I know that I am not the only one, but all the talk of KFC’s Grilled Chicken promotion was starting to irk me. You have to be living under a rock if you haven’t heard about Oprah’s partnership to give everyone in America who, during a two day period, could download a coupon for a free 2-piece grilled chicken meal. Every business’s dream is to make the Oprah show, because of the success stories, but there are just as many horror stories of brands that were unable to respond to the overwhelming demand for their products. There are countless stories of companies that went out of business because of being featured on Oprah. She is the Billy Mays of syndicated television, yet she remains shielded from mainstream negative sentiments over overt product placement, conflicts of interest, and any negative externalities of the products she promotes. Wasn’t Oprah honored by PETA not even a year ago? The same PETA that is aggressively against KFC’s treatment of animals?
I’ve read and heard myths, hearsay, urban legends, and conspiracy theories about this deal. I also never heard so much thanks and praise for Oprah, for enabling so many people to have two pieces of chicken, two sides, and a biscuit. For many, it’s like a dream come true: free food. Who doesn’t love free food? My older ex-colleagues at JPMorgan would remind me of the good ol’ days when the whole company received free Friday lunch. To me, standing in a line for over an hour for a market value of $3.99 doesn’t seem like the best use of time, but hey, I think my hour is worth more than four bucks. Maybe that’s the economist in me.
Initially, when KFC was rolling out their new product line, grilled chicken, they used the tag-line “Un-Think KFC”, to get consumers to forget that the F in KFC stood for fried, a tabu term in the days of low carb meals, eat fresh, organic/green food, and hydroxycut. From a brand standpoint, it is a stretch, a big stretch. It’s confusing and complicated to the consumer. The reason why this promotion was a brand crisis is that it strained relationships between consumers, the media, and the franchises themselves. In many ways, it reminded us of the McDonald’s Beanie Baby fiasco where mothers were buying the happy meals, throwing away the food, keeping the beanie babies, with McDonalds being unable to respond to the overwhelming demand for the toys.
KFC reported that over 10.5 million coupons were downloaded from the site, despite several site outages, slow response times, and crashes. I’d imagine that several orders of magnitude more were copied as well. KFC also reported that 4 million coupons were redeemed, but that would leave between 6-15 million more that weren’t redeemed! Talk about an inability to respond to market demand! KFC execs were forced to do additional commercials apologizing for the overwhelming market demand, and even prompted a visit on Oprah to apologize some more.
How could this all happen? Social media stepped in and showed a glimpse of it’s power.
Previously, e-mail chains would be used to send coupons, deals, and limited time offers. Now, I observed the URL being sent via Facebook and Twitter at a velocity I never thought was possible. This may have occurred with e-mail, but it was the fact that there were conversations built around the product, and shared conversations were taking place amongst friends, family, and strangers, amplifying the word of mouth. It is much more convenient and accessible to do it via these social media channels, and even if you’re not engaging in the conversation, you are reading the conversation, and passing that knowledge over to others.They were able to tap into new and infrequent customers, who may have never considered KFC as one of their options.
This is the era of the Real Time Web, and to me, this will be known as the crowning event that showcased the future of content, conversations, and corporate engagement. This can turn a successful media campaign to a crisis/disaster in a couple of hours. The one thing KFC did do well with this campaign is that everyone now knows KFC has grilled chicken. It will never be forgotten. Doing a Technorati search, over 447 blog posts have been written in regards to KFC grilled chicken and a Google Blog search yields over 62,375 results and a Twitter search yields new conversations about KFC grilled chicken every couple of minutes.
Here’s where they went wrong
Some KFC franchises didn’t participate in the promotion because they weren’t being reimbursed by the corporate headquarters. KFC’s corporate office said the franchises were reimbursed, but reports of the contrary are troubling. If this sounds familiar, it’s because Quizno’s failed with their franchises for the exact reason. For those that aren’t familiar, the franchises are encouraged to go along with promotions guided by the corporate offices and the challenges with the franchise model, is the sometimes turbulent relationship between the franchises and the franchisees. Most franchises, owned by individuals are under strict guidelines to be maintained as a franchise by the corporate offices. Much of the risk of owning a franchise is your ability to follow those guidelines, and be agile enough when promotions and special offers take place.
Consumers were confronted with long delays, frustrated with many KFCs inability to live up to market demand, and there are even some reports of riots and police involvement. Any time you don’t live up to the promises your promote, it’s a big time black eye for the brand.
What they could have done to turn the crisis into a competitive advantage
Any crisis management business school course will teach you that when you’re in a corporate crisis, not only do you have to provide transparency, and be honest about the shortcomings of the business, you have an opportunity to turn it into a competitive advantage. If it were me, as Monday morning quarterback, I’d let all customers get a raincheck, while we ramp up supply. In addition to that, to get a raincheck, everyone would have to fill out a quick online survey (optional) so that I can get some data on the demographics and psychographics of the consumers. Forget sending in your old coupon and hoping that many people don’t submit them (like companies expect with rebates). Give yourself a chance to get all the data you need, to better take over (or position yourself) within this market as a first-mover in the “fried chicken space”. You prevent others like Popeye’s from digging into your market share, and you know how to better target them in the future.
I don’t think anyone (especially the corporate guys) could have really anticipated this type of response. But with a struggling economy, and everyone counting their dollars, and cents, you can create a great deal of demand by focusing on price. It appears that with the advent of the $5 dollar footlong at Subway and dollar meals at all your fast food spots, it appears that they are really going to bottom out their profit margins in hopes for volume of sales. It will be interesting to chart the net profit margins of franchises vs. franchisees in this economy on a month to month basis.
In my next blog post, I will try and do some back of the envelope math to try and figure out the cost and benefits of this type of promotion. One thing missing from this analysis is the social value created by this promotion such as from a health standpoint. I think if you evaluate the demographic of their core patrons, who frequent their locations many times, there are significant benefits to having the option of grilled chicken to replace fried chicken.