The New Zealand Herald judged to have misled consumers in Herald Homes Advert

by Alistair Helm in


The Advertising Standards Authority (ASA) this week published its Complaints Board’s decision against NZME., publisher of the NZ Herald. The board adjudicated that the Herald Homes advert claiming that “On average properties sell for 20% more when the marketing includes the Herald Homes…” was likely to mislead consumers.

I filed the complaint with the ASA following the articles I wrote in October when the advertising campaign commenced (Can advertising generate extra sales price for property / Sale price premium cannot be claimed by advertising alone). I should highlight that at the time I was self-employed. Subsequently I have taken a role with Trade Me Property and this complaint is in no way related to Trade Me Property.

I submitted a detailed complaint to the ASA supporting my claim that the advertising was misleading and potentially deceptive. I judged it to be misleading, as the advertising made no reference to the fact that the research upon which the advert was based only examined million dollar plus homes over a selected six month period. I further stated that their claim could potentially be deceptive as the analysis of the data, whilst proving correlation between advertising and selling price, could not definitely prove causation between advertising and sale price given the multitude of factors and variables involved in selling a property.

The outcome is gratifying – the complaint has been upheld and the NZ Herald has been found to have undertaken an advertising campaign which was judged to be likely to mislead consumers. However, the process taken to reach this outcome and the remedies available to the ASA leave me feeling somewhat frustrated.

The ASA is an industry organisation which seeks to uphold industry standards but is unable to exercise any financial remedies or penalties. The options are limited to forcing advertisers to withdraw and cease to undertake such advertising, matched to a published retraction.

The NZ Herald, in their response to the complaint, stated that:

The Herald Homes advertising campaign has finished its run. It is no longer present on bus shelters, is not scheduled to run in any further print media, and has also concluded its run on all NZME digital channels such that it is no longer accessible online (eg, via www.heraldhomes.co.nz).

I consider this a poor excuse or justification. However the most surprising component of the response from the NZ Herald was their attempt to offload responsibility for the advertising to its research company (TNS Research):

TNS Research were (accordingly) asked to provide their confirmation that the claim and explanatory footnote to the advertising were: accurate; and capable of substantiation based on the research undertaken by them.

NZME received confirmation from TNS Research prior to publication of the Herald Homes advertising campaign, that the claim and explanatory footnote were accurate and statistically supported by their research.

In my opinion the NZ Herald has a responsibility beyond simply asking the research company for confirmation. The ASA Complaints Board found the NZ Herald had breached the Basic Principle #4 of the Code of Ethics. This found that the NZ Herald advertising had not been prepared with a due sense of social responsibility to consumers and society.

The advertising campaign is over and sadly the NZ Herald has achieved what it wanted to achieve – attempting to convince agents and vendors that the NZ Herald Homes advertising can deliver a 20% price premium over CV. Sadly that claim was misleading but the NZ Herald has banked any competitive advantage this has given them between October and December (the strongest listings period of the year).

My only wish now is that the NZ Herald and in fact all publications seeking to attract advertising dollars from agents and vendors take seriously their responsibility to act within the ASA guidelines and Code of Ethics and not to undertake misleading or deceptive advertising.

 

 


Sale price premium cannot be claimed by advertising alone

by Alistair Helm in


Last week I challenged the claim made by the NZ Herald that the power of Herald Homes print advertising added an extra 20% to the sale price of property featured in Herald Homes. I wrote a detailed article "Can advertising generate extra sales price for property?" challenging their assertion which I firmly believed was misleading.

I wrote to the NZ Herald to request answers to questions regarding the research, in order to enable me to better understand the research they quote in support of their claim. This was their response I received :

The research was carried out on our behalf by TNS Research, a well-respected global research provider.

TNS purchased a list of recently sold properties from CoreLogic – all properties were residential dwellings in the Auckland area (Franklin to Rodney), and had sold in the most recent 6 month period (1st August 2013 – to 31st January 2014) for over $1 million. This list contained fields for address, land area, dwelling area, number of bedrooms, CV, sale price, days on market, agency and agent.

This list was then supplied to the relevant agencies to populate with marketing data for each property. We asked for spend by media options (Herald, Property Press, TradeMe, etc.), open home visits, enquiries and numbers of auction bidders where relevant. This took a reasonable amount of time to collate but resulted in a completed list of 252 properties. Success measures were based on:
· Sale price to CV ratio
· Premium achieved (sale price minus cv)

This allowed TNS to look at similar properties (based on the data from CoreLogic) that included / didn’t include Herald Homes in their marketing mix (based on the additional agency data). Our advertising is based on the results of this analysis. We are absolutely confident in the methodology –as we have based our claims on actual sales and market data.
— NZ Herald : Brad Glading, Head of Research & Insights : NZ M & E Ltd 9 October 2014

This response is certainly illuminating. I have no problem from a research perspective as the sample size of 252 properties is sufficiently robust and the methodology and factual basis is without question. The one issue I do have is that they chose to limit the sample to only those properties that sold for over $1m. This fact is not detailed in the supportive advertising when disclosing the research. It should be disclosed as in my mind it creates a bias in the advertising campaign as people would rightly believe the claim applied to any property sold with Herald Homes advertising.

