How many times have you heard of the Unbelievable Offers, especially by a B2C brand?
Buy a Juicer Mixer and get a wall clock free.
Buy a bed mattress and get 2 pillows free.
Buy a vacuum cleaner and get couple flight return tickets to the US free.
Yes, you read it right. As a Salestor, I have been sifting through some of the worst sales promotional disasters of all times. While I have a list now, this one deserved a separate post.
The Hoover Debacle
Hoover Vacuum Cleaners was an American brand built with trust over decades in the 20th century and destroyed due to greed. The vacuum cleaner company had become not only a house hold name, but a verb too. “I am Hoovering the dining hall.”
The story of this brand began in 1908, when a department store janitor, James Murray Sprangler, was suffering from extreme dust allergy. Necessity gave rise to a huge invention, which happened to be the first model of a vacuum cleaner. He received the patent and soon sold it to his brother-in-law, William Hoover who started the company with the same name. Hoover’s products caught on like wild fire in America, and then Europe.
By late 1980’s, market dynamics like brewing British recession and eye-catching new entrant Dyson caused Hoover’s British market share to dwindle below 50% and profits to decline from £147 mn to £74 mn. Their warehouse inventory was piling up along with their worry. Their new talking-vacuum model failed to impress the audience and hence they were forced to take immediate measures to combat the situation. But acts of desperation don’t always result in favourable outcomes.
And then the Devil Knocked
In 1991, a small travel agency JSI suffering from similar effects of market dynamics approached Hoover with an idea of a grand Sales Promotion. They offered to reward every Hoover customer two return tickets to a destination in Europe on purchase of £100 or more. This sounded like just the plan to revive their drooping revenue. Hoover launched the deal, but with a highly exhaustive process in place to discourage the customers from applying.
It was a sell-out, a clear winner. By the end of 1992, Hoover’s products were flying off the shelves. Their stock was back on track and so were their profits. But greed can destroy wisdom and it did so in case of Hoover. For their second Sales Promotion, they decided to launch couple return flight tickets to America!
As per their Risk Assessment Team, it was a recipe for a massive disaster, but Hoover had just proven the mettle of the offer with their European flights. Ignoring the caution raised against it, they launched the campaign. The offer was that on a minimum purchase of £100 worth Hoover products, the British customers were entitled to win two return tickets to New York or Orlando worth £600 that time. Hoover didn’t expect more than a handful customers to make the purchase of an amount as high as £100.
Fire on the Mountain..
Britain went crazy on hearing this offer. Hoover was the talk of the nation and the market reaction was grander than what the management was prepared for. It was a reaction that should put a huge grin on the face of the management, except for the fact that Hoover’s manufacturing had to be put on a 7-day overtime to meet the demand. They had thought that a few customers would agree to take up the exhaustive application process for getting the tickets. However, much to their chagrin, customers were all prepared for the battle. The main challenge was that customers were spending only the basic minimum amount required to qualify them for the offer and that did nothing to aid Hoover in meeting the costs of the flights it was ultimately supposed to pay for.
300,000 customers were eligible, 10 times Hoover’s forecast, but the sales were about £119 per vacuum offering a revenue of £30 apiece. Two return flights to the US costed £600. So the total sales stood at £30 mn, while flights costed a £100 mn. Hoover was practically in a soup.
..Run, Run, Run!
Hoover was forced to resort to deceitful measures like:
1. Claiming that customers had filled the form incorrectly
2. Offering flights that departed from airports hundreds of miles away
3. Sending request forms during Christmas time hoping to utilise a two-week holiday window in delaying the exchange of forms.
Customers soon realised that this offer was a farce and this led to nationwide protests. The once most trusted brand was tarnished as a deceitful and unethical player. This led to the worst and quickest decline a company has seen. What followed was a lot of firing the top executives, legal battles and losses to the tune of £24 mn on sales of £390 mn.
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The End of an Era
Hoover never recovered from this disaster. Its products were tagged the least reliable by customers and British Royal Family withdrew its Royal Warrant status. Unwanted Hoover products that were bought solely to win those flight tickets flooded the market thus forcing Hoover’s warehouses to pile up with inventory. Michael Gilbey and Brian Webb, Director and Vice President — Marketing respectively, whose brainchild this Sales Promotion idea was, not only destroyed a 90-year old brand but also the careers of their own and Hoover’s President, William Foust’s. For the next six years, Hoover battled many suits in courts across the UK and finally 220,000 lakh got to fly. Although, there still remained lakhs of people who didn’t.
Ultimately, one of the most trusted companies of the century was sold off to an Italian giant for £106 mn at a loss of £81 mn.
6 Learnings from the Disaster
As a Salestor, we have a lot to learn from such Sales Disasters:
1. Never promise the customer something you cannot, or don’t have any intentions to, fulfil.
2. Customer is not a fool so make your offer believable.
3. If due to unforeseen contingencies, you believe you cannot fulfil the offer, try and be honest with the customer. It works better than most other excuses/stories and will save you from losing customers’ trust.
4. Every business needs to take risks time to time, but they need to be well evaluated. While there are times you need to listen to that inner voice and take some risk, be wary of the thin line difference between intuition and over-confidence. Get the facts in place to support your decision backed by intuition.
5. Listen to the consultants and Risk Managers when they try to warn you of a bad decision. YOU had hired them for a reason.
6. Don’t try and dupe customers. Your tricks wont last long and will tarnish your existing image.
Despite such a fiasco, there have been a lot of Sales Disasters worth taking a lesson from. I will be back soon with some more such interesting true stories.