'Confusion marketing' prevalent in some IT sales

Rising backlash over Apple iPad's "misleading 4G claims" serve as wakeup call for tech industry to pay more attention to marketing language and service recovery, say market watchers, who note this as critical to retain customers.

With more complaints expected to come from customers and regulators over Apple's "misleading" 4G claims, the ongoing saga serves as a reminder for companies to be mindful of how they market their products globally.

Rob Bratby, managing partner at law firm Olswang Asia, said Apple's situation was a good example of a global company that had failed to realize that the rest of the world, and Asia in particular, was different from its home country, or in this case, the United States.

Asian watchdogs quieter

Amid the ongoing rebuke Apple currently faces over its iPad LTE claim, while Australia and Europe have been at the forefront in probing its misleading ads, Asian watchdogs have remained relatively quiet.

Bryan Tan, director of Keystone Law, noted that this was likely because consumer protection was "more regulated and higher-resourced" in developed countries such as Australia. "Asian countries typically aren't and organizations like [Singapore consumer watchdog] CASE are largely privately-funded. Also, laws are still in its infancy," Tan said.

When contacted by ZDNet Asia, CASE (Consumer Association of Singapore) said it was monitoring the situation closely. "We have also written to Apple to request their plan to assist consumers who are misled," said Seah Seng Choon, CASE's executive director.

"You can see this issue as systematic across the organization," Bratby said. "While the immediate failure is [that] of the marketing team to tailor [the company's] message, the wider issue is that the global marketing campaign was launched when the product teams had concluded deals only in the U.S. and Canada with telecoms carriers.

"Apart from demonstrating a U.S.-centric view, [Apple] also shows a commercial myopia given the number of consumers in the growing Asian marketplace," he said.

The Australian Competition and Consumer Commission earlier this week accused the iPad maker of misleading customers by labeling the tablet as "4G-capable" as the device cannot work with Australia's only 4G, or long-term evolution (LTE) network, offered by Telstra.

Technically, 4G has not been defined by the International Telecommunication Union, but telcos worldwide commonly market LTE networks as "4G".

The case is scheduled to be heard in Australian courts in May. In its response, Apple said the new iPad would run only on selected LTE networks in the U.S. and Canada. It agreed on Thursday to display signs to state the new table would not operate on LTE networks in Australia and to offer refunds to customers.

Other countries including the United Kingdom and Sweden are reportedly also considering similar legal steps against Apple.

Nature of services also a factor

Jochen Wirtz, associate professor of marketing at the National University of Singapore (NUS), noted that misleading ads were not unique to the IT sector and often occurred in services-related products.

He pointed out that sales pitches for services such as those offered by telcos could be particularly complex and potentially misleading.

"With services now becoming more commoditized, how do you avoid competition? You make it hard to compare what you are selling."
-- Jochen Wirtz
Assoc Prof. of Marketing, NUS

Wirtz said: "With services now becoming more commoditized, how do you avoid competition? You make it hard to compare what you are selling." The marketing professor cited an example of how telcos often had different ways of selling talk-time in their service plans, such as "billing by per second, or per six seconds".

In a report by the New Zealand Herald, former Telecom CEO Theresa Guttang also noted that telcos used confusion as a marketing tool.

Esther Ho, manager of retail studies at Nanyang Polytechnic, pointed out that "confusion marketing" referred to how consumers are presented with an overload of information that is imperfect and ambiguous.

"This is particularly prevalent in industries or markets that are characterized by high competition, advanced and rapid technological advancements, and low switching costs. Examples are the telecommunication industry and the banking sector," Ho added.

Olswang's Bratby pointed out that the telcomms sector often struggled to effectively communicate with consumers. For example, Optus last year was fined A$5.26 million (US$5.46 million) for using what the court described as deceptive advertisements, which were not upfront about hidden conditions, to market its broadband plans.

The lawyer pointed out that false marketing also was not confined to the consumer market, noting that he had seen "a number of cases" where vendors completely misled the purchaser. He said a good example of this would be in the U.K. where media company BSkyB won its case against IT vendor EDS, which a salesperson "had made things up" to close a deal.

However, IT managers in Singapore told ZDNet Asia that they rarely encountered incidents of misleading salespersons.

Jerome Lee, an IT manager in a media company, said: "It's not something you hear often. Maybe because IT purchases are usually made by people with specialized knowledge so they know clearly what they are getting."

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Referring to the iPad LTE advertisement, NUS's Wirtz noted that it was unlikely a deliberate move by Apple to mislead customers as "big companies relied on building goodwill and trust with customers".

Ho added that companies must think long term. "The competitive advantage gained over time through reputation and credibility can also be eroded due to a misguided move in 'confusion marketing'."

She noted that the relationship between a company and customers did not end at the point when the product is sold. "Companies have to take steps to reassure their customers' choices and reduce negative dissonance with purchase decisions.

"The service recovery is important such as in the case demonstrated by Apple which offered to refund customers who felt that they were 'misled' by the marketing information," she said.