Be careful not to snatch defeat from the jaws of victory

“You are joking?” said my client. “At least I assume you are – I mean, how can a campaign be too successful?” Very easily. I should know. Back when I was a software bod, we loved running special offers. What better way to boost sales? You didn’t have to rack your brains to think of inventive, creative, eye-catching marketing campaigns. All you had to do was play with price, and the sales followed. Buy one, get one free (which revels in the delightful acronym BOGOF), Free upgrade if you buy in the next 30 days, and the ever-popular software bundles (software + keyboard/mouse/training/printer). It almost reached the point where special offers weren’t that special – they were the norm. To the point where they virtually – until we reined them in – killed regular sales. And on one memorable occasion, we had a runaway success that almost ran away on us. Thank heaven we had a success-recovery plan: the device that enables you to slam on the brakes when your promotion becomes unstoppable. And uneconomical.

Recipe for disaster

It’s a scenario that Rachel Brown is all too familiar with. Rachel owns the Need a Cake bakery in Reading, west of London, and she decided to run a promotion on Groupon. As you may know, Groupon brings together sellers with special offers, and buyers, hungry for great deals. You make the offer, they find the punters, and they take a cut. It’s a win-win-win situation. Or so you’d think. And Rachel did win – at first. Her offer of 12 cupcakes at 75% off (£6.50, instead of the usual £26) brought the orders flooding in. And in. And in. In all, over 8,500 people subscribed to the offer.  And just in case you can’t quickly multiply that by 12, let me save you the trouble: it’s 102,000 cupcakes. The offer was so ‘successful’ that Rachel ended up losing £2.50 to £3 on each batch. She also had to pay her staff £12,500 in extra costs to bake the cakes. “It’s been a nightmare,” she said. In fact, it almost put her business out of business. In the end, she had to call a halt to the offer.

Hope for the best, but…

When you plan a marketing campaign that involves a special offer, it’s always good to imagine what you’ll do if it’s wildly successful. Will you have the staff to cope? If not, can you call on temporary help? Is there a limit? What is it? Can you exceed that if you want to? If you have to? And what’s the absolute cut-off point? When and why will you bring the offer to an end? A special offer has to work for you and your prospects. And remember, each one acts individually, so they have no collective sense of what they’re doing. They just see a good deal, and grab it. But the frenzy can cost you dear, and in more ways than one. Trony, the oddly-named Italian electrical store with the catchy tagline Non ci sono paragoni (There’s nothing like it), recently opened a store in Rome. To create an Apple-esque sense of anticipation, they announced never-to-be-repeated offers that would bring the shoppers in. They had iPhones at €399 (£340/$535), washing machines at €79 (£68/$105), PCs and flat-screen TVs at just €99 (£85/$132) and mobile phones at €9 (£8/$12). The opening was on a Friday. On Thursday evening, people were already in their sleeping bags in a long line outside the store. At 8am the following morning, there were 25,000 people waiting for the doors to open. It took 250 policemen and 100 security guards to keep them under control. A monster traffic jam gridlocked Rome, and 28 bus lines had to be rerouted. Inside the store, there was a tw0-hour wait to get to the tills – even after the special offers had sold out. Trony raked in €2.5m (£2.15m/$3.35m) in just one day, but they weren’t laughing all the way to the bank. Extensive damage was caused to the area, and local residents were left shaking their heads in disbelief. “It reminded me of the first distribution of bread after the war,” said one old lady. To try to make amends, Trony dug deep in its decidedly full pockets, and forked out €110,000 (£95,000/$147,000) to pay for the policing and the damage caused. So it was a commercial success, but a PR failure. A good idea, but one that quickly spun out of control and did damage the company’s image.

…expect the worst (or at least plan for it)

Before rushing headlong into a promotion, it’s always a good idea to stop and think about the downside. Promotions can have  a seriously negative impact on you business:
  • Cannibalising your regular sales, so you’re making low margins on high volumes across the board.
  • Pushing up your costs, as you draft in extra help to cope with the workload.
  • Causing brand damage, as you struggle to fulfil orders, with longer lead times, slower response and lower levels of customer service.
  • Alienating regular customers, who don’t see why bargain hunters should be rewarded when they’re the ones who are loyal.
So special offers can be ‘special’ in a way you didn’t expect and don’t want. So don’t just think about disaster-recovery plans. Make sure you also have a success-recovery plan up your sleeve. It’ll stop your wildest dreams turning into your worst nightmare: the Curse of the Cupcakes. Find out more:
  • If you can’t stand the heat: 102,000 and counting, as Need a Cake’s Groupon offer bakes up a storm.