Fraud is the deliberate deception of someone else with the intent of causing damage. The damage need not be physical damage—in fact, it is often financial.1https://www.law.cornell.edu/wex/fraud
The Federal Trade Commission has determined that a representation, omission, or practice is deceptive if it is likely to:
- mislead consumers and
- affect consumers’ behavior or decisions about the product or service.
When it comes to marketing fraud, the two key words are deliberate deception. In a legal setting, a judge asked to rule on a marketing fraud case would need to evaluate the extent of the deception and the impact of the deception on the consumer. For our purposes, though, it is more useful to begin outside the courtroom with the basic starting point of marketing: the goal of marketing is not to deceive the customer; it is, in fact, to build trust.
When we consider the elements of the marketing mix—product, price, promotion, and distribution—there are opportunities for deception in each area.
Product: Is the product designed and manufactured as the customer would expect, given the other elements of the marketing mix? Is the customer warned about the product’s limitations or uses that are not recommended?
Price: Is the total price of the product fairly presented to the customer? Is the price charged for the product the same as the price posted or advertised? Has something been marketed as “free” and, if so, does it meet FTC guidelines for the definition of free? Does the company disclose information about finance charges?
Promotion: Can claims made to consumers be substantiated? Are disclaimers clear and conspicuous? For products marketed to children, is extra care taken to accurately represent the product?
Place (Distribution): Does the distribution channel deliver the product at the price and quality promised? Do other companies in the distribution channel (wholesalers, retailers) perform as promised and deliver on expectations set for product, price, and promotions?
