# Number Fever: How Pepsi Nearly Went Pop

An episode of [Cautionary Tales with Tim Harford](https://invisiblenetwork.ai/podcast/1484511465), 9 Apr 2021, 35 min.

Audio: https://podtrac.com/pts/redirect.mp3/pdrl.fm/18db03/tracking.swap.fm/track/SxlTEPDY7xDg35RXkASs/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/c0ae8c6e-22f0-4e9b-ac1c-ae390037ac53/594dd469-55b4-4fc2-871e-ae39003ba62f/audio.mp3?utm_source=Podcast&in_playlist=7f5a4714-6b10-4ccf-a424-ae390037ac70

Pepsi twice ended up in court after promotions went disastrously wrong. Other big companies have fallen into the same trap - promising customers rewards so generous that to fulfil the promise might mean corporate bankruptcy. Businesses and customers alike are sometimes blinded by the big numbers in such PR stunts - but it's usually the customers, not the businesses, who end up losing out. Read more about Tim's work at http://timharford.com/ Learn more about your ad-choices at https://www.iheartpodcastnetwork.com See omnystudio.com/listener for privacy information.

## Transcript

[0:15] Speaker 1: Pushkin in a tin roof chack in a slum of Manila,
[0:33] Speaker 1: the capital of the Philippines. Victoria Angelo lived with her husband, Puanito,
[0:38] Speaker 1: and their five children. Puanito was a rickshaw driver. He
[0:43] Speaker 1: made around four dollars a day. Life was a daily grind.
[0:47] Speaker 1: Hard work alone offered no route out of poverty. So
[0:51] Speaker 1: when the Pepsi Cola company started a new promotion in
[0:55] Speaker 1: nineteen ninety two, Victoria took notice. Number fever seemed easy
[1:01] Speaker 1: to understand by a bottle of Pepsi, and under the
[1:05] Speaker 1: bottle cap you'd see printed a three digit number and
[1:09] Speaker 1: a cash prize amount. Every night, on the Channel two
[1:14] Speaker 1: TV news program, Pepsi would announce a winning number. If
[1:18] Speaker 1: you had a bottle cap with that number, you'd win
[1:21] Speaker 1: the amount shown. The prizes went up to a million
[1:25] Speaker 1: paceos some forty thousand dollars. It would take Juanito thirty
[1:30] Speaker 1: years to earn that. Victoria started buying Pepsi. Every night,
[1:36] Speaker 1: she watched Channel two for the announcement of the winning number,
[1:39] Speaker 1: and she checked her growing collection of bottle caps, and
[1:45] Speaker 1: every night she was disappointed until one night the television
[1:52] Speaker 1: announced the number three four nine hold on Victoria was
[1:57] Speaker 1: sure she had a bottle cap marked three for nine.
[2:00] Speaker 1: Here it is. Now, what's the amount on the cap?
[2:04] Speaker 1: One million paceos. You can feelish school, you can get
[2:10] Speaker 1: the gullege. She told her children. We can buy a
[2:14] Speaker 1: real house. It seemed like a dream come true. But
[2:18] Speaker 1: unknown to Victoria, something very strange was happening in homes
[2:24] Speaker 1: all across the Philippines. Exactly the same scene was playing out.
[2:29] Speaker 1: Families were watching Channel two checking their collection of bottle caps,
[2:33] Speaker 1: discovering that they had one printed with three for nine
[2:36] Speaker 1: and a million Paco prize, and celebrating their incredible good fortune.
[2:41] Speaker 1: What had happened, It's not clear exactly. Instead of printing
[2:45] Speaker 1: just two bottle caps with three for nine on them,
[2:48] Speaker 1: they'd accidentally printed hundreds of thousands, and nobody at PEPSI
[2:55] Speaker 1: had noticed the problem. But three for nine had just
[2:58] Speaker 1: been announced as a winning number. PEPSI would notice the
[3:03] Speaker 1: problem soon enough. I'm Tim Harford and you're listening to
[3:09] Speaker 1: cautionary tales. In Worcester, England, a physicist called Phil Calcutt
