#2. Silo -- A Shitload of Bananas
This is somewhat famous for being one of the stupider stories to ever emerge from the world of retail promotion.
Cool, informal slang is important in advertising. It catches the viewer's attention and makes him think your brand of breakfast cereal is "hip" and "edgy," and implies that using your product will finally win him some friends at school. But when employing slang, it must be made crystal clear that slang should not be taken literally. With that, let's go back to 1986.
Awesome! Jelly bracelets for everyone!
That year, Silo, a discount appliance chain, had way too many stereos and needed to sell them off for shockingly low prices. So they ran ads saying it cost only 299 bananas for a new stereo. Obviously, "bananas" means "dollars" here, though you'd be forgiven for not knowing since no one has called money "bananas" since Calvin Coolidge's day.
"That's absolutely bodacious. Possibly even groovy."
At this point, dozens of wiseass customers flocked to stores with literally 299 bananas (worth about $40). Which brings up the question: Where the fuck were people getting all these bananas? We can see a local grocery store having a total of 300 bananas on the shelf, but who the hell keeps enough on hand to serve a line of customers each asking for 50 or 60 bunches? Is there a special fruit wholesaler just for industrious smartasses?
Being an insufferable douche is just good business sense.
Anyway, the appliance store had no choice but to accept all the bananas from dozens of customers wearing what we assume were shit-eating grins. Silo lost over $10,000 in one just day, pulling the ads the next day before others could get the same idea.
The saddest part? Silo couldn't even get rid of the bananas (they had thousands of them sitting there, presumably attracting fruit flies), as the local zoos stopped taking them and the food bank didn't take perishables.
"Couldn't we just ... chuck 'em at some hobos?"
#1. Tesco and Hoover Get Beaten at Math by Their Customers
As you can see, businesses seem to consistently underestimate the savvy determination and possibly greed of their own customers. Not that we feel sorry for them.
For instance, in 2011, British supermarket chain Tesco got into a price war with competitor Asda. Tesco announced that, by god, if Asda ever beat them on a price they would pay you the difference twice over. So if you bought 10 boxes of wine for 20 pounds each at Tesco, but could prove Asda had them for only 18 pounds, you could get back 40 pounds. That is how confident Tesco was that the average Tesco customer's shopping trip would contain nothing that could be gotten cheaper at the competition.
"Wow, Gary, I know your latest review said you were out of touch, but this is a masterstroke."
But this failed to take into account several things about human nature. Specifically, it assumed that customers would still only buy the things they wanted, rather than the items that would pay off the most in the promotion. Instead, customers simply scoured the two stores for whatever odd item that 1) happened to be cheaper at Asda and 2) had a price difference that was enough for the double-the-money-back guarantee to actually get back more money than what was spent. If you found some item that Tesco had for three pounds but Asda had for one, it meant that you'd get the item for free, and Tesco would have to give you a pound on top.
"They thought me too proud to price-check that lube. They were wrong."
People shared their strategies on the Internet and came up with ways to buy enough bullshit that they didn't actually need (but that gamed the system hardest) that it would cover the rest of their grocery shopping. If buying razors let you scam a free pound out of Tesco from the promotion, you could fill your cart with them and use the profit to buy food. After losing an undisclosed (but extremely large) amount of money, Tesco has since put a cap of 20 pounds on the promotion.
That's around the average price of a person's dignity.
And it's not like they didn't have any precedent to learn from. Back in the early '90s, the Hoover Company ran a promotion offering two round-trip airline tickets to Europe or the United States with the purchase of a vacuum (which gives you an idea of how much some of these vacuums cost). They for some reason thought this would encourage customers to buy the more expensive models, because the free tickets would justify it.
For a multinational corporation, they sure do have a lot of faith in human nature.
But, as you can now guess, customers who didn't even need a vacuum, but did need airline tickets, figured out that Hoover did in fact have cheap models (the fine print set the minimum purchase at just 100 pounds). So suddenly it was worth buying a vacuum you would never use, just to get the far more expensive free tickets out of it. People bought several vacuums they didn't need with the sole point of getting the tickets. Let's just say a lot of hobos and orphans got vacuums for Christmas that year.
"I empty the bag into Paul's dumpster. He hates it."
Hoover was absolutely overwhelmed with demands for tickets and started desperately fighting the claims, either stalling or trying to convince customers to buy something else in order to offset the loss. It became a media firestorm, and Hoover ended up losing 50 million pounds in what would be the single biggest failed promotion ever.
While parent company Maytag sold the European Hoover company off as a result, claims for flights were never fully settled until 1998. This fiasco ensured a new rule in marketing: Always make sure the free item given away never exceeds the cost of the product it is paired with. Especially if it, you know, can fucking bankrupt you.
See some more poor corporate decisions in 5 Corporate Promotions That Ended in (Predictable) Disaster. Or check out the 6 Global Corporations Started by Their Founder's Shitty Luck.