(This post originally appeared on Entrepreneur)
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?
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.
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?