Under the Influence with Terry O'Reilly - S2E14 - Famous Marketing Blunders

Episode Date: April 6, 2013

 Along with the most famous marketing blunder of all time - the Edsel - we’ll look at what caused Coke to make the mistake of changing their fabled formula, how a company went actually out of business by promising a product improvement, how a fashion house tweeted inappropriately and had an immediate PR disaster, and how a fast food company made a big mistake betting on the U.S. Olympic team.They are all great stories. Just be glad they didn’t happen to you. Hosted on Acast. See acast.com/privacy for more information.

Hi, it's Terry O'Reilly. As you may know, we've been producing a lot of bonus episodes while under the influences on hiatus. They're called the Beatleology Interviews, where I talk to people who knew the Beatles, work with them, love them, and the authors who write about them. Well, the Beatleology Interviews have become a hit, so we are spinning it out to be a standalone podcast series. You've already heard conversations with people like actors Mark Hamill, Malcolm McDowell, and Beatles confidant Astrid Kershaw. But coming up, I talk to May Pang, who dated John Lennon in the mid-70s. I talk to double fantasy guitarist Earl Slick, Apple Records creative director John Kosh. I'll be talking to Jan Hayworth,

who designed the Sgt. Pepper album cover. Very cool. And I'll talk to singer Dion, who is one of only five people still alive who were on the Sgt. Pepper cover. And two of those people were Beatles. The stories they tell are amazing. So thank you for making this series such a success. And please, do me a favor, follow the Beatleology interviews on your podcast app. You don't even have to be a huge Beatles fan, you just have to love storytelling.

Subscribe now, and don't miss a single beat. From the Under the Influence digital box set, this episode is from Season 2, 2013. You're so king in it. You're loving it in style. Your teeth look whiter than noon, noon, noon. You're not you when you're hungry. You're in good hands with us. You're under the influence with Terry O'Reilly.

R-dot-bar-sub-n That was an important piece of code on July 22, 1962. It was the launch day for NASA's space probe called Mariner 1. The space race between the United States and Russia was in full gear. As part of its mandate to win that race, NASA planned to launch sophisticated interplanetary space probes and develop the Mariner program. The first unmanned one NASA built, the Mariner 1, was created to explore nearby planets. It was equipped with solar cells to help power its voyage, and it contained instruments for studying Venus, which was its destination.

The probe was put on a newly designed rocket and was launched on a Sunday. 5, 4, 3, 2, 1, 0. But about four minutes after liftoff, the launch vehicle made an unscheduled maneuver and started to veer drastically off course. Suddenly, mission control had less than one minute to decide whether to let the flight continue with the risk of it crashing into a populated area, or to push a button and destroy the Mariner 1 in mid-air. It was a difficult decision to make with only seconds to make it in. The risk of the probe crashing into a town was very possible, yet the decision to destroy

millions of dollars worth of equipment was huge. But a decision was made. The Mariner 1 was destroyed over the ocean. NASA later discovered that the mishap had two causes. There was a problem with the rocket's guidance antenna, which had lost its lock on the ground guidance signal that provided steering commands. But that problem had been foreseen. NASA had put in a backup guidance computer,

which would ignore the antenna and proceed on a stored steering program. That's when the second problem kicked in. As it turned out, the guidance computer had a tiny programming mistake in it. A single character, a hyphen, was missing from the code. That's it. Because of that one a hyphen, was missing from the code. That's it. Because of that one missing hyphen, the spacecraft started making erroneous course changes. The code R-dot-bar-sub-n should have read hyphen-n. This typo led the software to treat minor variations of velocity as if they were serious,

causing the computer to swing left and nose down. The Mariner 1 cost over $80 million, and the Mariner space program cost more than $500 million. It was so expensive in 1962 that its crash came close to ending NASA's entire program of space exploration. As science fiction writer Arthur C. Clarke later said, it was the most expensive hyphen in history. Mistakes come in all sizes. Small ones can derail huge corporations,

