So if the fiasco ended up costing them $400 million in the long run, and that's 12 times the cost if they had just paid out the erroneous bottle caps, logically they should have just bit the bullet and paid. But of course that's impossible to see at the outset so they compare it to the $2M they have budgeted and paying seems outrageous. It's the number anchoring (as described by Daniel Kahneman) that seems to have made for a terrible outcome in this case! So interesting!
Well, I think the full payout was $32 Billion (800,000 caps x $40,000 ea). So the $400 million was a fraction of the worst case -- but as you pointed out -- well above the $2 million they had budgeted. I would love to have been in the room when they had the conversation with their errors and omissions insurance carrier! The scale of the disaster probably came into view slowly because it does not seem like they even knew how many winning caps had been printed when they decided to pay everyone $20 each. From this, it is probably good to remember not to maek decisions at 3 AM meetings!
Right!! $32Billion!! Another lesson - not to make comments at 9pm when you are tired and haven't paid attention to the math!
You're right about that 3am meeting. And I wonder if they'd decided on something like an approach of "We made a mistake with the rules and printing and we can't pay people without the security code up front. But we are working on a solution to pay incrementally over time."
Something that owned the disaster and brought people into their side as they worked out a solution??
I learned about your newsletter through Wynne’s blog, and have enjoyed reading about the time you all were in the Philippines in some of her posts. It’s fun reading about it here from a different perspective. As to what Pepsi could have done differently, I’d have to say don’t commit to more than what you can pay. Do the numbers ahead of time. Have a strategy. Things that, in hindsight, seem obvious (to Pepsi as well, I’m sure). Great reminder to count the cost, and don’t overpromise.
Thank you for the kind words and the sage advice for Pepsi not to overpromise. We did have a great time living in the Philippines. The people are lovely there, and I feel lucky every time I get to go back.
...........as to ideas of how better to have played the hand.............none. Advice.......stay away from risky $$ incentive games. Stick to clever, entertaining ads and good product(s)
Well, you know, unless you can get your own private island!! Seriously, I agree. Good products should sell themselves and if they need a nudge, the ads better be good too.
I'd deploy the Texas Two Step. Seems to too often work in this country (sadly). why not Phillipines!?
I had not heard about the Phillipines bottle cap fiasco. Have you heard of the Pepsi Harrier Jet debacle? Not a $32B pricetag, but serious $, and a hit to the brand.
Thank you, Wynne - you as well! I see that great writing runs in the family, and as you said, this really was an interesting case! Also, I wasn’t familiar with the term “number anchoring,” but found it to be interesting too. Makes me think of other types of cognitive biases, and how many decisions and behaviors (both in terms of business, as well as our personal lives) are effected by them. Fascinating!
So if the fiasco ended up costing them $400 million in the long run, and that's 12 times the cost if they had just paid out the erroneous bottle caps, logically they should have just bit the bullet and paid. But of course that's impossible to see at the outset so they compare it to the $2M they have budgeted and paying seems outrageous. It's the number anchoring (as described by Daniel Kahneman) that seems to have made for a terrible outcome in this case! So interesting!
Well, I think the full payout was $32 Billion (800,000 caps x $40,000 ea). So the $400 million was a fraction of the worst case -- but as you pointed out -- well above the $2 million they had budgeted. I would love to have been in the room when they had the conversation with their errors and omissions insurance carrier! The scale of the disaster probably came into view slowly because it does not seem like they even knew how many winning caps had been printed when they decided to pay everyone $20 each. From this, it is probably good to remember not to maek decisions at 3 AM meetings!
Right!! $32Billion!! Another lesson - not to make comments at 9pm when you are tired and haven't paid attention to the math!
You're right about that 3am meeting. And I wonder if they'd decided on something like an approach of "We made a mistake with the rules and printing and we can't pay people without the security code up front. But we are working on a solution to pay incrementally over time."
Something that owned the disaster and brought people into their side as they worked out a solution??
I learned about your newsletter through Wynne’s blog, and have enjoyed reading about the time you all were in the Philippines in some of her posts. It’s fun reading about it here from a different perspective. As to what Pepsi could have done differently, I’d have to say don’t commit to more than what you can pay. Do the numbers ahead of time. Have a strategy. Things that, in hindsight, seem obvious (to Pepsi as well, I’m sure). Great reminder to count the cost, and don’t overpromise.
Thank you for the kind words and the sage advice for Pepsi not to overpromise. We did have a great time living in the Philippines. The people are lovely there, and I feel lucky every time I get to go back.
Oh, I love seeing you in a different space, Kendra!! How fun - and your strategy makes sense!
...........as to ideas of how better to have played the hand.............none. Advice.......stay away from risky $$ incentive games. Stick to clever, entertaining ads and good product(s)
Well, you know, unless you can get your own private island!! Seriously, I agree. Good products should sell themselves and if they need a nudge, the ads better be good too.
I'd deploy the Texas Two Step. Seems to too often work in this country (sadly). why not Phillipines!?
I had not heard about the Phillipines bottle cap fiasco. Have you heard of the Pepsi Harrier Jet debacle? Not a $32B pricetag, but serious $, and a hit to the brand.
Yeah, I can't believe they got themselves out of that one. And it is the gift that keeps on giving with the Netflix docuseries about it just last year: https://en.wikipedia.org/wiki/Pepsi,_Where%27s_My_Jet%3F
I wonder how many times they can fire the person that thought it up!
Thank you, Wynne - you as well! I see that great writing runs in the family, and as you said, this really was an interesting case! Also, I wasn’t familiar with the term “number anchoring,” but found it to be interesting too. Makes me think of other types of cognitive biases, and how many decisions and behaviors (both in terms of business, as well as our personal lives) are effected by them. Fascinating!