Friday, November 19, 2010

8 Worst Business Screw-ups

Alitalia and their $39 ticket mistake to Cyprus

Alitalia Airlines is a carrier out of Italy that made a slight mistake on its website in 2006 regarding a fare from Toronto to Cyprus. The fare advertised was $39 - in business class! It was supposed to be $3,900. The rate was posted on a travel website and the rush was on. As many as 2,000 tickets were sold for this price. While Alitalia initially tried to cancel all the tickets purchased for the wrong price, they eventually decided to honor the mistaken fares. If all 2,000 people actually used their tickets, it adds up to a $7.72 million loss to the airline.

Coca-Cola Company and their New Coke fiasco

New Coke was the unofficial name of the sweeter formulation introduced in 1985 by The Coca-Cola Company to replace its flagship soft drink, Coca-Cola. Properly speaking, it had no separate name of its own, but was simply the new version of Coke, until 1992 when it was renamed Coca-Cola II. Public reaction to the change was devastating, and the new cola quickly entered the pantheon of major marketing flops. Company headquarters in Atlanta started receiving letters expressing anger or deep disappointment. Over 400,000 calls and letters were received by the company. A psychiatrist Coke hired to listen in on phone calls to the company hotline, 1-800-GET-COKE, told executives some people sounded as if they were discussing the death of a family member.

New Coke was a disaster not because it was crap (although it most certainly was), but because the consumer sheeple were too attached to their brand of cola which hadn't been changed since 1903 when the good stuff (cocaine) was taken out. The failure of the "new" formula points to the psychology of branding and consumer attachment to a freaking soft drink. It was only 3 months later when Coke Classic was brought back to appease the raging hordes of angry soda drinkers who were obviously in some sugar-induced maniac state. The Coke Classic did so well that it outsold the new coke and Pepsi, leading to some conspiracy theories that this was all planned in advance.
The subsequent reintroduction of Coke's original formula led to a significant gain in sales.

The AT&T network collapse and the 75 million lost phone calls

In 1990, 75 million phone calls across the US went unanswered after a single switch at one of AT&T's 114 switching centres suffered a minor mechanical problem, which shut down the centre. Normally, AT&T's long-distance network was a model of reliability and strength. On any given day, AT&T's long-distance service, which at the time carried over 70% of the nation's long-distance traffic, route over 115 million telephone calls.

When the centre came back up soon afterwards, it sent a message to other centres, which in turn caused them to trip and shut down and reset. The culprit turned out to be an error in a single line of code -- not hackers, as some claimed at the time -- that had been added during a highly complex software upgrade. American Airlines alone estimated this small error cost it 200,000 reservations.

Decca Records and the turning down The Beatles decision

Mike Smith and Dick Rowe were the executives in charge of evaluating new talent for the London office of Decca Records. On December 13, 1961, Mike Smith traveled to Liverpool to watch a local rock 'n' roll band perform. He decided they had talent, and invited them to audition on New Year's Day 1962. The group made the trip to London and spent two hours playing 15 different songs at the Decca studios. Then they went home and waited for an answer. They waited for weeks. Finally, Rowe told the band's manager that the label wasn't interested, because they sounded too much like a popular group called The Shadows. In one of the most famous of all rejection lines, he said: "Not to mince words, Mr. Epstein, but we don't like your boys' sound. Groups are out; four-piece groups with guitars particularly are finished."

The group was The Beatles, of course. They eventually signed with EMI Records, started a trend back to guitar bands, and ultimately became the most popular band of all time. Ironically, "within two years, EMI's production facilities became so stretched that Decca helped them out in a reciprocal arrangement, to cope with the unprecedented demand for Beatles records."

Ford and their $350 million-loss Edsel

In the mid-1950s, Ford, flush from its exceptionally successful Thunderbird, wanted to create a new model to compete head-to-head with General Motors' Oldsmobile. (The Ford Lincoln had served that purpose, but it was getting a makeover to go against GM's higher-end Cadillac.) Ford's solution: the Edsel, named after the son of founder Henry Ford. Despite all the hype - including a television special called "The Edsel Show" - the Edsel proved to be one of the biggest bungles ever in the auto industry. Ford whiffed on three fronts: style (the car looked too much like other Ford models), size (too large, given the growing trend toward compact cars), and price (initially intended to be priced between a Lincoln and the lower-tier Mercury, the Edsel actually fell within Mercury's price point, and thus confused consumers). Ford sank $350 million (in 1950s dollars) into the Edsel before calling it quits; production of the model ceased Nov. 19, 1959.

