Kmart’s Coupon Mistake Becomes PR Blunder

Discussion
Mar 23, 2010
George Anderson

By George Anderson

Mistakes happen. Everyone knows that. Usually the best approach is to admit
the mistake was made, apologize and then move on to making amends and insuring
it doesn’t happen again.

Last week, Kmart made a mistake. It sent out an email to customers offering
them a link to a coupon worth $10 off any purchase of $20 or more. The coupon,
posted on the Kmart website, was intended for shoppers in Baltimore, Chicago
and New York. It did not, however, specify the geographical limitation and
instead said it was valid at all locations.

Being 2010, many Kmart shoppers saw the coupon online, printed it and then
head out to their local store to redeem it. Many told their friends about it
so they could do the same. What happened next, based on a variety of reports
and posts of Kmart’s Facebook page, was not pretty.

Cashiers and managers in stores where the coupon was not valid refused to
accept the coupons and, in some instances, went so far as to accuse customers
of trying to cheat the retailer.

Seeing that the coupon had gotten out, Kmart pulled it with the following
explanation: “A coupon for $10 off a $20 purchase has had unauthorized circulation
and we have had to stop accepting it at most stores. The coupons will still
be honored in the intended stores in the New York, Baltimore and Chicago area.
We regret any inconvenience this may cause our customers. Thank you for your
continued patronage and we do look forward to sharing other deals and offers
with you in the future.”

One poster on Kmart’s Facebook page wrote, “These are tough times. If Kmart
thinks that people will not seek out and use coupons to the full extent of
their terms, they are not making wise decisions at the highest level of management.
What is absolutely shameful is the accusation that customers were attempting
to use fraudulent coupons. If you make a mistake, admit it, don’t blame it
on someone else.”

Another wrote: “This incident has gotten out of hand. While it’s obvious that
the coupon was too good to be true, the bulk of the blame lies with the company.
The accusation of ‘unauthorized circulation’ is not the appropriate response.
Kmart, you need to admit to the mistake that your own company made. This alone
will go a long way toward repairing the store’s image in the eyes of many customers.”

Discussion Questions: What lessons can be drawn from this incident with
Kmart? How should Kmart corporate have handled the issue once it discovered
its mistake? What is your assessment of how stores dealt with the issue?

Please practice The RetailWire Golden Rule when submitting your comments.

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22 Comments on "Kmart’s Coupon Mistake Becomes PR Blunder"


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Bob Phibbs
Guest
11 years 1 month ago

Lesson? Stupidity exists at many levels. How could this have been reviewed by any marketing or corporate officer and gotten this far? No excuse at this level of retail–they deserve the consequences.

Dick Seesel
Guest
11 years 1 month ago

A simple (although not cheap) solution to this problem: Honor the coupon. This was Kmart’s mistake, not the consumer’s, and it’s disingenuous at best to try explaining to a customer in (say) Dallas that the coupon was intended for people who live in Chicago. The costs of bad publicity and ill will are potentially much higher than the extra markdowns driven by the online offer.

I hope most retailers have the sense to own up to their own proofreading errors (and correct them quickly), instead of suggesting that the customer is doing something wrong by walking in the store.

David Biernbaum
Guest
11 years 1 month ago

The fact that cashiers and managers in Kmart stores where the coupon was not valid refused to accept the coupons and, in some instances, went so far as to accuse customers of trying to cheat the retailer, makes me believe that the CEO ought to sign up for CBS show “Undercover Boss.” However before he goes out to the field he ought to start his journey in the corporate office to check out the job being done by the proofreaders.

Ryan Mathews
Guest
11 years 1 month ago

Another example of why a good proofreader is worth their weight in marketers!

Obviously Kmart management handled it badly. They should have honored the coupons and found some way to pull them off the web or at the very least email out a notification of a truncated redemption period.

As to the stores, assuming the reports are accurate, somebody needs to remind them of the oldest of old retail axioms, “The customer is ALWAYS right, even in cases where the retailer is wrong.”

Art Williams
Guest
Art Williams
11 years 1 month ago

It looks like they chose the worst option available to them by refusing to honor their mistake. This can be studied in marketing classes as how not to handle a situation like this. The big question is “how much longer will Kmart last?”

Joan Treistman
Guest
11 years 1 month ago

I’ve advised my children and now pass the life lesson along to Kmart…before you make a harsh statement to a “loved” one or anyone, think of the upside value. For Kmart there was no upside value in how they handled this coupon episode.

