BlogBlogBusiness Nightmares - Too Good To Be true

Business Nightmares - Too Good To Be true

Business Nightmares - Too Good To Be true

They are absolutely everywhere you look. “Buy one, Get one free!” “Half price!” “Buy two get one free!” “Get a free x if you buy y”, but what happens when a special offer becomes a disaster and potentially brings a business to it’s knees? What happens when you gamble on one thing and something completely different happens?

 

It becomes a Business Nightmare and here is a huge story to prove that you can be become infamous as opposed to famous...

 

Let me tell you a story of what it was like in 1990’s Britain. Recessions had happened. Strikes were happening. We looked across the pond to the good ‘ol USA for hope, where the sun shone brighter, it was a dam sight warmer and most of us had never been there. 

 

But there was a company here in the UK that could make that dream come true…if only we spent £100 with them. It should have been the marketing coup of the decade, but it left a businesses reputation in tatters, corporate sackings and with a very large hole in it’s bank balance.

It was he most audacious buy-one-get-two-free offer ever made. Michael Gilbey and Brian Webb, two ambitious marketing executives in Hoover's Merthyr Tydfil factory, believed their free flights brainchild would make their careers.

 

In their dreams. Far from making their careers, it ended them. It was a spectacular f@@k up! And they took Hoover's European president William Foust down with them in a welter of recriminations and excuses. If nothing else, the promotion had the merit of simplicity. Buy a Hoover vacuum cleaner for at least £100 and receive two free flights to America or Europe. It couldn't fail to boost sales, trilled the ill-fated marketing department in Merthyr. Could it? 

 

Oh boy did it ever!

 

But to be fair they were partly right. More than 200,000 people bought Hoovers they didn't want. But satisfying the demand for free flights would have required more than 500 jumbo jets. It was no wonder Hoover reached for the small print to limit the ballooning liability. Newspapers sensed a front page demolition…and they got it. Hoover couldn’t/wouldn’t meet the demand. BBC’s Watchdog got involved and one chap, (who’s Hoover washing machine stopped working), held the repair mans van ‘hostage’ for 10 days until Hoover did something about the situation.

 

Rule number one of promotions is never offer anything that is perceived to be worth more than the product it is promoting. It doesn’t take Stephen Hawking to work out that the price of two flights to New York was worth the inconvenience of stuffing an unused vacuum cleaner under the stairs at £100. You were looking at roughly £600 per ticket. But in fairness they weren’t completely mad. The marketers had analysed data they received from a similar promotion based on European flights. The take up of the offer was in Hoover’s terms a success, but only a percentage had then gone on to take up the flight offer. This was the same gamble, just bigger. They bet on red and it came out shit coloured.

 

Hoover's factories resorted to seven-day working to try to meet the ridiculous demand for the otherwise unremarkable ‘Turbopower Total System’. It was a bit crap and at £119.99, but it was the cheapest cleaner to qualify for the free flights. Temporary staff were hired and shipped in to satisfy an unprecedented national enthusiasm for household chores with a Hoover product.

 

For a while Britain was awash with appliances. The free-ads paper ‘Loot’ reported a 30 per cent increase in its electrical items pages. You can only do so much with two vacuum cleaners. Remember they weren’t being bought for what they could do, it was for what was being given away.

 

There were winners. The airlines happily supplied Hoover with thousands of seats - British Airways provided 20,000. Virgin chipped in the same amount. A further 40,000 charter seats to Orlando, Florida were hastily negotiated. The VAT man was estimated to have trousered an extra £4m thanks to the unexpected sales. An increase in wages for workers, tax for the taxman and cheap cleaners for those who couldn’t have given a monkeys. Companies headed by people like James Dyson, started to realise there were companies that relied on marketing gimmicks as opposed to technology improvements and design upgrades.

 

The cost to Hoover, however, was enormous. The £30m of sales generated by the offer was dwarfed by the £50m it spent on airline tickets. That's MINUS £20 million!! And the publicity heaped on the company was devastating. In the end Hoover paid the ultimate price for the fiasco when its European arm lost its independence. The most famous name in household cleaning suffered the final ignominy of being taken over by a washing machine maker called Candy.

 

So a quick guide to running a promotion:

 

  • Have a definite start and finish date. Otherwise consumers ask themselves when does a ‘special offer stop becoming a special offer’?
  • Make sure you’re offer fits your brand. Another business nightmare was Cadbury’s running a ‘eat chocolate and get sports kit for free’ promotion. They never intended for people to eat more chocolate, but when it took nearly 8000 wrappers for a volley ball, what the bloody hell did they expect for God’s sake?
  • Can you cope with the supply and demand? How much MORE will it cost you to cope with a best case projected demand for your product and service?
  • Who’s running the promotion…you or a marketeer? It’s your business..grow a set and control the promotion.
  • Is it in line with your business values? No point doing a healthy foods promotion whilst selling copious amounts of cake is there?
  • How much profit can you make? Loss leaders are great if you can offer follow up products and services…at a good profit of course.
  • If the ‘giveaway’ costs more than the product or service…ask yourself…are you a ‘Hoover’ or a “Dyson’? It’s all about the marketing of the brand or it’s all about the advances in the product and service and what it offers customers and clients?

 

 

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