I love the Swiss "don't bother us on the weekend" thing. Probably the poor guy Emmi sent to the U.S. has no hope of reaching his Swiss bosses on the weekend to get appproval of his plan to avoid a massive loss.
I agree it was a stunning miscalculation. They probably figured no more than 10% would be redeemed and budgeted their promotional express accordingly. Instead it was 90%.
They probably also assumed that X number of new customers would be induced to try their product by this offer, leading to Y future sales from those new customers. However, the number of new customers they have obtained per $100 spent on miles if far less than they planned, because the miles packages have been hoarded by a small group, few of whom will ever buy the cheese again.
I don't know whether AAdvantage had an inkling what the redemption rate would be and therefore shares some blame for Emmi's fiasco. At any rate this will never happen again, as it would be fraudulent for AAdvantage to sell miles to a consumer packaged good company without revealing what AAdvantage knows from this exprience (that offering miles at 1 cent per mile or less will lead to an organized interception of your product at the distributor level, and that your redemption rate will exceed 90%).
Since there were a finite number of packages, I feel it was partially the greed of flyertalk members that prevented me from finding any packages. The reason my store never had any is that someone showed up earlier that day and bought 40 packages, or bought 1000 from the distributor specifiying mileage packages only. It's free country and no crimes were committed, but I don't have to feel warm and fuzzy about the gluttony either.
With this incident as a case study, I would be amazed if any consumer packaged good company offered anything near to 1 cent per mile again. It may be that as a foreign company Emmi was somewhat ignorant of the american cultural frenzy for someting for nothing. But now any company must know that if you offer a deal that works out to 1 cent a mile, your product will be hoarded by a small number of determined shoppers.
If you find yourself stuck with 100 worthless coupons, consider giving them to 100 households who can each send them in for the knife. At least you'll have the satisfaction of costing them some money.
I do think Emmi will have to pull the product from stores immediately, much like a tainted product recall. If a California consumer walks into a store today, sees a 500 mile offer on a package of cheese, buys the package of cheese as a result, and is then told sorry, you had to buy before December 1st---that consumer will have a cause of action in this state and in fact I believe the attorney general would take action on such a clear cut case. I don't think it would benefit me, however, if I buy cheese now, because I can't deny I am aware that Emmi has stated no miles for purchases after December 1st.
Originally Posted by
jabrams72
so the emmi website has been updated--quoted below and seems to follow the messages that have been sent here.
"NEW INFORMATION TO BE POSTED HERE ON MONDAY, DECEMBER 4, 2006 REGARDING SWISS KNIGHT PRODUCT PURCHASED ON OR BEFORE DECEMBER 1, 2006"
As well, attempting to blame this on AAdvantage marketing is absurd. There have been better (and worse) promotions over the past 25 years. The company making the promotion should be aware of what they are getting into, and to make an assumption, which is what seems implicit in this backpedaling, that many (perhaps even most?) people would not submit the codes seems counter to the very concept of why one finances such a promotion.
We all assumed that there was a cap to this promotion--the issue is with their printing more vouchers than the miles they were prepared to provide--a stunning miscalculation on their part. So, if you want to read this as riskless arbitrage, fine, but Emmi were getting something out of this--market share and recognition. They had the choice as to doing this and clearly felt that their return would be sufficient for an outlay of capital. Aadvantage (most likely) had no way of knowing that Emmi was not purchasing as many miles as they needed, nor is it their responsibility to know this information. They sell the miles--that's their business--how Emmi prices the miles is irrelevant information. If I feel that my product is worth X and I sell it at X, if the buyer turns around and sells it in a package combined with their product at Y, I may want to revalue personally, but it's not my responsibility to make sure that the X:Y ratio is consistent.