How Not to Run a Loyalty/Reward Marketing Scheme to Boost Your Business

This Is Marketing Genius

If I were to tell you that I’ve got a sure fire marketing strategy that you can use to increase substantially the sales of your products and services: would you want to hear about it? Of course you would.

If I told you that I’m going to give you the benefit of my advice free of charge: would that please you? Of course it would.

Let me, then, tell you what my piece of marketing genius involves. It involves a very clever loyalty/reward marketing scheme. A scheme that you might call a buy one get two free promotion. A promotion that involves you selling one of your products or services and giving away two of somebody else’s products or services.

Like I said; this is a sure fire way to increase your sales. It really is a little bit of marketing genius. I should consider charging outrageously for this advice.

Now that you are armed with this information: are you going to give my promotional scheme a shot? Of course you’re not.

I know what you’re thinking. You’re thinking that this is not a piece of marketing genius it’s a piece of business suicide. Who in her right mind is going to sell one product or service and give away two others? Not just any two other products or services but two others that are from another company!

I appreciate why you might be a little sceptical, perhaps even a touch cynical. No marketer would ever dream of doing something like that: would she? Even if she dreamt up such a scheme, she’d never be foolish enough to run it by her bosses: would she? Even if she ran it by her bosses they’d never accept it: would they?

Surely running with a scheme like this would demand a catalogue of crazy miscalculations and a display of ineptitude on a colossal scale? Precisely. Let me, then, tell you about the Hoover flights promotion fiasco.

If you saw this offer: buy one Hoover get two flights free…

… would you refuse it? It is very difficult to believe many people would refuse an offer like that. Believe it or not that’s exactly the offer that Hoover made in the UK in 1992. And yes people found it difficult to resist.

The promotion promised two free seats on flights to Europe or America to any customers buying a Hoover product that cost £100 or more. It would be just a tad of an understatement to say that Hoover sold a lot of units.

The public went wild for Hoover vacuums. Something like 200, 000 were sold – or if you like about 500 jumbo jets worth of free seats. Hoover had to take on extra staff to meet the production demands.

However, as The Independent reported in 1998, although there were winners – airline companies and the tax man – there were some losers, particularly Hoover itself. The Independent estimated that Hoover sold about £30 million worth of goods but had to pay out an eye watering £50 million.

If it’s too good to be true…

… it usually is too good to be true, but not if it’s Hoover offering free flights in return for the sale of one of its products: back in 1992 this offer was true and it was good. It was good if you were a purchaser of a Hoover. It wasn’t so good if you were any other stakeholder in Hoover.

The obvious question is how such a scheme got the go ahead? My guess is that it was a horrendous miscalculation. Those making the decisions probably had discussions around how many people would actually take up the flights and concluded that a large number of people simple would not take up their seats, particularly if the terms in the small print are sufficiently onerous. They hadn’t counted on the Hoover purchasing public’s tenacity. As the BBC reported:

‘The promotion was simply too generous. Spend just £100 on any Hoover product and two free return flights… could be yours – though only if you were determined enough to make it through the maze of small print and Hoover’s travel agents’ attempts to sell you profitable extras designed to offset the cost of the promotion.”

When it became clear that people were not being put off by the small print hurdles Hoover made the monumental PR blunder of putting further obstacles in the way of people wishing to fly. As Rob Page explains

“As the numbers of vouchers piled in to the travel agents, they created another rewards marketing blunder, they made it more and more difficult to redeem their rewards. One of the biggest “Do’s” in loyalty/reward marketing is to make it easy and fun. The agents were instructed to stop the bleeding by not accommodating travel requests (such as airports and travel days) and by strictly enforcing the small print. Consumers were no longer having fun and demanded that their rewards be redeemed.

The outcome was a total disaster and Hoover’s Free Flights Rewards program quickly became a Free Flights Fiasco.”

A Great Marketing Disaster

The Hoover case is used in marketing classes all over the country – and abroad – as a perfect example of a marketing disaster and how not to run a loyalty/reward scheme.

One question that is less often asked is why Hoover didn’t just pull the plug when things were going from bad to worse to career ruining calamity? If it is addressed, the answer to that question that is usually explored is that to have pulled the plug would have added further PR woe to what was already a cataclysmic marketing disaster.

Another answer that might be explored in law schools rather than marketing schools is that it may well have been too late to cancel the campaign in many cases. Had Hoover cancelled the campaign they may well have encountered one of the thorny issues of English contract law.

The thorny issue is all to do with something called unilateral contracts. Had Hoover cancelled, some of its customers may have been able to argue that they were already contracted with Hoover for the flight tickets even thought they had not yet purchased a Hoover product.

And that nugget of English contract law will form the subject of another article.