8 of the Most Costly Marketing Scandals (2022)

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From YouTube stars to penis pills that flopped

8 of the Most Costly Marketing Scandals (1)

The world loves scandals. Celebrities caught in a tryst. Politicians doing dodgy deals. Sports stars undertaking illegal activities.

And big brands and companies are not immune. The most common marketing scandal is false advertising — leading to huge fines and long term brand damage.

A study by Label Insight found that 94% of consumers are likely to be loyal to a brand that offers complete transparency. It also found that 73% of consumers say they would be willing to pay more for a product from such a brand. Despite this, some brands try to get traction through false and misleading information. Making claims based on manipulated or biased research.

Let’s take a look at eight of the biggest marketing scandals.

The German car company became involved in the fiasco known as Dieselgate.

The Environmental Protection Authority (EPA) found in 2015 that Volkswagen had for the last seven years, cheated on the emission tests of its diesel cars. The EPA found that Volkswagen cars had a “defeat device” — or software — in diesel engines, that changed the performance of the vehicle when they were being tested to improve results.

Without getting into the technical details of how the cheat device worked, the end result was the engines emitted nitrogen oxide pollutants up to 40 times above what is allowed in the U.S. This was in complete contrast to their whole advertising campaign which promoted “Clean Diesel” vehicles.

Over 550,000 U.S. customers were duped by these false claims, believing they were buying a low emission, environmentally friendly car, which wasn’t the case.

The Federal Trade Commission (FTC) filed a lawsuit against Volkswagen, and the resultant fines reached $15 billion. This included $10 billion to offer buybacks to owners of polluting vehicles and nearly $5 billion in funds to offset excess diesel emissions and boost zero-emission cars.

In addition to the huge penalties, the Volkswagen share price dropped 30% on the back of this news.

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Another company making false claims was Dannon with regards to their Activia yogurt. This product was marketed as being clinically and scientifically proven to boost immune systems and regulating digestion. The product claimed to prevent cold and flu and as such, was priced at a 30% premium above competitors’ products.

The television advertising campaign was launched with actress Jamie Lee Curtis spruiking the product.

One consumer took them to court over their marketing claims. She claimed she saw the ad and as she had stomach problems, purchased the product. After eating the yogurt, she noticed no difference in her condition. The lawsuit was upheld, and $35 million was awarded to any litigants who wanted to join in the class action.

Soon the FTC initiated a case and ended up fining Dannon $21 million and ordered them to remove the words, “clinically” and “scientifically proven” from their labels.

“These types of misleading claims are enough to give consumers indigestion,” said FTC chairman Jon Leibowitz. (Quite a funny comment from an FTC regulator, I must say)

It also turned out to be a claim that cost the company $56 million.

This inclusion is to show I can connect with the youth. And to take a brief step away from false advertising claims to a really bad social media post.

Logan Paul may not be an instantly recognizable brand to the Boomers or Gen X readers of this article, but he is one of the biggest social media stars globally. (I never thought I would use the term social media star, but that’s 2020 for you).

Across the various social media platforms, Paul has over 50 million followers, and his YouTube channel has over 20 billion views. So, he counts as a big brand.

In 2017, he posted a YouTube video of a person who had died by hanging himself in Aokigahara at the base of Mount Fuji in Japan, known as the “suicide forest.” He filmed himself and his crew’s reaction to the body and seemed to make light of suicide — at times even appearing to laugh.

Given much of his audience are teens and children, the content was highly inappropriate. The video received over six million views in the first 24 hours and was widely criticized in the media. An online petition demanding that Paul have his YouTube channel canceled soon reached 500,000 signatures.

The video was eventually removed for breaking YouTube’s content policy as the media backlash against Paul continued.

YouTube removed Paul’s channels from Google Preferred, its preferred ad program, and New World Order, the sequel to his YouTube film The Thinning, was placed on hold. He was also cut from season four of the YouTube Red series Foursome. Paul claimed to the Hollywood Reporter to have lost $5 million in revenue as a result of posting the video.

