Legal Advertising and the Impact on Client Expectations
Submitted by New Jersey Criminal Lawyer, Jeffrey Hark.
Potential clients who hear about a lawyer’s past successes (without hearing qualifying disclaimers about the relevance of those past successes) are likely to misjudge the likely outcome of their case with that lawyer. An overly optimistic client will guess that her case will succeed if prior cases with the lawyer succeeded. Lawyers who want to capitalize on that cognitive failure to gain more business have a strong incentive to include information about past successes.125 This type of advertising capitalizes on consumers’ predictable over-optimism.
For our purposes, the existence of advertising about past successes helps us diagnose behavioral market failure in these markets. We can determine that potential clients are likely overly optimistic because lawyers are spending money trying to exploit this sub- optimal decision-making. This type of advertising skews the market for legal services because clients who think they will succeed will pay more than those who are less optimistic about the chances of success.
Second, the availability heuristic explains why lawyers would advertise past successes even if they are not statistically relevant to rational consumers. Cass Sunstein summarizes the vast literature on how this mental short-cut works:
Under the availability heuristic, people assess probabilities by asking whether examples readily come to mind. Lacking statistical information, people substitute an easy question (Can I think of illustrations?) for a hard question (What realities do the data actually show?). . . .But the availability heuristic can lead to significant mistakes. If an incident is readily available but statistically rare, the heuristic will lead to overestimation of risk; if examples do not come to mind, but the statistical risk is high, the heuristic can give people an unjustified sense of security.126 As one common example, people are overly afraid of dying in a plane crash because stories about plane crashes are vivid and readily come to mind. On the other hand, stories of car crash are pedestrian, despite being much more statistically significant, leading people to underestimate the risk of dying in a car crash.127
Potential clients do not have data on the lawyer’s overall success rate. Even if they did, it would be difficult to apply that rate to their own case given the unique circumstances of the potential client’s case. So, lawyers who advertise past successes are counting on people employing the availability heuristic when evaluating whether they think the lawyer will succeed for them. Vivid examples of past successes (e.g., no conviction despite having a high blood alcohol level128) readily come to mind when a potential client is trying to assess the probability a lawyer will succeed in getting them out of charges.
In sum, advertising that focuses on past successes lacks a rational- choice explanation because no rational consumer could care about the results in one specific past case. But, behavioral economics offers a compelling explanation for this type of advertising, suggesting that it is likely that these markets are experiencing market failure.
- Advertising Through Selected Client Testimonials
Many websites also contained client testimonials about or reviews of the lawyer’s services. Considering just the websites (where lawyers control 100% of the content), 43.83% (n=199) contained reviews by prior clients. Consumer reviews of professionals are becoming more and more common, and these reviews are influential to potential consumers.129
A rational consumer would not be interested in a limited number of customer reviews. Like prior successes, evidence of specific client’s satisfaction with a lawyer does not demonstrate a lawyer’s overall success rate. In one Avvo profile, an attorney claimed to have helped clients with 12,000 cases over his 28 year career.130 The profile also had 5 very positive reviews.131 A rational actor would not view information from 0.004% of an attorney’s cases as representative of prior clients’ experiences with the attorney.
But, customer reviews on websites controlled by the attorney are even more problematic than prior success stories. When consumer reviews appear on third-party websites like Avvo, there are risks that the reviews are biased.132 But, when the sellers select which customer reviews they present, the selections are almost certainly going to be biased in favor of the seller.133
In our study, every testimonial on a firm’s website that we recorded134 was positive, stating things like they attorney “was amazing, professional and really knew what he was doing,”135 “was up to date with the latest procedures,”136 and was “professional” and exhibited “personal understanding.”137 And those reviews are just from the first three websites with testimonials in our study. Indeed, selective customer testimonials are so problematic that the Federal Trade Commission requires that any customer testimonial must be typical before an advertiser uses it:
An advertisement containing an endorsement relating the experience of one or more consumers on a central or key attribute of the product or service also will likely be interpreted as representing that the endorser’s experience is representative of what consumers will generally achieve with the advertised product or service in actual, albeit variable, conditions of use. Therefore, an advertiser should possess and rely upon adequate substantiation for this representation.138
A rational actor would not value testimony selected from only positive reviewers, so traditional economics cannot explain the existence of this type of advertising on lawyers’ websites.
But, insights from behavioral economics can. In addition to the optimism bias and the availability heuristic, behavioral economists have documented that people observing samples suffer from selection neglect. Selection neglect was first documented in an article noting that, “investors respond to advertised performance data [that is selected by mutual funds] as if those data were unselected (i.e., representative of the population).”139 Numerous other studies have confirmed the results, demonstrating, for example, that “investors are subject to a selection neglect when estimating the skill of top-performers [and] fail to take into account that they limit their analysis to a biased sample when chasing [high returns].”140 The upshot is that even when people understand that a sample is biased, for instance because the seller picks the sample, they fail to fully adjust their expectations about what the average experience is like or even wrongly think that the sample reflects the entire dataset.141 Lawyers who advertise selected client testimonials are likely trying to exploit potential consumers’ selection bias. People considering hiring the lawyer, like people deciding whether to invest in a specific mutual fund, are probably relying too much on these selected consumer reviews. Thus, because behavioral economics explains the existence of these advertisements where rational-choice theory cannot, it is likely there is market failure.