating him on American television? Does Lunenberg even have a high-tech surveillance system made by Cisco?

Your guess is as good as mine. However, I did find out that Lunenberg does not have its own police department. The city relies on the Mounties instead.