Was This the Worst Sales Promotion in the History of Sales Promotions? Hoover made a whopping mistake back in the '90s. Would you do the same now?
By Gene Marks
Opinions expressed by Entrepreneur contributors are their own.
Want a great idea to increase your sales? Go no further than the promotional idea dreamed up by Hoover in the late 1990s. Then do the exact opposite.
You know Hoover right? British people, even today, certainly do. In fact, they don't "vacuum" their rugs. They still "hoover" them. That's how successful the company became in the 20th century. But by the early '90s, beset by competition and recession, the iconic brand was in the midst of a sales decline. What to do? Marketing executives there came up with an idea. It was a brilliant sales promotion. Ready?
Why not give away two free plane tickets with every purchase of a Hoover vacuum? Bam! Love it! And so did the company's customers.
Related: Biggest Social Media Fails in Business
The Hustle's Zachary Crockett tells it all. The heavily promoted campaign was launched in 1992 and offered two free roundtrip plane tickets anywhere in Europe for customers who spent more than £100 (~$250 USD today according to Crockett) on a Hoover product. A simple idea with big results. The company saw its sales skyrocket, projections increase and its value grow. The plane ticket idea was clearly a home run.
But then its executives got a little too greedy. They decided to up the ante and offer not only tickets to Europe but two tickets to the U.S.
Two tickets to the U.S. for buying a £119 vacuum cleaner? Now, that was a deal too attractive to pass up. And, despite an ingeniously designed process that marketers thought was complicated enough to keep the number of ticket-seekers at a minimum, the idea just proved too popular. Lots of people bought lots of Hoovers. Too many. According to Crockett, sales outpaced projections by ten times and the campaign generated a whopping £70 million in losses. Yikes.
Related: Microsoft Lost $400 Billion Because Of Bill Gates's One Great Mistake
To make matters worse, the company attempted to backtrack out of the promotion. That produced a public relations nightmare, so much so that "pressure groups" of as many as 4,000 angry customers were created to hold the company accountable for what they promised. "We don't want blood," one angry buyer said. "We want tickets." The company's once-trusted brand was ruined and its market share fell by almost 90 percent. In 1995 — less than three years after the launch of its ill-fated campaign — it was sold off at an enormous loss.
So what happened? Everyone points to a simple reason: bad math and yes, the math was awful. Just one £119 vacuum cleaner (the minimum purchase allowed by the promotion) earned Hoover a profit of £30. But the free flights cost at least £600. What were they thinking?
As devastating as this loss was to Hoover, it's not an unfamiliar story to many small business owners like myself. Our eagerness to drive more sales sometimes clouds our better judgment. It's why we need other people around us: accountants, attorneys, insurance advisors and even outside consultants to temper the enthusiasm of our sales and marketing people and to weigh in and help us consider all the risks. It's also why we never bet the farm on just one marketing idea. It's why we do test marketing and evaluate the results not on sales, but on profits generated.
Related: The 10 Biggest Mistakes in Sales
We've learned that marketing is best when driven by data, not emotions.
Let's admit it: we're all like Hoover. Yes, their sales promotion was the worst sales promotion in the history of sales promotions. But we understand their excitement about a potential home-run marketing idea. We love it when people come up with innovative ways to expand their businesses. We live for more sales! Yet we've also experienced failure. Hopefully, not as spectacularly as Hoover. But enough to have learned the right way to handle a marketing campaign.
