Flirting with disaster?

The past few years have seen the number of complaints about sales promotions in the UK soar. But, what is the best way to avoid disasters like the Hoover free flights fiasco? By David Benady

A dramatic rise in complaints about UK sales promotions last year has added to the perception that this type of marketing cannot be left to office juniors.

The Advertising Standards Authority (ASA) recorded a 15 per cent increase in complaints about sales promotions in 2003, rising to more than 2,000 from 1,670 the previous year. The bulk of the complaints – more than 400 of the total – concerned free gift promotions.

Industry observers believe many of the problems in sales promotions arise from a failure to properly observe the legal terms and conditions of prize draws and competitions. This is compounded when companies save money by omitting to have their promotions checked by solicitors or the copy-clearing services offered by the Institute of Sales Promotions (ISP), which charges an enhanced membership fee for the service.

According to ISP director- general Edwin Mutton, the most serious area for problematic promotions is when they are run as lotteries, which means people are asked to pay for the chance to enter without the opportunity of having a free-entry route – though these rules are about to be shaken up by new European legislation. There are also numerous illegal overseas lotteries operating in the UK.

Proof positive

But Mutton adds: “At the other end of the scale, big brand names are guilty of being careless in putting the terms and conditions together. This can include failing to make provisions for lists of winners in a competition or draw – you must provide this list to prove the draw has taken place. This is an area that annoys people and it doesn’t show the industry in a good light.”

The sales promotions industry is self-regulated, and the bible for those running promotions is the British Code of Advertising, Sales Promotion and Direct Marketing, or CAP code for short. Complaints about infringements are handled by the ASA.

Sales promotions insiders say they see numerous examples of competitions and prize draws which infringe the codes, often caused by minor mistakes in the way the terms and conditions are written. Some entries for industry awards have to be turned down because eagle-eyed judges notice irregularities in the composition of the promotions.

Beware the backlash

Mutton believes that in most cases these problems are down to oversights rather than an intention to con people, as brands that make these mistakes can suffer a backlash from bad publicity.

Promotions can often appear to be poorly thought out, while the customer’s perspective is overlooked. Earlier this month, the ASA started investigating a promotion operated by The Sun that offered a free Simpsons PC game worth &£19.99. Readers were asked to collect vouchers and go into various stores to collect the game. But the game turned out to be only a demonstration, and it can be downloaded free from the internet. The ASA received more than 30 complaints about the offer, but has yet to make a ruling.

Some believe that increasingly sophisticated technology can help to ensure promotions are run without a glitch. PIMS-SCA, which specialises in risk management for sales promotions, has introduced a system from its US parent called TrueDraw. Companies running promotions upload their contestant files to PIMS-SCA and TrueDraw can automatically select the winner and send back the details within hours.

PIMS-SCA managing director Mark Kimber says TrueDraw allows those running a draw to prove that it has been done randomly and “protects your company from any doubt regarding the integrity and randomness of your winner selection”.

Kimber adds: “We live in an environment where the integrity of virtually every process is subject to inspection. Consumers, regulators, the media and clients are ready to ask questions. In some cases this can cause problems and question the integrity of a promoter’s winner-selection process.”

Technology may make promotions easier, but a computer error was to blame for one sales promotion that went wrong – with tragic consequences.

In the Philippines in 1992, Pepsi launched a bottle-cap contest designed to award prizes of up to $32,000 (&£17,200) to a handful of customers. Instead, a computer error caused 750,000 winning bottle caps to be distributed rather than 18, increasing Pepsi’s potential pay out to more than $20bn (&£10.8bn). The soft drink-maker tried to settle out of court by paying $20 to more than 400,000 cap holders. But that decision resulted in criminal and civil lawsuits and led to riots that resulted in at least six deaths.

Other fiascos range from corporation-busting crises such as the Hoover free flights disaster in the early Nineties to major frauds, such as that suffered by McDonald’s in the US three years ago.

There have been mistakes that have cost companies dear in injured pride. A promotion for Hartley’s jelly cubes 20 years ago offered prizes of free goldfish, which were sent to customers through the post in plastic pouches. Unsurprisingly, many of the goldfish died before they arrived, causing considerable embarrassment for those working on the brand.

However, Graham Green, who runs marketing communications agency Meerkat and has worked for many years in sales promotion – including a stint as chairman of the then Sales Promotions Consultants Association (SPCA) (now the Marketing Communication Consultants Association) – says: “I have been in the industry for most of my career and am amazed at how few sales promotions do go wrong. But when they do, they go wrong in a big way.”

He says the Hoover fiasco was in fact a blessing for sales promotions agencies, as the promotion had been run in house. Green was SPCA chairman at the time, and used the debacle to argue the case for brands retaining experienced agencies when running promotions – or face a monumental mess.

Hoover damned

Hoover offered free flights to the US to anyone in the UK buying a vacuum cleaner worth more than &£100. The travel company Hoover collaborated with on the redemption scheme thought it would be able to regain its outlay through cross-selling travel insurance and accommodation, but the travellers didn’t take this up and the travel company soon realised it would not make its money back and pulled out of the offer. This left thousands of customers without their free flights. The resulting bad publicity and legal action forced Hoover’s parent company to sell off the vacuum cleaner manufacturer.

“There was so much hubris with Hoover. If someone is buying the promotion and not the product, that can land you in trouble,” says Green. He recalls one scheme he set up for laundry detergent Daz in which a booklet of money-off vouchers worth &£1.50 was offered free in each pack. But as the boxes of Daz cost only &£1, street traders started buying the packs, redeeming the vouchers and selling the detergent cheaply on market stalls.

But Green believes that the rules governing UK sales promotions are fairly lax and he sees no good reason for producing illegal or incorrect mechanisms.

With a shake-up in the rules governing sales promotions being discussed by European legislators, the industry may have to familiarise itself with a new set of red tape as it seeks to expand the use of promotional mechanisms into new products and services.

There is the prospect that companies offering prize draws may have to donate funds matching the size of the prizes to charity, while the new rules may spell the end of the free-entry route. The regulations could also mean more brands falling foul of red tape if they do not check their promotions with the utmost care.

However, the directive has been drastically revised (MW last week) and the proposals on charity donation and prize capping have been dropped, tossing a life-line to industry for the time being. But, the EC is to look at the proposals again in four years.

An area of particular concern is where the prizes for a draw are won in the first few days of a promotion, making subsequent advertising announcing the prizes illegal. Promoters have to be ready to make quick changes to their advertising, or risk falling foul of the law.

Stamp of approval

A prize draw competition run by Royal Mail two Christmases ago showed that it is possible to hedge against such a disaster. It ran a draw with a top prize of &£1m to encourage people to trade up to first-class post from second class. What was planned as a six-week campaign was holed in the second week when a claimant came forward to win the top prize.

But, as a Royal Mail spokesman says: “We had a series of other prizes and had prepared copy for advertising to get the message across that there was more money out there to be won. Because we had contingency plans in place, we were able to produce them. There were concerns that the early win would have a damaging effect, but in the end it worked out well.

“There’s nothing you can really do about early winners if it is a fair promotion. It is one of the risks.”

Sales promotions may not have the high profile or glamour of television advertising campaigns and can get shunted to the bottom of a marketer’s work schedule. This should make marketers especially wary of leaving the job of creating a promotional campaign to inexperienced staff.

Mistakes do happen, and the new set of gaming regulations and the European shake-up of sales promotions will mean the rules need to be studied again with extra care. But there are always steps that can be taken to cut out the errors and spare the blushes of the marketing department.

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