A cautionary tale from the 90s. How not to manage a marketing campaign.
The worst sales promotion in history: Hoover’s free flight fiasco
In late 1992, the UK branch of the vacuum manufacturer, Hoover, offered an impossibly sweet promotion: If a customer bought any product worth £100, he’d get two free round-trip flights to the United States.
What could possibly go wrong? Well, pretty much everything. Multi-million pound losses and the end of the company, at one time one of the most trusted in the UK.
Under a new promotion, that same £100 Hoover purchase could net a UK-based customer two free round-trip flights to New York or Orlando — a package worth £600+ (£1200, or $1,460 USD, today).
When Hoover ran this plan by risk management professionals, the company was warned that it would be an absolute disaster.
“To me it made no logical sense,” recalled Mark Kimber, one of the consultants. “Having looked at the details of the promotion [and] attempting to calculate how it would actually work I declined to even offer risk management coverage.”
A quick look at the numbers. What were they thinking?