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Belch: Advertising and
Promotion, Sixth Edition
IMC PERSPECTIVE 16-4
V. Developing the
Integrated Marketing
Communications Program
16. Sales Promotion © The McGraw−Hill
Companies, 2003
McDonald’s and Others Learn the Perils of Promotions
Contests, sweepstakes, and premium offers are often
used by marketers to give consumers an extra incentive
to purchase their products. However, when these
promotions don’t go as planned, they can embarrass a
company or even create legal problems. A number of
high-profile companies known for their marketing
excellence have experienced problems with promotions
over the years. Kraft Food and PepsiCo encountered
problems resulting from printing errors and
computer glitches, while more recently McDonald’s
was the victim of a conspiracy to steal high-value
game pieces from its long-running Monopoly game
promotion. These botched promotions were embarrassing
for the companies and resulted in the loss of
goodwill as well as money.
Kraft was one of the first to learn how expensive it
can be when a promotion goes awry. In 1989, a printing
error resulted in the printing of too many winning
game pieces for a match-and-win game promotion.
Kraft canceled the promotion but still had to spend
nearly $4 million to compensate the winners—versus
the $36,000 budgeted for prizes. The snafu gave birth
to the “Kraft clause,” a disclaimer stating that a marketer
reserves the right to cancel a promotion if there
are problems and hold a random drawing if there are
more winners than prizes.
A few years later, PepsiCo had a major problem when
a bottle-cap promotion offering a grand prize of 1 million
pesos (about $36,000) went wrong in the Philippines.
Due to a computer glitch, the winning number
appeared on more than 500,000 bottle caps, which
would have made the company liable for more than $18
billion in prize money. When the error was discovered,
Pepsi announced that there was a problem and quickly
offered to pay $19 for each winning cap, which ended
up costing the company nearly $10 million. The furor
caused by the botched promotion prompted anti-Pepsi
rallies, death threats against Pepsi executives, and
attacks on Pepsi trucks and bottling plants.
McDonald’s also ran into a major problem with a
promotion when winning game pieces were embezzled
from its popular Monopoly game promotion. McDonald’s
ran its first Monopoly game promotion in 1987
and began running it annually in 1991. The company
was able to run the game so long because it worked on
many different levels. Consumers knew how to play the
game, its big prizes generated excitement and interest,
and its format—which required participants to collect
all the Monopoly board game pieces to win—drove
repeat traffic into the restaurants. McDonald’s also
spent large amounts of money on ads promoting the
game and kept refining it with new iterations such as a
Pick Your Prize twist. However, in August 2001 the Federal
Bureau of Investigation arrested eight people for
embezzling winning game pieces from the Monopoly
game as well as the company’s “Who Wants to Be a Millionaire”
sweepstakes in order to divert nearly $24 million
worth of prizes to co-conspirators.
The conspiracy is believed to have begun as early as
1995, and the FBI investigation, which was conducted
with McDonald’s cooperation, lasted two years before
the arrests were made. Fifty-one people were indicted
in the case, nearly all of whom either pleaded guilty or
were convicted following trial. Among those pleading
guilty was the director of security for McDonald’s promotional
agency, Simon Marketing, who stole the winning
tickets and conspired with the others to
distribute them to a network of recruiters who
solicited individuals to falsely claim they were legitimate
game winners.
Following the arrests McDonald’s immediately fired
Simon Marketing, as did several other of the agency’s
clients, including Kraft Foods and Philip Morris Co. To
win back consumer confidence, McDonald’s ran a fiveday
instant giveaway promotion over the Labor Day
weekend in which consumers could win 55 cash prizes
ranging from $1,000 to $1 million. The company also
created an independent task force comprised of
antifraud and game security experts to review procedures
for future promotions.
The promotion scandal that rocked McDonald’s sent
shock waves through the industry and threatened to
undermine consumer trust in contests and sweepstakes
in general. Marketers are now more carefully
reviewing their contests and sweepstakes as well as
the companies that manage them. However, most
industry experts maintain that McDonald’s was a rare
victim in an industry conducted honestly and legitimately
and policed by many private and public watchdogs.
While marketers will continue to use contests,
sweepstakes, and games, they will be taking extra precautions
to safeguard them to avoid the problems
Kraft, PepsiCo, and McDonald’s encountered.
Sources: Kate McArthur, “Guilty Verdict for Four in McDonald’s
Sweepstakes Scandal,” AdAge.com, Sept. 3, 2002; Kate McArthur,
“McSwindle,” Advertising Age, Aug. 27, 2002, pp. 1, 22; Cara Beardi,
“Scandal May Impact Other Sweepstakes,” Advertising Age, Aug.
27, 2002, p. 22; Betsy Spethmann, “The Perils of Promotion,” Promo,
November 1996, pp. 22, 134.
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