and big ones can end up just being embarrassing lessons. In the world of advertising and marketing, mistakes can go from a disastrous new product launch that almost brings down a company, to a tweet that almost ruins a reputation, to, well, a Chia Obama. I'll explain that later. So sit back, grab a coffee, and let's look at some of the most famous marketing blunders of all time. And be glad they didn't happen to you. You're under the influence. The story of marketing failures is not only long and wide, it's deep. In the clarity of hindsight, it's sometimes astounding why some bad products were brought to market,

while at other times, it's equally astounding to see how some smart marketers made disastrous mistakes with good products. Some mistakes seemed immediately obvious, while others were completely unforeseen. And in one case today involving McDonald's, their mistake happened when the cosmic tumblers just clicked into place. But when people think of classic marketing blunders, two examples tower above them all. Possibly the most famous mistake of all time hit the road in 1958.

How does it feel to own an Edsel? It's like falling in love. Oh, your step is snappy When you own an Edsel Your pulse beats happy When you drive an Edsel Cause you've got to drive it to feel What this great new car can do for you The Ford Edsel is considered one of the biggest marketing blunders in history. It's a strange story.

It was one of the first big new car launches after the war. It was highly anticipated. The public had an appetite for it. Ford expected to sell a minimum of 200,000 Edsels in the first year. But when it was launched, the public took one look at it and stayed away.

There are many theories as to why the Edsel failed. While its technology was actually leading edge, the overall design wasn't as radical as promised. Its biggest feature was a large oval ring in the center of the grille. As Failure magazine says in their excellent article on the Edsel,

reviewers said it looked like an Oldsmobile sucking a lemon. Not good. Not good. Then there was the economy. 1958 was a terrible year for the automobile industry. Almost every car company suffered losses. By the late 50s, the public's interest in huge cars and big tail fins was over. And the Edsel was both.

On top of all that, Ford didn't build a dedicated assembly line for the Edsel. So it was made on Ford Mercury lines. The employees on those lines were not versed in Edsel assembly, so cars were coming out of the factory with parts missing and brakes that didn't work. Even the hood ornament became a safety hazard because once the car got up to 70 miles per hour, it would just fly right off. Whoa!

By 1960, the biggest marketing mistake in automotive history had come and gone. Since then, the Edsel has become a collector's item. But as one of those collectors said, to this day, it's still pretty embarrassing to be broken down on the side of the road with one the second most quoted marketing mistake was new coke as we've mentioned before, the 80s were the decade of the cola wars. Pepsi had launched its successful Pepsi Challenge taste tests, where they would set up impromptu booths and ask real people to sample hidden colas

and say which they preferred. Invariably, the person would point to the winner and it would be revealed to be Pepsi. People were amazed to see Pepsi chosen over and over again instead of Coke. Rooting for the underdog became a national pastime. Now, the distance between Pepsi's market share and Coke's was an ocean of difference. Coke far outsold Pepsi. But perception often trumps reality. Coke felt

momentum swing towards Pepsi. So, it made a momentous decision to change its formula to be sweeter, to challenge the sugary taste of Pepsi. They called it New Coke and launched it with spokesperson Bill Cosby.

I will now predict the exact moment in time when every single one of you will enjoy the best tasting Coca-Cola ever. It will be the very moment that you pick up this can, because inside this can is the new taste of Coca-Cola. Here's the amazing epilogue to that launch. The negative backlash from Coke drinkers was so immediate, so loud, that Coke switched back to its original formula only 79 days later. You can only imagine what that cost.

And for a while, they offered new Coke and classic Coke. Some thought it was one of the biggest marketing blunders of all time, and others thought it was a brilliant marketing stroke to get attention for Coke as a brand. But, as Coke CEO Donald Keogh famously said, The truth is, we're not that dumb, and we're not that smart. New Coke is a well-worn marketing story, but I tell it again because I want to make a point. Yes, it was one of the biggest marketing mistakes in history.

