Retailers Learn Hard Lessons From Mismanaged Promotion Deals
Last week, children’s store Build-a-Bear Workshop made international headlines after a promotional deal offering a “pay your age” policy for a day which resulted in hours long wait times, disgruntled customers, and an emergency shutdown of the deal because of such an overwhelming response that stores were completely unprepared for.
This promotional snafu is not exclusive to Build-a-Bear– from unlimited first-class flight promotions to endless snow crab specials, many executives have lost their jobs and companies millions as a result of promotional backfires.
The common trend in every corporate marketing disaster lies in the companies’ unpreparedness and underestimation of the popularity of some of these promotions.
In 1981, American Airlines executives were searching for good ideas to get more people flying with the line. The result was the American Airlines AAirPass, an ‘all you can fly first-class’ lifetime pass– sold at its inception for a hefty $250,000 (with the option to add an extra $150,000 to bring a friend). A total of 66 people ended up taking part in the promotion—and the company lost as many as a million dollars on single customers in the following years. Some pass-holders were making as many as 16 first class international trips a month and in response AA raised the prices significantly throughout the 80s and early 90s before discontinuing the promotion and revoking current passes.
This first-class flight fiasco ended up with several lawsuits from unhappy customers who had their passes revoked and the end of the “lifetime” flying deal for American and any other airlines who learned from their mistakes.
The food service industry is no more perfect than retail stores or airlines either.
In 2003, seafood chain Red Lobster offered an “all you can eat” promotion for their Alaskan snow crab. At the time, crab prices were increasing and much like the Build-a-Bear customers and AA fliers, Red Lobster severely underestimated Americans’ penchant for gluttony. The restaurant corporation lost an incredible $1.1 million every month that year during the short span of the deal and the President of Red Lobster resigned as a result.
American consumers are always looking to make the most out of their money and corporations should always be strategizing new ways to attract customers, lower costs, and make money in the process. Unfortunately, many companies underestimate the power of the frugal American spirit and proceed a massive marketing campaign with a major PR crisis.