I’m with those who believe that Kmart should own up to the error. Further I think they should have told their customers, “Our loss is your gain. Enjoy!” That message would have done a lot to create an image of a company that appreciates their customers and an unexpected pleasure that might come their way.

I think the cashiers’ attitudes and statements reflect the attitude of management at least at the local level. It seems they told the cashiers that if coupons get through, their jobs are at risk. People who are scared are not concerned with being polite.

There’s much for Kmart management to examine…proofreading, corporate attitudes toward customers and how staff is trained to interact with customers.

Marge Laney
Guest
11 years 1 month ago

They should have honored the coupons everywhere. The money lost in time, sales (because you know more than one person decided not to purchase based on the coupon being declined), and customer experience/loyalty probably far exceeded what it would have cost to honor them. This is what happens when bean counters, not merchants, run retail establishments.

Mark Johnson
Guest
Mark Johnson
11 years 1 month ago

The fact that the mistake was made was one issue, but how it was handled internally probably cost them significant and immeasurable good will, PR, etc. They should have bitten the bullet, and accepted the coupon. Good will expense, advertising expense, etc. That coupon may have led to lift, increased long term share of wallet, etc. Yet this is not going to happen now.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
11 years 1 month ago
Stew Leonard’s, a successful grocer that started with one store in Norwalk, CT and now has 4 thriving in New England displays a huge piece of granite in the front of each store. He engraved in the stone the two store policies. 1) The customer is always right. 2) If the customer is not right refer to rule one. Stew put this rock outside the store after he learned an important lesson. He gave a shopper a tough time about returning some milk that she claimed was bad. The women left the store claiming to never shop their again. He then did the math and realized what a mistake he had made. An argument over the cost of a gallon of milk was going to cost him over $5,200 per year ($100 per for week 52 weeks). Not to mention her telling her friends. Good thing Facebook was not around in the 1960s when this happened. Kmart made a mistake. It happens. What they did after the mistake is what hurt them the most. Kmart… Read more »
Beth Ely
Guest
Beth Ely
11 years 1 month ago
Once it’s out there, it’s out there…and you have to live with it. Part of the copywriter’s (and copy director’s) job is to think through the ramifications of the disclosures…and lack thereof. It really requires a bit of a legal mind to think through what might be necessary to protect the store and clearly define the parameters of the offer to the customer…while, on the flip side, making it sound compelling. If there’s any doubt, run it through legal…while it slows down what is usually a rushed process, it’s well worth the hassle to get another opinion. All that being said, mistakes still happen, and the store has to handle them with sensitivity to the customer and the shopping public. I’ve seen a major retailer open an entire chain of department stores an hour early when a catalog went through the proofing process with an early store opening time that wasn’t correct. That was a tremendous cost in salaries, utilities, etc, but it was the right thing to do, since the information was already out… Read more »
W. Frank Dell II
Guest
11 years 1 month ago

This is not the first or last time a retailer will make a mistake using the internet. A starting point is retailers need to understand direct marketing to consumers does not have the same geographic boundaries as physical stores. While pinpoint targeting seems easy, it is not. Without detailed consumer location information, the areas become fuzzy.

Second, limiting the redemption to a few cities only makes consumers upset. The only way around this is to make sure only consumers that can redeem the coupon should get it. The coupons should have clearly state what cities they could be redeemed in.

If Kmart was smart they should have accepted every coupon submitted without question. It was their mistake, not the consumer’s. By their actions, consumers have lost trust in Kmart. It is very difficult and expensive to rebuild trust. As for the store I suggest the Stew Leonard approach:
1. The customer is always right.
2. If the customer is wrong see rule number 1.

Cathy Hotka
Guest
11 years 1 month ago

Ouch. Notice the strong consensus here that Kmart should have honored the coupon. The challenges for retailers are to train their associates that the customer is always right, and to have better mechanisms for communicating with stores when problems like this arise.

Doug Fleener
Guest
11 years 1 month ago

I wonder if the folks over at Walmart will send Kmart a thank you card? I’m thinking after you’ve been told no and accused of being dishonest, you’re unlikely to return.

As everyone else commented, they should have owned up to the mistake and honored it. Yes it’s expensive to do, but not nearly as expensive as losing a whole lot of customers.

Max Goldberg
Guest
11 years 1 month ago

Kmart made a mistake. Sooner or later every retailer does. Kmart should have simply honored the coupon. That’s what company that is customer-focused does. They could have used their mistake to build good will. Instead, they chose to alienate consumers. When you make a mistake, own up to it, take your lumps, learn and move on. Are you listening, Kmart?

