Saturday, March 31, 2012

Sensational brand- or sensationalized advertising?

Special Guest Blog: Elisa Philippon

Toning shoes (as a category) had had explosive growth. Check out the graph below. Sales were $17 million in 2008; $245 in 2009 and over $2 billion in 2011 (Bohnhof, Jones, Swanson, and Moses: Reebok EasyTone Plans Book). That’s especially impressive when you consider that the athletic shoe category has been shrinking.

There was a brand that drove a disproportionate amount of this growth: Reebok EasyTone.

The positioning of EasyTone is straightforward: the brand is an easy solution to get rid of a flabby derriere. More eloquently, EasyTone provides extra tone and strength to leg and buttock muscles. Reebok emphasized its positioning by hiring the curvy (but firm!) Eva Mendez as poster child for its new line. (http://www.youtube.com/watch?v=7xkWaqHCbkA )

In its promotion, Reebok claimed that the unique shape and off-balance characteristics of the EasyTone shoe meant that the consumer just had to wear the EasyTones shoes during her daily routine for the product to work its magic. Sensational, right? But, there was a problem. According to the Federal Trade Commission (FTC) Bureau of Consumer Protection, the regulatory body that governs false commercial claims, Reebok had sensationalized it claims. In other words, Reebok could not effectively link the results it advertised. (Reebok continued to insist that they had not misrepresented the findings. Reebok claimed the findings are legitimately based on their experiments.) In other words, the FTC believes that Reebok misled consumers. The FTC alleges that Reebok falsely claimed that walking in EasyTone footwear had been proven to lead to 28 percent more strength and tone in the buttock muscles, 11 percent more strength and tone in the hamstring muscles, and 11 percent more strength and tone in the calf muscles than regular walking shoes. Consequently, the FTC charged Reebok $25 million in customer refunds for misleading statements. (http://www.ftc.gov/opa/2011/09/reebok.shtm)

What is interesting is this: Reebok EasyTone shoes caused the problem for Reebok. Yet, any consumer who purchased EasyTone shoes, capris, pants, shorts, bras, sleeveless shirt and short sleeve tops became eligible for compensation due to the misleading information. This suggests that the FTC believes that the misleading information spills over into different product categories. The fine, is levied against the brand- not against the product!

What was Reebok's response to this?

“On September 28, 2011, the Federal Trade Commission (“FTC”) announced that Reebok and the FTC have come to a settlement agreement on the FTC’s allegations regarding the U.S. EasyTone advertising campaign. The allegations suggested that the testing we conducted did not substantiate certain claims used in the advertising of our EasyTone line of products. In order to avoid a protracted legal battle, Reebok has chosen to settle with the FTC. Settling does not mean we agreed with the FTC’s allegations; we do not.

We fully stand behind our EasyTone technology – the first shoe in the toning category inspired by balance-ball training. We have received overwhelmingly enthusiastic feedback from thousands of EasyTone customers, and we remain committed to the continued development of our EasyTone line of products. Our customers are our number one priority, and we will continue to deliver products that they trust and love.”

2 comments:

  1. What hit me-
    If Reebok sold say even 100 million of these shoes, at say $100 (which is conservative given the numbers you post), with a margin of $2.5 per shoe via net margin (which again is being wildly conservative), that is 250 million in total net margin...a $25 million dollar fine is not a lot!

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  2. Are we to conclude that sometimes it makes good business sense to be deceitful as long as one is not going beyond a certain costly limit where the cost would exceed the benefits (literally)? In this age of fierce competition perhaps what this tells us is that some companies feel compelled to delve into more risqué punctual strategies.

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