The mid-market UK tabloid, Daily Mail  recently had  a typically strident headline 'Hotel giants accused of misleading online customers by hiding VAT charge'.

The paper cites an investigation by Which? magazine which found that of "24 hotel chains used by its readers, 11 included properties that did not initially show the tax - which adds 20 per cent to the cost of a room - to those booking online.

Trading standards experts have warned hotels not displaying VAT that they are potentially breaching consumer protection regulations".

The "investigation" was a follow up to the UK's Advertising Standards Authority decision to uphold a complaint that VAT-exclusive prices of websites of Intercontinental Hotels Group (IHG) and its subsidiary Crowne Plaza were misleading and breached the ASA code. The British regulatory agency's website states that in "2011 the ASA received 2,106 complaints about 1,555 ads" in the travel sector alone. The Daily Mail does note that almost all the "offending" hotels amended their offerings to compy with ASA guidelines almost immediately.

Purveyors of services and goods  "misleading" consumers (ofen) makes for juicy headlines but consumers misleading sellers of goods services, which happens often enough,  results in transaction costs to merchants but makes headlines on far fewer occasions.  However, a recent study by two Australian academics published in the Journal of Consumer Research is centered around "lies" by consumers and how they are used to "obtain otherwise unattainable material rewards or financial benefits".

The study entitled "The Labor of Lies: How Lying for Material Rewards Polarizes Consumers' Outcome Satisfaction" finds,  perhaps unsurprisingly to some, found that consumers who lie during a service derive more satisfaction than those telling the truth particularly if they attain their desired outcome but were considerably more miffed if they failed in their endeavors.

Consumers also tend to lie more facilely if they were "unacquainted with the person listening to the lie". The authors note that "social psychological research suggests that cues to deception may be moderated by the liar's relationship with the target". 

A notable conlusion of the study is that "marketers must make a trade-off between the financial loss of allowing a successful lie and decreased satisfaction if the deception does not result in material gain". That could be summed up as "damned if you did and damned if you don't" as far as service/product purveyors are concerned.

Clearly liars and those looking to mislead businesses vest so much in the process that they make for tricky customers in more ways than one. Nevertheless, they probably could be turned into enduring clients given the satisfaction they obtain from the first encounter and, if the Australian researchers are right, are less likely to mislead once they are familiar with the merchant 

Vijay is Chief Operating Officer and part-founder of Apple Core Hotels- a chain of 5 midtown Manhattan hotels offering value and comfort in the heart of the city. Member of the board of Directors - Hotel Association of New York.

www.vijaydandapani.com