How much did the greatest marketing disaster cost?
Over £50 million and a historic mention in the ‘do-not’ marketing case studies.
During the global recession in the ‘90s, one of the top executives at Hoover’s British division was lured by a Travel agency, JSI Travels into a campaign that would boost company’s dipping sales.
The consumer appliance company was hoping to meet their targets and move an idle inventory of vacuum cleaners and washing machines.
The offer construct was simple-
Buy a Hoover product and get complimentary round trip tickets to Europe.
This bumped sales for Hoover and JSI Travels was to benefit from the ‘long term prospects’ and revenues made on insurance, hotels, etc. A multi-step eligibility process ensured to keep the redemptions minimum. This could have changed fortunes for many. The results were promising.
So Hoover decided to fly International ✈️
They partnered with the 3 biggest carriers — Virgin Atlantic, American Airlines, and British Airways. With the help of a few travel agencies, the campaign was on TV.
More than 200K people bought the products, sales went up.
A 4 fold jump on Hoover’s projections.
And then someone realised, 2 things were going wrong. Miserably.
- The company was offering a £600 reward in exchange of a £100 purchase. (Hmm..)
- And people brought products they didn’t intend to keep. (HAHA)
What was Hoover doing?
What Hoover did was an old trick in the book — Cross Promotion.
Recommending and selling each other’s product to achieve a bigger share of sales. It works because both brands leverage on credibility and distribution of each other. (Ariel x LG, McDonalds x Coca Cola, Android x KitKat. You get the idea.)
Ok, but where did Hoover go wrong? And also the math didn’t add up. Did someone even think this through?
Cross promotions work only when the consumer finds both brands ‘useful’. In Hoover’s case — Airline tickets were the Hero.
Customers brought the offer, not the product.
Vacuum cleaners were purchased only to be dumped for resale. People who actually wanted to buy vacuum cleaners could find new, mint condition Hoovers in the second market, for a fractional cost.
Hoover had asked few risk assessment companies to review the promotion before launching. All of them ridiculed the unbelievable offer.
And in-spite of the red flags, Hoover went on. The pilot had went well and the ROI on paper was so crazy. :)
With an overwhelming demand and requests from customers, Hoover was unable to keep up. They had expected only a small % of customers to complete the lengthy eligibility process.
And then travel agencies were not keeping their part of the promise and misleading eligible customers with the fine print.
A lot of finger pointing. Things got dirty.
Some bad press, led to more people buying the offer.
And this led to more bad press.
Nobody got the tickets.
Customers got angry. Company’s reputation was at stake.
British took the offer only because they had TRUST in Hoover. If they promised, it was to be delivered.
Hover ended up paying £50 million to buy all the promised air-tickets compared to £30 million revenue generated from the promotions.
Market share, Customer loyalty went down south.
Top 3 executives got fired.
Ultimately, The British division of the company got sold to an Italian competitor.
This case is more than relevant in today’s times.
Customers are more aware. Information is easily accessible.
A bad review can change fortunes for an organisation. Any brand can easily loose their Brand equity built over years.