the pudding coup--a minority view
 

I realize this will probably resuly in my being permanently banned from Flyertalk, but does anyone beside me have some doubts about the propriety of Pudding Guy's feat? Here's my thinking on this: it is obvious that he found a loophole in this excellent promotion. No harm there, we all look for them. I don't know how to explain this other than by reference to a legal term called "overreaching." This describes a situation in which one party to a transaction finds he has an advantage which he exploits to an extreme degree. Not exactly fraud or illegality, simply taking advantage. Think about the economics here: I don't know what Conagra paid for the miles, but the normal "wholesale" rate for 3rd party distribution is around 1 centor even more as best as I can tell. Even assuming that Conagra got a good volume discount, it is likely that it lost $3 or $4 on each 25 cent sale. Multiply that by thousands of sales and it becomes a significant amount. So what's the bottom line: it would not be surprising if someone lost their job over this one and it makes it less likely that Conagra is likely to repeat this one any time soon (as someone has already inquired here). The issue then becomes do we kill the goose laying the golden eggs when we go beyond the obvious intent of a really great promotion (i.e. throwing an extra few items in the cart at the grocery store) and perhaps make this company and others less likely to offer these things in the future out of fear of getting burned by an unforeseen loophole. Okay, those are just some thoughts. Fire up your modems and take aim...

Here's a counter-point to your legitimate concern: PuddingGuy created a tremendous one-time revenue for AA in particular, and the other airlines to a lesser extent. Since you have to assume that PuddingGuy still needs to keep his day job, it will be quite a while before he burns off all those miles. So, in the meantime, AA has gotten income without having to incur an expense.

Just another example of frequent flyers helping the airline industry?

I misspoke. In my economic analysis above, I guessed that Conagra lost $3 or $4 on each 25 cent sale. I meant on every certificate redeemed. My conclusion is still the same.

I did some calculations in my head also. I had the thought that this publicity might be a downside to future promotions, but then I thought about the publicity Healthy Choice has received this past week. Wall Street Journal article, TV spots on NBC in the morning and the evening. What did they shell out for Pudding Guy? $12,000 face value, even if they spent $50,000 when all the expenses are added in, they got a deal. Prime time news coverage for $50,000 and several plugs for what a great deal it was to buy Healthy Choice pudding. I am sure the executives are really happy with the promo plugs they have received. I wouldn't be surprised to find out there are board meetings everywhere figuring out how to get the next big winner. Remember that greed is what is making all these TV shows a hot item now. People want to know that someone out there is getting a good break. And the company is getting what they ultimately wanted - exposure for their product.

So they forgot to put a cap on the miles. They probably won't do that again.

"Don't waste mistakes! Learn from them, but whenever possible, learn from other people's. It's cheaper and a whole lot less painful."

Myleguy:

Don't really see how one kills the "goose" here; you need to clarify/justify this.

The only entailment from PG's feat is that ConAgra will have to take such legitimate feats into account, realizing that some sellers will sell the pudding individually. ConAgra certainly did the numbers based on its least costly item. If ConAgra didn't account for this, then they have learned a valuable lesson in the competitive marketplace.

Mileage seekers are generally shrewd, as are many on this board. Most astute marketers, offering frequent flyer miles, account for this.

PuddingGuy didn't find a "loophole"; he legitimately worked within the parameters of the program, and was astute and exceptionally shrewd, thus the plaudits, acolades, and veneration.

I don't really understand your perspective or questioning of this. The "economics" are not really hurt in any such way: the same economics that may have "harmed" ConAgra also comprise the forces that drive the demand for miles and fuel the promotion. If anything, the economics will not ruin such promotions, but make the marketing more efficient (e.g., ConAgra will cap miles and/or factor in extreme scenarios; or perhaps ConAgra did account for such feats, knowing that the overall impact of the promotion was likely to be a success).

[This message has been edited by JeffLewis2 (edited 01-26-2000).]

As us finance folks would say (this is what I'm learning in school these days anyway) Pudding Guy spotted an opportunity to exploit the market and arbitraged it to his advantage ... it's the American Way. If he hadn't done it, someone else would have ...

I agree that Healthy Choice is loving the publicity and its worth every cent that Pudding Guy cost them.

He told Katie he still likes the HC pudding!

I disagree with myleguy's assertions but would never ban you for a contrary view! Healthy debate on Healthy Choice I say.

With the print and electronic media coverage, who knows how many column inches or minutes of free publicity Healthy Choice got. As a company they could retreat inside their shells or take advantage of the "bounce" from this coverage.

Also, how many people bought HC with the intent of redeeming miles but never did? They probably did more business from people with good intentions than they "lost" from Pudding Guy.

FWIW- another plus for HC - I buy their products once in awhile now where I would not have considered them before. For example, I always bought Progresso soup, now when I walk down the aisle sometimes I will buy HC instead. So now they are making money off me where they would not have before.

Great point for discussion, myleguy. I'll freely admit that I'm usually happy to take advantage of loopholes. I don't think that's the case here, though.

For one, Healthy Choice included some language in their promotion materials that specifically encouraged people to go nuts with this promotion: Off their website: "The more you buy, the more miles your earn! The number of Frequent Flyer Certificates you can earn is virtually unlimited." and "Remember that you can buy any Healthy Choice product for this offer." and "Q: Is the offer limited? A: American Airlines--No Limit"

Second, Healthy Choice obviously knew about the pudding when they made the offer. This must have (or should have) been factored into the economics of their promotion.

As I sent in the huge box of UPCs, I did think there might be some bad results for the Healthy Choice promotion team. However, any tinge of guilt I had was quickly erased in knowing that the pudding was put to good use. It would have been much easier for me to just tear off the pudding tops and throw the pudding away, but this would have put a taint on the effort.

Finally, I should tell you that a VP with the ConAgra Promotion group called me after the Journal article ran. He congratulated me and said that they design their promotions to be loose and fun with the expectation that people might do crazy things.

Healthy Choice certainly got a huge return on the investment they spent for my miles because I had nothing but good things to say about their products during the media coverage. Of course the result would have been much much different if I had made negative comments about their products.

Thank you BlondeBomber for pointing out that polite disagreements are no reason whatsoever for animosity or even mild anger, let alone banning.

We learn far more from Healthy debates than we would ever learn from sitting around agreeing with each other.

It's impossible to buy the kind of publicity Healthy Choice received from this. The story has even been picked up by a paper in London.

To top it off they have someone who's not a paid spokesperson saying on national TV thant he likes the product - that's priceless.

Yes, they'll be smarter next time. The Kellogg's cereal promotion, which must have some connection to Healthy Choice as it includes their cereals, is limited to specially marked packages, giving the company much more control. But I suspect this would have happened even if Pudding Guy wasn't involved as there were enough other people in on the pudding deal to make them realize they'd made a mistake.

Now that PG has taken the public and marketer's awareness to the next level, what do you folks think the outcome will be generally? More specifically, will FF mile promotions become more common but also more difficult? I can't help but analogize the marketing of VISA/MC/Amex over the last 25 years. There certainly are not the "loopholes" with plastic there used to be!

Excellent points BlondeBomber and Punki about censorship and polite disagreements (I hope this a majority view and not a minority viewpoint).

I don't know if the airlines will impose a cap or not on buying miles. AA was among the two airlines which did not have a cap for this promotion, they are among the most aggresive in selling miles.

For some of us this deal (I mean the 25c pudding) was simply not available. I remember a discussion in FT a while ago about the cheap pudding. If the items are priced higher, e.g. cereal there is much less incentive to buy a truckload of merchandise.