Sucker punch to free rides: Hoover's ill-fated flight of fancy has dealt a fresh blow to the image of sales promotions. Chris Blackhurst and Russell Hotten report

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The Independent Online
TO THE group of senior executives sitting at Hoover's UK headquarters in South Wales last summer, it seemed like a terrific idea.

There they were, wondering how they could drum up sales in the recession and all too aware that the company was about to enter its traditional lean pre- Christmas period.

In marketing jargon, Hoover products - vacuum cleaners and washing machines - are 'distress purchases'. People may buy a new one as a treat - when moving house, say - but usually an appliance has to go on the blink before it is replaced.

Christmas, is especially difficult: vacuum cleaners and washing machines do not appear on many present lists. And this Christmas, in the midst of recession, would be terrible.

The executives' scheme was simple: promotions with Air Miles and air tickets were all the rage, so why not follow suit? They called in a firm of travel agents and drafted a plan. They narrowed the offer down to two flights to a choice of six European cities, required a customer to spend at least pounds 119 - the price of the cheapest qualifying Hoover vacuum - and reckoned on 50,000 applicants.

Last week, Hoover fired the two senior executives responsible for the scheme: Brian Webb, vice president of marketing UK, and William Foust, head of Hoover UK and European president. Michael Gilbey, director of marketing services, was also made redundant but the company said this was not conected with the offer.

Their attempt to boost sales in a flat vacuum cleaner market had exceeded their wildest expectations - so much so that triumph turned to disaster.

Instead of 50,000 applicants, there were 200,000 (including an additional 100,000 for a second promotion for flights to the US, launched before the first offer turned sour). Shops could not get enough Hoover products to cope with demand. The company was forced to draft in extra manpower to help on the travel side and it put the factory on a seven-day week.

Management has had to find at least an extra pounds 20m to buy the air tickets. One industry expert estimated that for every 4,000 responses, Hoover would have to pay pounds 1.75m (4,000 x two people x the pounds 220 average air fare). Worst of all, the good name of Hoover has been pilloried in the media as complaints from customers anxious to obtain their free flights have flooded in.

And the Hoovers that were hard to find in the shops are now easily available - in the classifieds in Exchange & Mart and local newspapers.

The fiasco has ceased to be just Hoover's problem. Sales for other vacuum and washing machine manufacturers dipped as customers plumped for Hoovers and brought forward their purchases. But after Hoover, the pounds 10bn promotions industry has been hit hardest.

The public, already deeply suspicious of sales 'gimmicks' and far less gullible than marketing personnel suppose, have had their prejudices confirmed by Hoover's deliberate, if failed, attempts to stop their customers from flying: sales promotions are a con.

At least that is the fear of John Hooper, 30 years in the marketing business and chairman of the Sales Promotion Consultants Association. 'It will undoubtedly affect the way consumers look at these offers,' he said. 'It reinforces their scepticism. People were becoming used to sales promotions as a part of everyday life.'

Unlike many other European countries, Britain does not legislate against special offers. The Hoover campaign, said Mike Halstead of the HH&S promotions consultancy, could not have happened in France and Germany, where the law is much tighter. Here, sales promotions are governed by a voluntary code of practice.

'It may force the Government to wake up to tougher laws,' he said.

This, after all, is not the first time the industry has been found wanting. In the late 1980s, there was a rush of buy- back promotions where retailers offered to re-purchase electrical goods after 10 years. The contracts were riddled with small print, and the schemes failed when insurers refused to underwrite them.

Several newspaper offers have also drawn complaints. Only last week, the Advertising Standards Authority said it was investigating a Sunday Times free Air Miles scheme. Two years ago, a Sunday Mirror promotion offering cheap flights annoyed readers who discovered they had to buy five-star hotel accommodation on top.

SOME failures are just innocent cock-ups. A bingo competition run by Procter & Gamble, the soap powder giant, once resulted in a flood of winners of washing machines after too many right numbers were printed. In 1984, McDonald's ran an Olympic Games competition in which customers won a gold medal every time an American won a gold medal. When the Eastern bloc boycotted the games, US athletes had no real competition and McDonald's had to find an awful lot of gold.

Peter Mueller, a former Sunday Mirror promotions manager (who was not employed at MGN at the time of its contentious offer) said the small number of promotions that turn sour should not disguise the many popular and successful schemes.

He cited Sainsbury's flight promotion with British Airways and Boots's joint offer with British Rail as textbook examples of how incentives can work.

But no matter how good their track record, post-Hoover, holiday/travel promotions are a dead duck as far as marketing directors are concerned. An Independent on Sunday straw poll of retailers found that no one would touch flight deals until the Hoover furore had died.

