Seattle based retailer Nordstrom avoided any action by the Federal Trade Commission recently, but just barely. And its experience presents a cautionary tale for retailers who want to tap into the power of social media.
Nordstrom Rack put on a “TweetUp” event to promote a new store opening in Boise Idaho. The store invited social media “influencers” to the event. The influencers were expected to tweet about the fabulous deals and other amenities at the store, no doubt with the hope that they would “influence” (you had to see that coming) other customers to head on down.
At this point, you may be wondering exactly why the FTC was interested in this event. The answer to that question has to do with a publication the FTC put out in 2009 called Guides Concerning the Use of Endorsements and Testimonials in Advertising. In that Guide, the FTC made it clear that a “material connection” between advertisers and endorsers must be disclosed when the relationship “is not otherwise apparent from the context of the communication that contains the endorsement.”
It turns out the influencers received gifts, including $50 Nordstrom gift cards for their trouble. Which sounds like a “material connection not apparent from the context of the communication” – in this case the tweets. The point of the FTC Guide is to make sure that endorsements – including those made via social media – are transparent. If the person tweeting about how much she enjoys the Nordstrom experience is getting paid, that impacts the credibility of the tweet. And consumers should have all the data, including information that might call into question the tweet’s sincerity.
What helped keep Nordstrom out of trouble here was, as it turns out, transparency. Apparently a number of the influencers disclosed their pay off. It also helped that Nordstrom voluntarily updated its social media policy to make sure there would be no repeat. That was enough to convince the FTC to close the investigation with no further action.
Nordstrom dodged the bullet in this case, but the lesson is clear. If you are inducing customers to sing your praises on social media platforms, better be upfront about it.