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Paul made a donation of $1 million to suicide prevention agencies and issued several apologies to the victim’s family and also to his audience.

To once again prove how powerful his brand is, the apology video above has been viewed over 58 million times.

Back to “regular” brands again. And of course, companies making false claims — this time Hyundai.

Following rising gas prices, Hyundai promoted their cars based on their superior fuel economy. They manipulated data to their advantage, resulting in an inflation of fuel economy by one to six miles per gallon. They also understated the greenhouse gas emissions of their cars in their advertisements. These claims applied to vehicles sold in the USA between 2011 and 2013.

After a 2014 investigation, the EPA said, “Hyundai and Kia gave consumers inaccurate information about the real-world fuel economy performance of many of these vehicles.”

It was a costly claim by the Korean car manufacturer. They were fined $100 million for their false claims and also forfeited $200 million worth of carbon credits. Other car companies were also audited by the EPA with Ford also being forced to compensate customers after claims they also overstated fuel economy.

8 of the Most Costly Marketing Scandals (2)

ExtenZe, yes, its name has an annoying capital Z in it, is a herbal supplement, that makes the claim that it enlarges the penis. (Yes just like the promise made by all those spam emails we receive!)

Fronted by porn star Ron Jeremy, and in a strange choice of product endorsement NFL Hall of Famer Jimmy Johnson, ExtenZe made its promise without any scientific proof, much to the chagrin of its deflated customers.

It was hit with a class-action lawsuit (I wonder if the individual claimants withheld their names — I mean it’s embarrassing to admit to purchasing this product). In 2006, ExtenZe was found guilty and forced to pay $6 million in damages to the class action.

They continue to make the product but have been involved in further controversy. In 2010 they were the sponsor of NASCAR driver Kevin Conway but were accused of not paying the sponsorship money agreed on.

The same year, 400m Olympic gold medallist Lawshawn Merrit received a two-year ban for taking ExtenZe, which is a prohibited substance for athletes. He said that he made a “foolish, immature and egotistical mistake… any penalty I may receive for my action will not overshadow the embarrassment and humiliation I feel.”

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I bet he did feel very embarrassed!

8 of the Most Costly Marketing Scandals (3)

Classmates.com is a website that offers you the chance to reconnect with people from school. The class bully, the girl who rejected your prom proposal, the jock, and all your other favorites.

In 2007, millions of people received an email from Classmates.com, advising that old friends were trying to contact them. There was a catch; the only way to connect with these people was to upgrade and purchase a Gold membership to the website.

Unfortunately for users who did pay to upgrade, they found it was a marketing ploy. There was no one waiting to reconnect — it was just false and deceptive advertising.

One client furious at the deception launched a suit against the company, which soon became a class action. Classmates was forced to pay out over $9.5 million in the settlement.

The company didn’t learn from this mistake, finding itself the subject of another action in 2011 — this time for false billing and affiliate marketing. Users were enrolled in third party programs when joining Classmates.com and being charged for services they didn’t agree to. Even when users tried to cancel the subscription, the charges were ongoing.

This time they received an $11 million fine for misleading advertising and promised to change their ways.

Maybe people should just stick to Facebook?

8 of the Most Costly Marketing Scandals (4)

The shoe giant released a range of EasyTone footwear in 2008, which it claimed toned and strengthened muscles as the user walked or ran.

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Among the advertising claims were: that their shoes had been proven to lead to 28% more strength and tone in the buttock muscles, 11% more strength and tone in the hamstring muscles, and 11% more strength and tone in the calf muscles than regular walking shoes.

There was no evidence at all to support these claims, and the FTC issued Reebok with a $25 million fine. It’s worth noting that for these cases, the realized costs are actually far more.

