I’m not against making a profit. Not at all. Commerce and profit have been woven into my life since I was a checker (at age 7) at my father’s Ben Franklin five-and-dime on Main Street in Charles City, Iowa. The profit I’m concerned about is what an increasing number of companies are making from older consumers. Super high margins are being made on products of questionable value. On the surface, the commercials for gold, speed-up-your-PC software, supplements and other products look very legitimate. And the creative is often speaking directly to the deepest emotional concerns of older consumers. The problem with many of these products is threefold: exorbitant profits, a business model that is not transparent and questionable product quality. Here’s my current ‘hit list’ of questionable products and services that are targeting older consumers.
Scam Advertisers Are Targeting Senior Consumers
The Speed-Up-My-PC Scam: This category is low-hanging fruit for the senior profiteers. Older consumers are generally not comfortable with computer maintenance. And several companies have taken advantage of the issue with highly questionable products. According to ARS Technica, a leading technology website, a significant number of these products are ineffective and, in some cases, harmful to user’s computers. From fixing ‘fake problems’ to even loading malware on user machines, the products are bad news. According to ARS Technica, consumers of all ages are better served by free software available from Microsoft and other reputable sources.
The Senior Gold Rush: Older consumers, largely because they’re watching political events in our country with horror, are great targets for the doom-and-gloom pitch of precious metal hustlers. And while some of the companies do offer competitive pricing on gold and silver coins (the bait), high mark-ups on other products such as numismatic coins can hammer the consumer. A better alternative is a precious metals ETF or a session with a retirement planner with a fiduciary interest in the client.
“Free Products” With Hidden Handling Charges: Several years ago some direct marketer discovered that they could unload more of their cheap crap if they gave it away and then charged the consumer a ‘hidden’ handling fee. You’ve heard the pitch, “Call now and get our product for free. You just pay shipping and handling.” As a result, there are currently a ton of “free” products—everything from DVDs for dealing with difficult kids to “secrets” of getting more from social security that a consumer can get for no charge, other than the handling charge that is ten times what postage would normally be for shipping the product. The hard-core direct marketers even put a digital counter on the screen that indicates how many free widgets are still available for that day, which is amazing because the commercials are all prerecorded.
Social Security Scams: There are, indeed, social security claiming strategies that are legitimate which will help consumers get more from Social Security benefits. They’re free and available at a number of legitimate websites and financial planners. Leave it to the scammers to find creative ways to charge people for free information. One of the schemes is being run by a national magazine through a radio ad that promises to help consumers unlock hidden Social Security benefits. In order to get the information, the consumer agrees to a trial newsletter subscription that, unless cancelled in a specific time period, becomes an annual paid subscription to several newsletters. After this scheme gets past 30 days and the consumer is billed for the subscription, it is very difficult to cancel the subscription. By the way, direct marketers have a name for this type of scheme. It’s called a ‘Continuity Plan’ because it results in monthly revenue from the consumer for a product, service or subscription.
Reverse Mortgages: The television ads tout the good life that one gets when they finally get the cash from tapping into their home equity. Celebrity endorsers make the process look so easy and quick. What goes unmentioned are the fees and other costs associated with a product that can leave seniors in serious financial trouble. While the reverse mortgage product is not necessarily a scam, the marketing tactics being used to promote them are very questionable.
Final Payments Insurance: Here’s a lovely group of scallywags who target older consumers with low incomes. Yes, that’s right. It’s not good enough to just screw-over seniors, they nail the ones who don’t have much to begin with. The pitch: Buy this insurance so when you die your funeral arrangements are covered. The scam: The companies don’t disclose that they’re selling insurance. The insurance is not low cost, as advertised. And, many consumers already have coverage in their existing insurance coverage.
Tax Debt Resolution: Clever marketers have discovered that if they describe the IRS tax resolution process as complicated and mean enough that they can over-charge consumers who owe back taxes. They pitch ‘secret’ government programs like some kind hidden treasure that only they can unlock. After their marketing makes them sound like Indiana Jones taking on the IRS, these firms charge large ($10,000 and more) retainers up front to accomplish a the same job that can be done by a patient CPA for much less.
Charities: Older consumers have hearts…big hearts. And the non-profits know it all too well. For every reputable charity advertising on television and radio, there’s probably 10 bad ones. They’re bad because they handle the money you give them poorly. Oftentimes a low percentage of gifts will reach the actual people in need, going instead to charity overhead. Charity Navigators, a non-profit Charity watch dog group, does an outstanding job of policing the non-profit sector. Sadly, some of the most commercially active non-profits are among the worst rated charities in the Charity Navigator ratings. The relative high cost of advertising campaigns often result in a high cost of donor acquisition. Put another way, when you give to a charity that is advertising on radio or television, your gift often goes to pay for the commercial that motivated you to give.
As I’ve written previously, I’d love to see broadcasters take a more aggressive role in cleansing the airwaves of scammers, especially the ones that target older consumers. However, the current debt service of broadcast companies won’t support this kind of honesty. And although the government would love to get move involved in the process of protecting us (EG: Consumer Financial Protection Bureau), I believe it is the consumer’s responsibility, including senior consumers, to be even more vigilant in our consumer lives. With the freedom of American commerce comes a responsibility for the consumer to be informed. On my consumer advocacy program, The Consumer Team, we regularly talk about strategies that consumers of all ages can use to avoid being ripped off. In my next blog, I’ll take you through the strategies. And, best of all, there is no charge…..not even shipping and handling.
President/CEO
(Editor’s Note: Pete Thomson is a 30 year veteran of broadcast media and marketing. As a television and radio broadcaster, he worked in programming, sales, sales management and general management. In 2011, Thomson opened McQ Media, a full service marketing and advertising firm located in Dallas, Texas. Also in 2011, Thomson founded The Consumer Team, a consumer advocacy radio program heard weekly on CBS Radio’s KRLD in Dallas.)