Camille P. Schuster, PhD.
Guest
11 years 1 month ago

Shortchanging business processes comes back to haunt you. Cutting employees to the point at which employees have too much work and can not concentrate well is a problem AND/OR not valuing or rewarding all required work is a problem. Mistakes will happen. What business processes do you have in place to catch them? How do you employees respond to them when identified? These are also important activities that need to be built into your business process.

Kai Clarke
Guest
11 years 1 month ago

Kmart could have turned this into a PR bonanza! Instead of upsetting their customers, they should have called a huge news conference and honored the coupons at all locations. The increase in shoppers, over just a single day $10 coupon, would have cost less than the advertising to get the same number of shoppers into their stores. In addition to this, Kmart would have realized incremental sales and developed a more loyal customer.

Craig Sundstrom
Guest
11 years 1 month ago

Question so far unasked: why would a coupon be limited to (only) 3 cities, and what will be the reaction of everyone else – which in this case is practically everyone – when they find out they’re not included?

Anyway, the obvious lessons here are (1) don’t make mistakes in the first place, but (2) own up to them when you do. Both of these, of course, require employing competent people, and one has to wonder if an organization than is known for making more cuts than a gang member’s knife is still hiring the best and brightest…not accusing, mind you, just wondering.

Rick Myers
Guest
Rick Myers
11 years 1 month ago
As a store person, you can imagine a customer coming in with the coupon and you not knowing anything about it. It’s printed off a computer, which we know can be changed very easily. I would hope an associate wouldn’t outright accuse a customer of fraud. Most responses would be an “I don’t know.” Many stores like our local Kroger have signs up stating they have the right to refuse internet coupons. I’m not sure about Kmart. There are fraudulent coupons in the market. It also looks too good to be true at $10 off a $20 purchase. So you take care of the person in front of you, then talk to your store manager, or district, regional manager. Or, if you are really ingenious you pull up the internet site and print the coupon yourself and call your home office. Working in stores, you generally have to assume that people are generally honest until proven not, or it will drive you nuts. You take your lumps for the duration of the coupon and realize… Read more »
Tomer Tishgarten
Guest
Tomer Tishgarten
11 years 1 month ago

This is another case of history repeats itself.

I remember a promotion during the Summer of 2006 when Starbucks distributed an email containing a coupon for a free latte to employees. Employees were encouraged to pass it along to friends so as one can imagine, it caught on like wildfire.

So what was the outcome?

(A) Starbucks initially honored the coupon but they later shut it down.

(B) They also issued a release (see link) explaining that the coupon was no longer valid.

(C) Faced a lawsuit for $114M by one customer claiming that it was fraud. It seems that the lawsuit was dismissed — no surprise here!

So what’s the difference?

Starbucks ate the cost of the FREE latte initially — which is the smarter way to go. Permanent damage? None. No one seems to even remember it; well, maybe one person?! 😉

I know that we’re talking about a $10 loss but they moved merchandise and realized $10 in revenue. They should have taken the hit because it certainly pissed off some loyal customers.

Mark Johnston
Guest
Mark Johnston
11 years 1 month ago

While mistakes do happen from time to time (not proof-reading advertising copy), the largest and most costly mistake was in Kmart’s mishandling of the situation. Consumers do not like to be called dishonest, and accusing them will result in bad feelings, mistrust, and ultimately fewer purchases.

Li McClelland
Guest
Li McClelland
11 years 1 month ago

Yes, it was a PR nightmare that Kmart’s Crisis Management Dept. was obviously not equipped to handle. They bungled it after the fact, big time.

That said, I do not think enough is being made here of the horrible in-house mistake that was made in the first place. It’s too easy to say “oh, mistakes happen” and rip the local managers across the country who were never even alerted to this promotion or to expect any coupons at all.

This should NOT have happened. This was an email-initiated coupon that was supposed to be targeted and limited. This was not mistakenly put out to the world on their website, but was erroneously sent out to customers who have already given Kmart their email addresses (and most certainly other locality/zip code info). The internet list was not scrubbed or filtered. Somebody or several somebodies need to be fired over this.

Other retailers will be nuts if they do not use this screw-up as a lesson/example to their own marketing and internet promotion managers.

Ed Dennis
Guest
Ed Dennis
11 years 1 month ago

The primary lesson is that you don’t entrust your business to incompetent employees and agencies. If Kmart was a standard bearer this would be even worse. Fact is we are much more surprised when Kmart gets something right!

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