In this instance, the publication Ad Age calculated the real costs as being closer to $80 million:

“Reebok worked with ad agency DDB on campaigns for the products. It spent $23 million, or more than 80% of its total measured-media budget on advertising EasyTone in 2009, according to Kantar Media. In 2010, the athletic brand devoted $31 million to marketing EasyTone. And in the first half of this year, it spent $10 million marketing toning products. And that’s just in the U.S.”

Other shoe companies promoting, “toning sneakers” were also fined, including New Balance.

In a statement, David Vldhek, director of for the Federal Trade Commission’s Bureau of Consumer Protection, said: “The FTC wants national advertisers to understand that they must exercise some responsibility and ensure that their claims for fitness gear are supported by sound science.”

A herbal supplement, Airborne claimed that its formula — a result of research by second-grade teacher Victoria Knight-McDowell — could prevent colds and the flu.

Their marketing made claims that Airborne can “boost your immune system to help your body combat germs” and advised people to “take it at the first sign of a cold symptom or before entering crowded, potentially germ-infested environments.”

The claims worked from an advertising perspective as the product was hugely successful, being stocked in drugstores alongside approved flu medicines. Victoria was even asked to appear and promote the product on the Oprah Winfrey Show.

“You get Airborne. You get Airborne. Everybodddddddy gets Airborne!”

However, there was no scientific proof to back these claims, and the Center for Science in the Public Interest (CSPI) was asked to conduct research and test the marketing claims of the product. And the claims were found to be false and without evidence.

Airborne was forced to pay out $23.2 million in damages in a lawsuit.

All of these examples resulted in huge fines and brand damage. In many cases, overambitious claims made to exaggerate the benefits of a product.

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There is now more scrutiny on products, especially ones making claims that can be easily disproved. For any marketers, it is good to remember these words from the founder of global agency DDB, William Bernbach:

“The most powerful element in advertising is the truth.”

FAQs

8 of the Most Costly Marketing Scandals? ›

  • 8 of the Most Costly Marketing Scandals. From YouTube stars to penis pills that flopped. ...
  • Volkswagen. The German car company became involved in the fiasco known as Dieselgate. ...
  • Activia Yogurt. ...
  • 3. Logan Paul. ...
  • Hyundai. ...
  • ExtenZe. ...
  • Classmates.Com. ...
  • Reebok.
Aug 17, 2020

What has been the worst marketing campaign? ›

1. Kendall Jenner Pepsi ad. This long commercial from 2017 follows along with a marching protest and features popular model Kendall Jenner watching and then joining it. In the end, she walks to the front of the protest line and hands a can of Pepsi to a police officer as a peace offering.

What are some examples of unethical marketing? ›

Let's take a heard look into real examples of false marketing practices.
  • Misleading Images. ...
  • Plagiarism. ...
  • Using Sex, Religion, and Politics. ...
  • Twisting Facts. ...
  • Smearing Competitors. ...
  • Exaggeration. ...
  • No Scientific Data. ...
  • False Advertising.
Aug 17, 2021

What went wrong in marketing? ›

Lack of Research and Testing. Skipping research and testing is one of the most common marketing mistakes that companies make. Market research and testing save time and money by predicting how your products and promotions will perform before you launch a single campaign.

Why some expensive advertising campaigns have been unsuccessful? ›

Marketing campaigns can fail for a lot of reasons. Some of the most common reasons are that they aren't targeting the right personas, you didn't do enough research, you didn't have realistic goals, you created the wrong message, and you delivered content at the wrong time in the buyer's journey.

What are some of the greatest marketing disasters in history? ›

So without further ado, here are the top 10 worst marketing disasters of all time (and what we can learn from them).
  • Enron. ...
  • Fiat's Love Letters to Women. ...
  • BP CEO “Would Like His Life Back” After Explosion Kills Employees. ...
  • Kenneth Cole Egypt Civil Unrest Tweet. ...
  • Justine Sacco and Her Infamous Tweet.
Jun 10, 2021

What's an example of a viral marketing attempt that failed? ›

The Fake Hoverboard That Fooled Everybody

Finally, they had the chance to be Marty McFly. But just as quickly as their dreams were realized, they were snatched away. How so? It was revealed that the boards were nothing more than viral marketing for Funny or Die.

