ARI SHAPIRO, HOST:
Have you ever dreamed of winning a grand prize that seemed too good to be true, like from a fast food or soda company? Well, Darian Woods from Planet Money's podcast The Indicator has the story of a promotion that went terribly wrong for Pepsi. He talks with economic writer Tim Harford about sales and stunts that promised huge rewards and ended in disaster.
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DARIAN WOODS: Victoria and Juanito Angelo were a couple living in Manila in the Philippines. They had a pretty hard life. Juanito worked as a rickshaw driver, and the whole family lived in a tin roof shack. But they had a dream. Tim Harford had talked about this in his "Cautionary Tales" podcast.
TIM HARFORD: And that dream is that they'll win a very unusual lottery. The lottery is called Number Fever. And the lottery numbers are printed on the inside of a bottle tops on bottles of Pepsi.
WOODS: They sat down every night to watch numbers drawn on TV. If the number from your bottle top was drawn and won grand prize, you could win a million pesos. That's equivalent to about $40,000 American dollars.
HARFORD: A life-changing amount of money for Victoria and Juanito if they were ever to win it. But, of course, you know, it's just that one grand prize. What are the chances they would ever win?
WOODS: But Pepsi messed up, and 800,000 bottle tops were printed with the winning number 349. So for Victoria and Juanito...
HARFORD: The way I imagine this is that they run out onto the streets to celebrate, and everybody else is on the streets, and they're celebrating, too, because they all have the number 349...
HARFORD: ...On their bottle tops.
WOODS: OK. So they're all going to be millionaires?
HARFORD: Yeah, well, you'd think.
WOODS: Pepsi was on the hook for at least $15 billion. As you can imagine, this wasn't going to end well. But when Tim looked into the story, he got obsessed with lots of other failed promotion campaigns.
Sometimes you get these promotions that seem too good to be true, but they're not necessarily a mistake, are they?
HARFORD: No. Sometimes they're just hoping that their customers don't notice how good the deal is, and they don't really follow through with the maths.
HARFORD: The other thing that I think is very common indeed is exploiting something called breakage rates.
WOODS: Breakage rates is the industry term for how many people fail to follow up on offers. And companies intentionally try to increase breakage rates by making it hard for the customer to follow through.
HARFORD: One example is in the 1990s in the U.K., Hoover offered free transatlantic flights with any Hoover appliance. Buy yourself a, you know, cheap washing machine, a cheap vacuum cleaner, and you get to fly across the Atlantic. I think it was a pair of tickets.
WOODS: Not bad.
HARFORD: And they just bet that the breakage rate would be high enough that this would work out for them. They would sell a lot of appliances, but people just wouldn't be able to follow through. The flights they were offered would be deliberately inconvenient. You'd have to fill in a form to get another form, and then you'd have to fill in the second form and all of this stuff. In fact, people in Scotland were being offered free flights only from London, which is hundreds of miles away. And people who lived near London were being offered free flights only if they went up to Scotland.
WOODS: That is evil (laughter).
HARFORD: It's really evil. In the end, it cost them a huge amount of money.
WOODS: Wow. So what happened in the end with Number Fever in the Philippines?
HARFORD: They said, look; anybody who's got the 349, we're going to give them - I think it was the equivalent of $20. But it's certainly not $40,000. It's not a million pesos.
WOODS: Tim Harford, thanks so much for joining us.
HARFORD: Well, thank you.
WOODS: Darian Woods, NPR News. Transcript provided by NPR, Copyright NPR.