Long ago, Ronald Reagan and Lucille Ball endorsed cigarettes in ads. Sammy Davis Jr. hawked Alka-Seltzer.
In the modern day, Cindy Crawford appeared in Pepsi commercials. Shaquille O’Neal is a fan of Icy Hot. Tom Selleck and Henry Winkler support reverse mortgages.
Probably, the most embarrassed celebrity seller is Larry David, whose Super Bowl ad for crypto company FTX backfired later when the company shut down and founder Samuel Bankman-Fried was sentenced to 25 years in prison. David apologized.
Celebrity spokespeople are nothing new. But in a major development, the Federal Trade Commission is warning companies who use big names to sell their products to watch out lest they become the next CarShield/American AutoShield.
In case you haven’t heard, the company that promises in its ads to help you pay for car repairs has agreed to pay $10 million for its deceptions. News about reimbursements to customers should come soon.
Customers were promised help to pay for car repairs, and the company let them down.
In a statement to The Dallas Morning News, CarShield attorney Michael E. Carter blamed the pandemic, which caused supply chain issues and labor shortages. He said the company came under “extreme stress and intense pressure.”
Many CarShield customers came under the same kind of stress and pressure when they realized they were lied to by the company. Many paid and got nothing in return.
Misleading claims
CarShield uses celebrities in its ads, most recently rapper and actor Ice-T, actress Vivica A. Fox and ESPN announcer Chris Berman.
Mark Lovvorn, a longtime Dallas banker and certified fraud examiner, told me he visits church groups and retirement communities to warn about falling for scams.
He urges his audiences not to fall for celebrity endorsers. He questions whether they even use the product that they are pitching. If they do, he says they probably get better treatment than complaining customers.
“The trust factor lures them in,” he says of customers.
Washington, D.C., lawyer Gonzalo Mon told me that in the CarShield case, the FTC charged that some of the claims in commercials were misleading, either because they weren’t true or because they reflected experiences that aren’t typical for most consumers.
The FTC enacted disclosure requirements for when social media influencers endorse products. Among the rules, they must identify if they are getting paid.
Celebrities could be next. Mon said the FTC “has said that celebrities themselves could face repercussions, particularly if the celebrities knew or should have known that the claims they made weren’t accurate.”
Celebrities sell
A study from the Wharton School at the University of Pennsylvania examines the marketing psychology behind celebrity endorsements — and it’s eye opening.
It actually involved a study of how eyes follow celebrities in ads.
The study suggests that celebrities’ endorsements work. Consumers are more likely to buy products supported by celebrities.
They tested eye movement for ads and found that a famous person draws attention away from a product and is more likely to bring about a quicker sale. Non-famous people do not have the same power of attraction.
Wharton researchers concluded that the power of celebrities to persuade is rooted in evolution and biology.
“Both humans and primates will follow the lead of high-status, high-prestige individuals in their group by aligning their gaze or copying their decisions,” the study concludes.
As for CarShield, company lawyer Carter promised in a statement that the company expanded rental car coverage and provided rideshare benefits for customers.
“Finally, we are making very clear that all spokespeople in our ads are actual CarShield customers.”
How hard is that? They could have saved $10 million.
Watchdog tips: Don’t sign a contract with a company without looking at it first.
In CarShield’s case, buyers only saw a 25-page contract listing all services covered after they signed the contract.
Instead of buying a risky extended warranty contract, consider putting money away in savings for future car repairs.
At most car dealerships, the warranty contract is usually where they make their biggest profit. Negotiate!
Do a web search to check out a company’s record before signing up.
Don’t fall for celebrity endorsements.