Ford has since bounced back, but the lesson remains. "It's a classic case of perspective taking," says Adam Galinsky, a professor of management and organizations at Northwestern University's Kellogg School of Management. "If businesses don't consult outside perspectives to objectively assess consumers' demands, their products are at risk of failure."

The Canarsee natives and their trade of Manhattan for trinkets

The Canarsee natives took a wise decision in 1626: they traded for trinkets a now rather stylish plot: Manhattan (then called New Amsterdam). Legend states that the Carnarsee sold Manhattan to the Dutch Governor Peter Minuit for "24 dollars' worth of beads and trinkets." The island fondly dubbed "the center of the universe" by many New Yorkers is now worth a cool $1 trillion, estimates Matthew Mondanile of Cushman & Wakefield, a global commercial real estate firm.

According to history, on May 24, 1626, Minuit was credited with purchasing the island from the natives in exchange for trade goods valued at 60 guilders. The figure of 60 guilders comes from a letter by a member of the board of the Dutch West India Company, Pieter Janszoon Schagen, to the States-General in November 1626. Sixty guilders in 1626 had the approximate value of $1000 in 2006, according to the Institute for Social History of Amsterdam.

The transaction is often viewed as one-sided, usually to the benefit of the Dutch, though one popular history of Manhattan claims that Minuit actually purchased the island from the wrong tribe). In any event, there is no evidence that either the Dutch or the Indians believed they had swindled, or been swindled by, the other party to the deal. An 1877 embellishment of the myth claimed that the Dutch offered "beads, buttons and other trinkets," though there is no evidence for this]. A contemporary purchase of rights in nearby Staten Island, to which Minuit was also party, involved duffel cloth, iron kettles and axe heads, hoes, wampum, drilling awls, "Jew's harps", and "diverse other wares".

ABC-TV and their refusal to have a black family show, The Cosby Show

In 1984, Bill Cosby gave ABC-TV a first shot at buying a sitcom he'd created - and would star in - about an upscale black family. But ABC turned him down, apparently "believing the show lacked bite and that viewers wouldn't watch an unrealistic portrayal of blacks as wealthy, well-educated professionals." So Cosby sold his show to NBC instead. What happened? Nothing much - The Cosby Show remained #1 show for four straight years, was a rating winner throughout its eight-year run, lifted NBC from its 10-year status as a last-place network to first place, resurrected TV comedy, and became the most profitable series ever broadcast.

Burger King and their $40 million Herb ad campaign failure

In 1985 and 1986 Burger King came up with the Where's Herb? advertising campaign. Supposedly, "Herb" was "the one man who has never tasted a Burger King burger." In one commercial the camera pans across crowded beaches and escalators in search of Herb. Supposed friends and family are interviewed, and boy are they completely boring losers. Can't wait to meet Herb! In early 1986, Burger King "found" Herb. Soon he was appearing on NBC's Today show and at a New York City press conference. Burger King even cooked up a biography for Herb, (Wisconsin, cheese factory, you get the idea) Herb was played by actor John Merrick, who would randomly appear at Burger King restaurants nationwide; if a customer spotted Herb at a Burger King, he or she would win a prize. Except nobody gave a damn.

Only the corporate world could come up with such a letdown as Herb the Nerd. The icing on the cake is the exclaim "Gary Sirotzke found me!" as if anybody knew who Gary Sirotzke was and should give a damn. So Burger King gives us not one, but two nerdy accountants. Yeah, that'll get them in the door! Burger King spent over $40 million on the Herb advertisements; however, the advertisements were not successful, and are widely cited as a flop. We were totally caught off guard! John Merrick/Herb was never heard from again.

No comments:

Post a Comment