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A Double Handful Of Lead Generation Pitfalls

By Jul 27, 2010

Here’s the necessary: Marketers need to replenish their supply of customers. And here’s the evil: Prospecting, especially in regulated industries, is fraught with potential missteps. And very often when a campaign goes awry all participants in it – marketers, suppliers and service bureaus – can get caught up in the resulting storm.

Jonathan L. Pompan, an attorney with Venable LLP, offered thoughts on ten avoidable hazards of prospecting campaigns during a session at LeadsCon East, a prospecting conference which runs through today.

1. Failing to consider the legal implications of a particular advertising campaign

Any given campaign may face restrictions and regulations under the Federal Trade Commission (FTC) Act, a variety of state legislation, medium-specific statutes such as the CAN-Spam Act or the Telemarketing Sales Rule, as well as FTC guidance on endorsements and testimonials. Within newer media, social and other online channels bear a variety of terms and conditions. There are regulations that govern sweepstakes, contests and other promotions. And individual verticals, such as debt relief, mortgages and health and beauty offerings, among others, carry their own specific laws and regulations.

2. Ignoring the basics of advertising law

The Federal Trade Commission Act’s sections 5 and 12 offer a fair amount of detail on the nature of unfair and deceptive advertising. For example, expressed or implied claims reasonable consumers take from advertising should be truthful and not misleading. And the truth alone may not be a defense: While an ad may be literally truthful, it can also be deceptive. Ads may also be deceptive by omission: Fine-point disclosures won’t cure an otherwise deceptive ad. Disclosures should be “clear and conspicuous.” Advertisers need to offer “competent and reliable scientific evidence” regarding health, safety and efficacy claims. And in addition to the focus on health and beauty products mentioned above, children’s advertising comes under its own set of laws and regulations.

3. Not recognizing the legal risks and consequences of noncompliance

Reading cases of the FTC and other authorities successfully going after deceptive marketers will give a fairly good overview of this: Consequences include mandatory refunds, cease-and-desist orders with 20-year reporting requirements, bans and bonds, and disclosures in future ads or corrective advertising. There’s a new wrinkle, as far as prospecting goes: The FTC is cracking down on deceptive practices from affiliate marketers, and state attorneys general are looking the roles affiliates, merchants and/or networks play in knowingly facilitating these.

4. Ignoring the law specific to the vertical

Debt relief services, mortgage companies, payday lending, auto service warranties, insurance, health and beauty and nutrition products, education and other industries are governed by a wide swath of regulations and laws. Not only should the marketer know these, but anyone selling leads to a marketer should know them as well. “It’s harder to backtrack if leads aren’t in compliance – that’s when the Better Business Bureau and law enforcement get involved,” Pompan said.

5. Not knowing sources of leads

A basic, but not comprehensive, set of qualification questions for lead source vendors might include: Who are you buying from? Who are you selling to? Where did the lead originate from? What was said to solicit the lead? These concerns can be additionally mitigated by developing qualification programs and standard operating procedures for list source evaluation, and following up with reports and audits. “The FTC holds everyone accountable for misrepresentation,” Pompan cautioned.

6. Calling a consumer on the do-not-call list without permission

Calling a number on the national do-not-call registry is a no-no, of course – unless there is an established business relationship. Whether or not there is such a relationship depends on the actions of the lead generator, which when a third-party source of leads is used can lead to tricky situations. In the past, when inappropriate calls have been made, the FTC has charged the marketers, despite the fact that the leads had been generated by consumers volunteering their information to third-party lead generators. The FTC argued that the consumers whose numbers were on the prospect lists hadn’t reached out to the particular company making the call – and therefore did not have an established business relationship.

7. Upsells, cross-sells and negative-option marketing require careful planning

Both advance consent marketing, in which goods or services are received on a continuing basis until the consumer who has enrolled in the program elects not to receive them, and negative-option marketing, in which a consumer’s silence or failure to actively reject an offer is viewed as acceptance, are coming under legislative and regulatory fire. Know the laws and the regulations – and know that state and federal laws on these are in flux.

8. Contractual relationships

Written lead-generation contracts usually include provisions regarding ownership, exclusivity, payment, terms and legal liabilities. Companies using lead-generation firms should be very clear regarding what they are liable for in the event of a dispute or a government investigation or enforcement action.

9. Failure to protect and safeguard private information

Marketers need to know the promises made to consumers regarding their personal information throughout the lead generation process. Some considerations: This information usually needs to stay encrypted to industry-level standards throughout the generation-to-use process. And even after – how information is disposed of after a campaign may have its own set of legal requirements.

10. Endorsements and testimonials require caution

Endorsers, as well as marketers, may be liable for statements made during the course of their endorsements. The reason why marketers love the phrase “your experience will vary” is because they often don’t have the facts needed to support the claims made by the endorser – claims which should reflect the experience other users will have. As for marketers who use outside bloggers and other social media sources to generate leads: The endorser is responsible for disclosing a material connection with an advertiser. That said, advertisers have a responsibility to advise endorsers of their disclosure obligations, and advertisers should monitor an endorser’s statements to ensure they comply with the Guides and take corrective actions if they are not.