How is Nike unethical? ›

Environment. Nike received Ethical Consumer's worst rating for its cotton sourcing policy, because it lacks a clear approach to use of pesticides and herbicides. Cotton accounts for 12.34% of all insecticide sales and 3.94% of herbicide sales, even though cotton covers only 2.78% of global arable land.

Is Coca Cola unethical? ›

Since the 1990s Coca-Cola has been accused of unethical behavior in a number of areas, in- cluding product safety, anti-competitiveness, racial discrimination, channel stuffing, dis- tributor conflicts, intimidation of union workers, pollution, depletion of natural resources, and health concerns.

Why Amazon is an unethical company? ›

Amazon is an arch tax avoider and is the subject of a global boycott call by Ethical Consumer. The world's biggest online retailer is generating huge revenues in the UK but paying very little corporation tax. It does this by funnelling money through its holding company in the notorious tax haven of Luxembourg.

What's the biggest mistake digital marketers make? ›

10 Deadly Digital Marketing Mistakes and How To Avoid Them
  1. Underselling Your Website. ...
  2. Missing Your Target Market. ...
  3. Setting Unrealistic Goals. ...
  4. Using Clickbait. ...
  5. Not Investing in The Right Resources. ...
  6. Only Spending on Paid Advertisements. ...
  7. Not Personalizing Your Communication for Every Customer.
Dec 30, 2019

Why do marketing strategies fail? ›

They don't have concrete goals

Many marketers fail simply because they don't know what they're working towards. Your company can avoid this by setting concrete goals. When each member of your team knows exactly what they need to accomplish, they're more likely to do it.

What is poor marketing? ›

Poor Marketing Is Expensive

By using the wrong marketing mediums, or targeting the wrong people, you're eating up budgets that could be better used elsewhere.

What companies failed due to poor marketing? ›

Let us look at ten products that have failed due to poor marketing.
  • Segway. Do you remember this two-wheeled transportation device called Segway? ...
  • Google Glass. ...
  • Amazon Fire Phone. ...
  • Google Plus. ...
  • Cheetos Lip Balm. ...
  • Crystal Pepsi. ...
  • Volkswagen Phaeton. ...
  • Samsung Galaxy Note 7.
Mar 23, 2022

Which company has an international marketing campaign that failed? ›

HSBC Bank. HSBC Bank was forced to rebrand after a failed international marketing campaign. In 2009, the worldwide bank spent millions of dollars on its 5-year-old “Assume Nothing” campaign.

What is an example of an unethical product? ›

Traditionally, potentially harmful products have been regarded as tobacco, alcohol, armaments, drugs, and other goods. However, as the society has started to be more knowledgeable and global in its judgments, many other goods and services have begun to be seen as unethical.

What examples of unethical marketing have you seen in relation to healthcare? ›

Unethical Healthcare Marketing Example #1: Dabbling in Black Hat SEO
  • Paying for links to critical pages on your site.
  • Hiding spammy keyword-stuffed content so only search engines can see it.
  • Using forums or blog comments to plant links back to your website.
Dec 3, 2019

Are there unethical marketing strategies? ›

Ethical marketers sympathize with emotions, while unethical ones exploit them. This unethical marketing practice may include intentionally evoking rage or sadness to manipulate consumer decisions, using fear tactics, targeting disadvantaged people or tricking customers into buying a product or service.

Why is Nestle considered unethical? ›

Nestle aggressively pushed their breastfeeding formula in less economically developed countries (LEDCs), specifically targeting the poor. They made it seem that their infant formula was almost as good as a mother's milk, which is highly unethical for several reasons.

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