Dixons, the electrical stores group, is running a variety of special schemes, including flight offers. But its deputy chairman, Mark Souhami, said the company would be 'back playing' air deals for a while.

He summed up the general feeling among retailers: 'We have been doing flight promotions because the airlines have offered exceptionally good value. But flight promotions are going to be like poison. Anything that has got an airline promotion attached will be viewed with deep suspicion.'

That will be bad news for the recession-hit holiday industry, which has been relying on these deals to help soak up spare capacity. Ferry company P&O said the Hoover affair could have a short-term impact on promotions. BA, currently in talks with several companies about joint flight deals, refused to talk about the likely impact, saying it was 'hypothetical'.

Special promotions have spiralled during the recession. Hoteliers, ferry companies, brewers, manufacturers of consumer goods, even theatres and restaurants: they are all trying to dream up schemes to get people spending.

Once, the knee-jerk response to recession was to slash prices. Now the reaction is more imaginative. 'Focusing on price cuts shows a lack of faith in brands,' Mr Hooper said.

'If a company's only response is to cut prices, it can be damaging. Customers just say: what is wrong with the product?'

THE use of 'guaranteed benefit' promotions - where free gifts are included with a purchase - has increased. But these are a fixed cost and can prove expensive, so many companies turn to 'non- guaranteed benefits' in which customers have to apply for their incentive. The value of the gift is greater, but would-be applicants have to fill in lengthy forms or make an extra, expensive purchase such as hotel accommodation.

Hoover was relying on a certain amount of this 'slippage' in demand. But it made elementary mistakes, most seriously in making the offer far better value than the product.

In the words of Mr Mueller: 'They produced an offer that was just too good.' Instead of buying a Hoover, customers bought the offer.

Hoover sources admit it did not fully test the likely level of responses, and promotions consultants are quick to point out that none of their number was hired. As one marketing executive asked: 'How many companies would do an advertising campaign without using a professional agency? A promotion like Hoover's is just another form of advertising.'

Mr Halstead commented: 'I would have said, 'Great, this is a big idea. Now let's make it stand head and shoulders above the rest of the field'.'

The first thing he would have done was test different price thresholds or 'break-points' - pounds 100, pounds 125, pounds 150 up to pounds 200 - on randomly selected members of the public.

'We did a two for one on BA with the Daily Mail where you needed to collect 12 vouchers, and we got tens of thousands of responses. But we knew that is what we would get. They should have researched the elasticity of the pounds 100 cut-off.'

He added: 'You can imagine what anyone would have said if told all they needed to do to get two free flights was spend pounds 100. They'd have said, 'Brilliant, when can I do it?' '

Hoover, he argued, should probably have pitched the offer at around pounds 150 and made the promotion one free ticket or half-price for a couple rather than two giveaways.

A further error was that the air tickets were not bought up- front. As a result, Hoover has had to engage in an undignified scramble for tickets and has been forced to pay full prices for scheduled services rather than picking flights up cheaply in advance from charterers.

It is standard practice that promotions should have built-in hurdles. The most common are 'subject to availability', 'only one per household', and restrictions on when you can take up the offer.

'These are not unreasonable,' Mr Hooper said. 'Offers cannot be left open-ended. There are always a certain amount of people who are going to be disappointed. If the number of Hoover's unhappy customers had been on a small scale, it would not have mattered.'

Known in the trade as 'wising' - deliberately trying to dissuade customers from taking up the offer, the Hoover approach included: in the small print, setting tight postal deadlines that caused the application to lapse if not met; slowing down applications so deadlines passed and customers lost interest; persuading applicants to spend an extra pounds 300 on 'extras' such as car hire, insurance and accommodation; and restricting their flights to dates when they would not want to travel.

This approach went too far and only served to enrage applicants and the media alike.

Ironically, evidence of just how Hoover managed to botch up its offer comes from Currys, which launched a rival promotion on a wide range of products but not Hoover's.

Customers were limited to 12 European destinations, the qualifying limit was higher, there was no need to book accommodation in advance and the customer could choose when to travel.

'The offer has just ended and we've had no problems,' said a spokeswoman for Currys.

Even if the number of responses to Hoover's promotion had been manageable, leading figures in the marketing industry have questioned its usefulness. No one, it seems, was interested in the product; they just wanted flights.

There is little Hoover can do now except to meet the demands, play with a straight bat from here on and maintain a low profile.

Ever the optimist in an industry founded on optimism, Mr Hooper believes the promotions industry can help to recover lost ground by going out to appear whiter than white.

He wants to run a campaign called 'stamp out the small print promotion'. 'The promotion has to be as good in its delivery as it is in its promise,' he said.

(Photograph omitted)

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