But the reason Koch made this mistake is so interesting. Koch had done extensive market research before changing its formula. But it realized, in hindsight, there is one thing you can never really measure. Here's Keogh explaining the lesson they learned. The simple fact is that all of the time and money and skill poured into consumer research on the new Coca-Cola could not measure or reveal the depth and abiding emotional attachment

to original Coca-Cola felt by so many people. It's a wonderful American mystery, and you can't measure it. Coke had made the unforgivable mistake of not realizing how much it was loved by its customers. Few brands in this world have such deep reservoirs of goodwill. Coke, to its surprise, did. It just happened to be the most expensive focus group of all time. You're looking at a live picture there. I believe it's still live.

You can see flames coming from party headquarters. This is happening right now in Cairo, Egypt. Sometimes, marketers make mistakes due to a temporary absence of taste. When the revolution erupted in Egypt in 2011, shoe retailer Kenneth Cole tweeted the following message. Millions are in an uproar in hashtag Cairo. Rumor is they heard our new spring collection is now available online. What followed next was an instant internet backlash.

First, Kenneth Cole was taken to task for hijacking the Cairo hashtag, which had been created to help Twitter users follow the latest news exploding out of Egypt. People were appalled that Kenneth Cole was using the protests as an opportunity to sell fashion. As the outrage spread, many Twitterers called for a store-wide boycott. The offending tweet was eventually pulled, and the company posted the following four hours later.

Re-Egypt tweet. We weren't intending to make light of a serious situation. We understand the sensitivity of this historic moment. Kenneth Cole himself tweeted by saying, I apologize to everyone who was offended by my insensitive tweet about the situation in Egypt. It was a PR disaster for the fashion retailer. One simple tweet and a massive marketing mistake

unfolded in internet time, which is to say, it was immediate. And the Kenneth Cole Corporation found itself attacked from all angles, and the company had to scramble to save face. And we'll be right back in case nobody's told you weight loss goes beyond the old just eat less and move more narrative and that's where felix comes in felix is redefining weight loss for canadians with a smarter more personalized approach to help you crush your health goals is here losing weight is about more than diet and exercise it can also be about our genetics hormones metabolism felix connects you with online licensed healthcare practitioners who understand that everybody is different

and can pair your healthy lifestyle with the right support to reach your goals. Start your visit today at felix.ca. That's F-E-L-I-X dot C-A. If you're enjoying this episode, why not dip into our archives, available wherever you download your pods. Go to terryoreilly.ca for a master episode list. In another galaxy far away from high fashion, this commercial began running in 2009. Change has come to America.

Our moment is now. Yes, we can. To commemorate the inauguration of our 44th president with a well-known American icon, introducing... Ch-Ch-Ch-Chia, Chia Obama. This Chia Obama is a special edition and a collector's item. Just spread the seeds, water, and watch it grow. Your Chia Obama is a symbol of liberty, opportunity, prosperity, and hope. Display it on your desk, in your home, at your school. FDF! FDF! Show pride and support with Chia Obama. Order now. Go to ChiaObama.com.

Yes, you heard right. It was a Chia version of President Obama. Picture it. A bust of Barack Obama. You water his head and out grows Chia hair. And the more it grew, the more it resembled a big, green afro. You really have to watch this commercial on our website. Trust me on this one. Not long after the launch of Chia Obama, national retailer Walgreens pulled it from their shelves in Chicago and Tampa after customers complained it was racist. It's a Chia pet that got shoved out the door of Walgreens

a mere week or so after its introduction at certain Walgreens in Chicago and Florida. Walgreens went on record saying the new collectible was wrong for their image. 77-year-old Chia founder Joseph Pidot told CNN Walgreens went on record saying the new collectible was wrong for their image. 77-year-old Chia founder Joseph Pidot told CNN he was shocked by the criticism of Chia Obama. It's a Chia, and you can trim it to any hairline you want. Give it a haircut. What has that got to do with racism? Pidot stated that it might become his bestseller ever, and also added it was available online for the amazingly low price of just $19.99,

with three seed packs included. Some marketing mistakes are obvious, some are not so evident, and some don't make any sense at all from the get-go. Back in late 2009, a billboard campaign began appearing above the slums of Mumbai, showing Gandhi's face next to a Mont Blanc pen. The billboard was advertising the launch of Mont Blanc's limited-edition commemorative fountain pen in honor of Mahatma Gandhi. The price of the pen? $24,763.