As a point of reference and context. Using Barfoot & Thompson sales data for Auckland $1m + property sales represented just 1 in 8 of all property sales in the period from August 2013 to January 2014. Therefore this selective sample set of $1m + sales is actually a small fraction of the market. 

Far more important than the bias of the sample set is the belief by Herald Homes that the premium price achieved at sale is solely due to the advertising. The data they have analysed certainly shows a correlation between premium sale price and advertising BUT their assertion is that the advertising is causing the resultant premium sale price - this is not provable.

The NZ Herald have fallen into the classic trap of believing that "Correlation implies causation" where in fact the opposite is true. The fact is that a correlation between two variables does not necessarily imply that one causes the other.

The fact is there are just too many variables at work in the factors influencing the sale of a property for any one component to be isolated to be proven to be the cause of a sale price premium. I am certain that with the same set of data Trade Me could argue with confidence that advertising on Trade Me would result in a sale price premium or that auction sale process caused a premium or that real estate agents with blue logos caused a sale price premium.

On a more serious note I believe that there is a alternative hypothesis to explain the results of the research undertaken on behalf of the NZ Herald.

Alternative Hypothesis

 A key factor in the Auckland property market over the past few years especially of property  sales value over $1m is the prevalence of inner city renovated properties. These are properties which have achieved significant premiums over their respective CV due to the substantial investment in renovation of many hundreds of thousands of dollars. I detailed this situation in an article from earlier this year "Property statistics can be misleading".

I believe that such properties which have been renovated and then come onto the market attract a higher level of marketing investment which clearly will involve the Herald Homes together with other advertising in print and online. These properties also attain a higher margin over CV because effectively they are new homes and the CV relates to the former home on the site. These type of properties are more than likely to be skewing the results of the research and creating the correlation.

To prove my assertion I undertook a detailed piece of research of my own. I took the inner city suburb of Grey Lynn and with the assistance of a friendly agent accessed the CV and sale price for a total of 62 properties sold in the suburb between August 2013 and January 2014. Of this total, 46 properties had a sale price in excess of $1m. I then went through these properties one-by-one to identify which had been sold following a renovation. There were 16 properties which had been renovated.

Here is the resultant sale price premium for renovated and non renovated property compared to CV.

Renovated properties: 16 - average sale price over CV $403,125

Un-renovated properties: 30 - average sale price over CV $335,826

The margin is 20%! 

So I could quite legitimately say that the 20% premium claimed by the NZ Herald as attributed to the power of Herald Homes advertising is as likely to be the result (in the case of Grey Lynn) to be down to properties having undergone a renovation.

I judge that the NZ Herald has leapt to a interpretation of causation from their commissioned research simply by identifying a correlation potentially the result of significant renovations and therefore the advertising claim is without foundation and therefore fundamentally misleading.


Can advertising generate extra sales price for property?

by Alistair Helm in


  • If a TV company were to say to an company - if you buy this campaign you will see a 20% increase in sales - you would not believe it?
     
  • If a radio network were to say to an restauranteur - if you buy this campaign you will see a 20% increase in sales - you would not believe it?
     
  • If a real estate agent were to say to you as a seller - if you buy this campaign you will see a 20% increase in the selling price - you would not believe it?

So why would you believe it when the NZ Herald says - if you buy a campaign in the Herald Homes you will see a 20% increase in selling price?

Well that is exactly what the NZ Herald wants people to believe with the new advertising campaign it has started

To be fair and accurate they are not, as the headline says claiming that by using Herald Homes that you will see a 20% higher selling price. Although these banner ads you can read above suck you in with this ambitious claim!

What they are saying is that if you use Herald Homes then on average the premium of the sale price over the CV of the property will be 20% higher than for a property without the Herald Homes - as ever the small print tells the real story whilst we are seduced by the headline!

Herald_Homes_-_Sell_your_property_in_Auckland_for_more.jpg

So if I am correct in this assessment, this is the scenario they are claiming based on the much promoted Grey Lynn 'dump' - its CV was $690,000 and it sold for $1,075,000 at auction on Wednesday. So Herald Homes is claiming that if this property had not been in the Herald Home (which it was, as well as TVNZ, TV3, Stuff etc etc) then it would have sold for 20% less than $385,000 margin over CV - effectively without the Herald Homes a sale price of just $998,000. So the claim in this case is that the advertising in Herald Homes boosted the sale price by $77,000! - That is some claim. Clearly if this were to be believed then the investment of c. $6,000 a page would be money well spent!

