There used to be a saying that there is no such thing as a free lunch. People don’t do lunches now. It’s all about going to the latest savvy coffee shop.
But this article is not really about coffee or lunches. Well, it kind of is, but the message has nothing to do with coffee.
It’s about coming up with ideas that are so good it becomes a spectacular failure followed by a PR nightmare.
I tell my team, and I tell all my clients one thing. The key to a successful business is to give so much value to the customer that they fear going elsewhere because they know that they will not get what you give them.
But sometimes, this can backfire, especially if you have not covered all loopholes.
Want examples? Well, in 1992, the UK was in recession and the Hoover company needed to boost sales. So, they came up with an idiotic and stupid idea that was full of value. They said if you bought a product for at least £100, they would give you 2 flight tickets to the USA worth £600.
Yeah ….. this is what naïve business owners do. But a multinational? I am unsure how that got past the ‘this is the maddest idea I have ever heard of’, but it did. You do not have to be a little short in the grey cells department to know that success is unlikely if you spend £600 to get £100.
They were inundated with people buying products for £100 and then claiming 2 flights to the USA. The company cancelled the promotion which resulted in a class action and getting horrific PR. The company never recovered and was later sold.
And recently, it happened to Pret A Manger. Many will not know of the company in Australia but if you have been to an international airport or been to the UK, you cannot miss them.
In my days as a junior auditor, they were a relatively small business of 6 stores (they now have 697 worldwide), and I have fond memories of undertaking their audit with lovely food and all the caffeine I could handle.
In September 2020, they gave fantastic value. For a £30-a-month fee, “Club Pret” customers could enjoy up to five coffees a day for ‘free’ and 20 per cent off food purchases.
At the time, it seemed a pretty good idea, as they needed to recover from COVID-19 and needed a loud, in-your-face, no-brainer offer to get customers back into his stores.
And it was too good to be true.
Because the idea was that as most employees would be working from home, there would be days when no coffee was ‘purchased’. But as office workers returned to work, it was soon costing the company millions of pounds a week in giveaways. In 4 years, they supplied 250 million coffees under the scheme.
What they did not realise was that they were cannibalising sales, too. That was because those who joined the club were existing customers – they were now paying less but getting more.
And there were loopholes, too. 5 coffees a day is a lot, even for caffeine-crazed addicts. But because all you had to do was show a barcode for your coffee or discounted meal, the barcodes got shared around so that people who did not pay a subscription were getting a coffee for free. In most cases, each subscriber was claiming 5 coffees a day.
You do not need to be Einstein to work out this was a problem.
At the start of the promotion, they hoped that about 2,000 people would sign up in the first 24 hours. But by 3 pm on the first day, the number of Pret subscribers had hit 16,500.
One senior insider was far less diplomatic. “It never made any sense in the first place.”
And after 4 years, the scheme has been significantly watered down, causing a massive backlash from customers.
The learning from such foolishness is that, yes, you must provide value. But not so much value that it costs you so much money you have on your hands a PR disaster. But it does not have to be a PR disaster. You just need to annoy a few customers, and your brand can be seriously damaged via a viral post.
So, how do you balance it out? Well, most marketing ideas are about blowing the competition out of the market. Don’t do that.
All you really need to do is look at the market. What are competitors giving? Then, ask what customers want. There is usually a gap, and usually, what customers want is everything. And that usually means you cannot give everything because if you do, you end up at the nearest asylum.
What you need to do is give value that no one else is giving for the same price. That usually means giving just 1 thing over and above everyone else. It’s not a thousand things because a thousand things of value for a similar price to competitors is what is going to get you in trouble.
Hoover and Pret A Manger did it the wrong way. In Hoover’s case, the question should have been, ‘Does it make sense to pay £600 to get £100 in? In Pret’s case, all they had to ask was what we had to do to beat our competitors and get our existing customers to start buying from us again. Instead, they tried to blow the competition out of the market. And it may have done. Except the only problem was they also blew themselves up too.
Working out the right value to give to customers is step 3 of our 9 steps to working less, earning more and creating awesome wealth. If you would like to know more, contact Hitesh at hitesh@wowadvisors.com.au or Ros@wowadvisors.com.au or call 07 3161 9548.