The handmade pens were adorned with Gandhi's signature and just 241 were made to pay tribute to the number of miles Gandhi walked in his famous protest against a British colonial salt tax. The association between a luxury product and Gandhi created an immediate outcry in India. To many, the pen was seen as a mockery of the great man and an insult to the nation.

Within days, lawsuits were filed to try to halt distribution of the pen. Indian broadcasters wondered why a multi-million dollar conglomerate would be interested in the image of a man who espoused frugality and opposed luxury. As USA Today noted, the pen was, quote, stratospherically out of reach for the vast majority of Indians. Over 450 million live on less than $1.25 a day. As the story unfolded, it was reported that Gandhi's great-grandson, Tushar Gandhi, had approved the deal.

Montblanc had reportedly given a $145,000 check to Tushar's foundation, which would also receive a royalty for every pen sold. But still, a pen bearing Gandhi's image, that cost more than most Indians would make in a decade, provoked continued outrage. In an ill-conceived PR move, Montblanc said that because the pen was based on Gandhi, it only made sense that a more affordable edition be made available.

So, a cheaper line of pens was issued, at a cost of $3,500 each. Soon, two Delhi-based advocates moved to the Supreme Court to halt the sale of the pens, denouncing the use of Gandhi's image as grossly inappropriate and illegal under an act that protected Indian emblems and names. Sure enough, in February of 2010, the High Court agreed and asked Montblanc to take the pens off the market.

The German pen maker and its distributor tendered an unconditional apology for hurting sentiments in the country and said they had no intention to exploit the name of Mahatma Gandhi or to bring him any disrepute. In hindsight, it seemed like a marketing decision that was completely tone-deaf in its execution. And, once launched, theoton's got you covered. Summer runs or playoff season meditations, whatever your vibe, Peloton has thousands of classes built to push you.

We know how life goes. New father, new routines, new locations. What matters is that you have something there to adapt with you, whether you need a challenge or rest. And Peloton has everything you need, whenever you need it. Find your push. Find your power. Peloton. Visit Peloton at onepeloton.ca. Sometimes your own success can lead to your demise.

Over 30 years ago, as writer Harry McCracken points out, PC computers weren't primarily desk-bound, they were entirely desk-bound. The thought that computers could be portable was almost inconceivable. That changed on April 3, 1981, when a startup called the Osborne Computer Corporation launched the Osborne 1 at a computer fair in San Francisco. As McCracken describes it,

the sewing machine-sized Osborne 1 weighed 24 pounds and came with a handle. Although it wasn't so much portable as luggable. But it was a fully functioning, transportable computer, it was relatively easy to use, and it gave you everything you needed for a then low price of $1,795. The first unit shipped in June of 81, and by August,

the company had sold $10 million worth of computers. By February, revenues had reached $100 million. But soon, Apple and Compaq introduced more sophisticated versions of portable computers into the market. That prompted the Osborne Computer Company to acknowledge their computer had certain shortcomings and announced they were going to launch an updated and improved model a few months down the road then a funny thing happened everyone stopped buying the osborne one in anticipation of the better model coming out later in the year the company became instantly cash starved as a matter of fact they had absolutely no income for the next month as that that trend continued, other things went wrong and soon,

massive layoffs began. The incident became known as the Osborne effect. Defined, the Osborne effect is when a company pre-announces a future product and that announcement has a devastating effect on their existing product. In other words, the company commits unwitting suicide as the public stops buying their current product and waits for the new one. You might notice which company took the Osborne effect lesson to heart. Apple. It is famously silent on its new products.