The advertising material to support this ambitious claim references to a "TNS Research 2014" as the source of the claim. I have written to the NZ Herald with questions about the research and to seek to obtain a copy.

I cannot believe this claim as the fact is there is no such thing as a 'control' environment when it comes to property and any claim to state that this method of sale, or that agent, or this advertising will achieve a higher price is unprovable.

To be able to in any way even test this hypothesis you would have to analyse a sample group of properties in a similar area of the country across a variety of price points using different selling methods - some of these properties would be advertised with say Herald Homes and Trade Me / Realestate.co.nz, some just Herald Homes and some with no Herald Homes and just online.

I can see no possible way for any seller to be happy to participate in this type of 'research' - every seller wants maximum exposure and there is absolutely no way of isolating the impact of Herald Homes from other factors such as market demand or online premium advertising or any number of other factors.

I will wait with interest to see if the NZ Herald respond to my request and also to see if they continue with this advertising. I believe that this advertising proposal breaches the code of practice of the Advertising Standards Authority in regard to misleading and potentially deceptive advertising claims. 


Agents breaking with convention to demonstrate their success

by Alistair Helm in


A few weeks ago I posed the question in an article as to “Just how competitive is real estate in NZ” - citing the factual comparative advertising shown in the UK. At the time I suggested that factual comparative advertising was not regarded as appropriate in NZ within the industry.

Well I was wrong. What is more, I have found it alive and well right on my doorstep in my local community newspaper in Devonport, the suburb in which I live.

The local comment newspaper “The Flagstaff” is a great collection of news, letters, profiles and historical insights, very conspicuously supported by the real estate industry in the community - 1 in 5 of the pages is a real estate advert for an agent or a listing. Not unusual, as I am sure such local community papers exist around the country and are widely patronised by agents to reach out to the community.

This week's paper had two full page adverts from individual agents both of which typify the traditional approach taken by agents to promote themselves.

One approached the advert in a traditional manner - full photo and a biography of past achievements and involvement in the community, talking of "bringing energy and confidence to the real estate process", of "real estate expertise and real world experience and success through hard work" - all laudable attributes of an agent.

The other chose to let her clients speak for her with a glowing testimonial, extolling her capabilities and commitment to go the extra mile and her passion and positivity. Oddly given the industry’s love for profile pictures I was surprised that this advert does not have the ubiquitous agent photo and personal contact number - merely the office details.

Both of these adverts are what I am sure we are all accustomed to and would be likely replicated around the country by many hundreds of agents each week. There is no implied criticism in these adverts, they serve a purpose in raising the respective agents profile.

However turn the page in this community magazine and I was surprised by this advert.

This advert is direct, factual, compelling and has an arresting capability to attract attention and get people talking.

This agent makes a statement of performance that leaves the other agents struggling to catch their breath. 

In past 2 years in the suburb of Devonport this agent is responsible for selling 46% - virtually half of all the properties sold in the suburb for over $2 million. That is 23 sales out of 49 in the past 2 years and this is by one agent. There are, as she states 42 agents in Devonport - she is one of them and she alone accounts for close to half of all sales above $2m. The suburb has a median price of around $1m - Wow!

You have to say, if you owned a $2m house in Devonport you would have to think twice about why you would not use her or at least get her to pitch for the business.

This is without doubt smart advertising. Its factual. It is absolutely relevant and clearly it is true and it blows out of the water the subjective differentiation other agents seek to establish around ‘pillars of the community’ and working ‘that bit harder’ - after all what counts is results.

Maybe what the real estate industry needs is to expose more of the facts and let people choose agents based on their performance and let their performance track-record speak for itself.


Golden rule of advertising - never apologise?

by Alistair Helm in


I was quite literally taken aback when I saw this poster on a street along from where I live in Central Auckland.

A real estate company; the largest Auckland real estate company apologising (if I am reading it correctly) for increased popularity and thereby by insinuation for high property prices in the local area!

B&T poster.jpg

I would say that is a risky marketing strategy. For whilst in my interpretation, what they may well be trying to say is that as a function of their success in selling property locally the suburb has become incredibly popular.

I might suggest that what it conveys to observers of the poster is that the company is in someways smug about riding the property wave of demand (and profiting from it) rather than taking the opportunity of reinforcing the value of their services or possibly demonstrating the value in their sales success as judged by market share or customer satisfaction.

Now I know as a marketeer that part of good advertising is "standout" to create interruption and thereby become memorable and distinctive but I can't recall a campaign that has built credibility or memorability through apologising! 

Now maybe the concept of this campaign is to start a series of these ads around this company's core Auckland market. I can just see these future version:

Herne Bay sure has become pricey - sorry about that

Otara sure has become unpopular - sorry about that

Meremere sure is a long drive to the CBD - sorry about that

Albany sure has become congested - sorry about that

It's just my opinion, but I feel that apologising is not the best platform for a brand building campaign - maybe you disagree. Happy to hear your views. Please feel free to share a comment below.