476 The Marketing Book
marketing mix, they will not revive the fortunes
of an outdated brand, and overuse can be
counter-productive. Despite their manageabil-
ity, promotions frequently run into problems.
Advertising, with its fixed upfront costs, is often
considered to be riskier than sales promotions,
whose costs are generally more spread out and
related to sales volume. However, while miscon-
ceived advertising dents credibility and wastes
communications budgets, a bungled promotion
can also incur significant ‘clean-up’ costs. This
was graphically illustrated by the legendary
Hoover ‘Free Flights’ promotion, where a dras-
tic underestimate in the redemption rate of a
flights giveaway led to losses initially estimated
at £20 million, and a great deal of adverse
publicity. On-line promotions have opened up
many new opportunities for promotions, and
also new opportunity for promotion disasters.
Vitamins.com, for example, was driven out of
business partly through poorly controlled dis-
counts. Their website offered new visitors $25
off purchases of over $25, free delivery and a $15
off next purchase coupon.
The ways in which promotions can go
wrong are many and varied, from Pepsi’s
virtually vowel-free ‘Spell Your Surname and
Win’ contest, won by an unexpectedly large
number of people called Ng, to lightning wiping
out Bayard Sales’ sole copy of its promotional
database. Some promotions have even ended in
tragedy. In 2000, Burger King had to recall 25
millionPokemon: The First Moviepremiums after
two infants were suffocated by the packaging of
the Pokemon trading cards.
There are eight dangers commonly asso-
ciated with promotions:
1 Promotional price wars. These erode margins
instead of boosting sales. During 2001, markets
including mobile phones, computers and
Internet services witnessed promotional price
wars among already heavily indebted
companies.
2 Misredemption of coupons. This presents a major
hazard, and although previous estimates of
around 20 per cent misredemption seem to
have been an exaggeration, there have been a
number of multimillion dollar scams. Three
executives from New York’s Sloans
Supermarket were found to have run a 20-year
coupon fraud operation which netted them
$3.5 million (Shimp, 2000). Although coupon
barcode scanning has provided opportunities
to cut fraud, the problem is resurfacing in
relation to on-line coupons.
3 Reference price changes. A promotional price
attracts customers by undercutting the
expected ‘normal’ price. Too long or too
frequent price promotions lower customers’
‘reference’ price, so that they see a return to
the original price as an increase (Lattin and
Bucklin, 1989).
4 Printing errors. Gamecard promotions require
careful attention to printing accuracy and
security. Esso’s Noughts and Crosses game had
to be withdrawn after its first two weeks after
twenty £100 000 first prize winning tickets
emerged when only two should have existed
for the entire promotion.
5 Over-redemption. Coupons, giveaways and
buyback schemes are all based around
estimates of the response. A promotion which
is unexpectedly successful in attracting
customers (as happened to Hoover) can result
in disastrous losses. Misjudging the extent or
timing of consumer response can also lead to
stock-outs and subsequent customer
dissatisfaction. One-2-One’s offer of free
phone calls on Christmas day for purchasers of
a mobile phone created demand which
virtually seized up their network, preventing
many callers getting through to their loved
ones.
6 Quality dissonance. Reducing prices, or
offering low-quality free gifts or competition
prizes, risks devaluing an otherwise strong
brand in consumers’ minds. An unexpected
side-effect of P&G’s switch from coupons to
lower prices was that the price cuts reduced
the brand’s perceived quality (Gardener and
Trivedi, 1998).
7 Ta x. Several major promoters, including
McDonald’s, Boots and Sony, have found