As we've mentioned before, Steve Jobs once viciously sued a magazine for leaking details about an upcoming new product. He didn't do it to punish the magazine. He did it as a warning to his employees. He wanted to send a signal about how seriously he took secrecy. The Osborne Computer Company shut its doors not long after. A company killed by the promise of a new product.

But the Osborne effect remains a harsh lesson. It was based on faulty messaging. I think actor Strother Martin put it best in the movie Cool Hand Luke. What we've got here is failure to communicate. Exactly. Back in 1984, the U.S. hosted the Summer Olympics.

That year, McDonald's came on board as a major sponsor. As part of that sponsorship, the company wanted to show its support and confidence in the American Olympic team. So, it came out with its If the U.S. wins, you win promotion. Feel like you're part of the Olympic action.

Play McDonald's when the U.S. wins, you win Olympic games. What's your event here? Boxing. If the U.S. wins, then I win. When the U.S. wins a medal in the event on your game card, you win a Big Mac.

Or regular fries. Or regular Coca-Cola. Or win up to $10,000 instantly. So go to McDonald's and collect your game cards, because when the U.S. wins, hey, you win. I'm in training. Now, it's safe to assume that no company would enter into a promotion like this without doing their homework.

McDonald's must have looked back at the 1976 Olympics to see that medal count. There, the U.S. had won 94 medals, 34 of them gold. So, that allowed McDonald's to calculate how much free food they might have to give away. The reason they looked back at the 76 Olympics and not the 1980 Olympics was because the U.S. had boycotted those games as a protest to the Soviet invasion of Afghanistan. So, they based their promotion on the 76 Olympic medal count. Then, guess what happened? 14 countries took part in a Soviet-led boycott of the U.S.-based 1984 Games. Iran and Libya also declined to participate

for other reasons, which means the competition in many events was diluted, and the U.S. won a staggering 174 medals total, 83 of them gold, compared to the 34 they won in 76. That was great news for the U.S. and bad news for McDonald's. They had to give away much more food than they had ever anticipated, including twice as many Big Macs, which was McDonald's biggest moneymaker. It was even reported that some locations were running out of Big Macs and not making a penny on them.

It was an unforeseen marketing mistake that cost millions. McDonald's, as many of the advertisers we've talked about today, had bitten off way more than they could chew. All companies make mistakes. The hope, of course, is that the mistakes will be small ones, and those little mistakes will yield big insights. But that's not always the case. Some blunders are huge and are performed in full view of the world.

In Edsel's case, it was a marketing mistake born of the best intentions. Ford really believed it had a winner on its hands. The public thought otherwise. The Osborne Computer Company admitted its product could be improved and announced a future update and by doing so, killed the company.

Koch's mistake was one of the most interesting of all. It simply didn't realize how much the brand meant to their customers. When you listen to the company's CEO, you hear the genuine surprise in his voice. Kenneth Cole and Montblanc committed the sin of being tone deaf. While Montblanc struggled in courts, Kenneth Cole owned up immediately, took full responsibility, and his share price didn't lose a penny.

Then there was McDonald's. Proud to be an Olympic sponsor, happy to give out free food based on the U.S. medal count, and hobbled by an overachieving U.S. Olympic team. But, that's marketing. You never know what

fresh hyphen hell awaits you when you're under the influence. I'm Terry O'Reilly. Uh, hello, Terry. Uh, I had a marketing idea while listening to your show today. How about a Terry O'Reilly chia? Oh, no, wait, you don't have hair, do you?

That would look just plain weird. Never mind. Under the Influence was produced at Pirate Toronto. Sound engineer, Keith Oman. Theme music by Ari Posner and Ian Lefevre. Series coordinator, Debbie O'Reilly. Research, Lama Balagi.

Log on to cbc.ca slash under the influence to see all the visual elements from this episode. And you can follow me on Twitter at Terry O'Influence. See you next week.