[3:36] Speaker 1: was doing his regular shop at his local supermarket Tesco.
[3:40] Speaker 1: As he strolled down the fruit tile, a special offer
[3:43] Speaker 1: caught his attention. Buy a bunch of bananas and get
[3:47] Speaker 1: twenty five Tesco club card points. The bananas cost one
[3:51] Speaker 1: pound and seventeen pence. The points were worth fivepence each.
[3:56] Speaker 1: Mister Calcutt did the math. He'd get club card points
[3:59] Speaker 1: worth eight pence more than the bananas cost. Could that
[4:03] Speaker 1: be right? He double checked his mental arithmetic. Yes, he'd
[4:07] Speaker 1: make a profit of eightpence on every bunch of bananas
[4:10] Speaker 1: he bought. So mister Calcott piled his trolley seven feet
[4:14] Speaker 1: high with bananas. Then he got another trolley and filled
[4:18] Speaker 1: that with bananas too. My living room was stacked from
[4:22] Speaker 1: floor to ceiling with twenty five cases containing around three
[4:26] Speaker 1: thousand bananas. But when I popped back for some more,
[4:30] Speaker 1: they said they would only sell me one case, which
[4:32] Speaker 1: is quite understandable because they seemed to be making a
[4:35] Speaker 1: loss on it. When he'd redeemed his Tesco club card points,
[4:38] Speaker 1: mister Calcott ended up with a profit of twenty five
[4:41] Speaker 1: pounds and twelvepence, a modest sum, perhaps, but far more
[4:47] Speaker 1: valuable was all the fun he had distributing free bananas
[4:50] Speaker 1: like some comic book superhero around his neighborhood. Children in
[4:55] Speaker 1: the street. Now shout banana man whenever they see me.
[5:02] Speaker 1: Whoever in Tesco's marketing department had proposed that promotion evidently
[5:07] Speaker 1: hadn't done the math, nor had the manager who signed
[5:10] Speaker 1: off on it, nor had any of Tesco's millions of
[5:14] Speaker 1: other customers. Only one man had noticed banana man. Is
[5:22] Speaker 1: that surprising? Probably not if you're the mathematician John Allan Paulos,
[5:27] Speaker 1: who wrote the classic book in Numeracy. Paulos tells the
[5:31] Speaker 1: story of watching the TV news with a friend, a
[5:34] Speaker 1: notoriously pedantic friend, the sort who'd correct you for saying
[5:38] Speaker 1: continuously when you mean continually. The weather forecast came on.
[5:44] Speaker 1: There's a fifty percent chance of rain on Saturday and
[5:48] Speaker 1: a fifty percent chance on Sunday, so there's certain to
[5:52] Speaker 1: be rain this weekend. Paulos turned to his friend. Did
[5:56] Speaker 1: you hear that? How embarrassing? What was I'm sure you've
[6:01] Speaker 1: noticed the forecasters mistake. In fact, there's a one in
[6:04] Speaker 1: four chance of no rain, the same probability of flipping
[6:08] Speaker 1: a coin twice and getting two tails. It's the seventy
[6:12] Speaker 1: five percent years of weekend rain. Obviously it is. I mean,
[6:17] Speaker 1: oh yeah, sure, when it comes to numbers, said Paulos.
[6:21] Speaker 1: Even the smartest among us are unobservant. Companies know that
[6:26] Speaker 1: they take advantage of it all the time. We see
[6:29] Speaker 1: the low monthly payment in big type and forget to
[6:32] Speaker 1: multiply by the number of months we keep paying our
[6:36] Speaker 1: monthly gym membership instead of dividing it by our monthly visits,
[6:40] Speaker 1: and seeing we should switch to pay as you go.
[6:43] Speaker 1: We buy extended warranties on household appliances when some simple
[6:48] Speaker 1: probability would suggest we should take our chances. Number fever
[6:53] Speaker 1: played on that numerical laziness. Flip the cap off your
[6:57] Speaker 1: bottle of PEPSI, see a three digit number and a
[7:00] Speaker 1: million pay so prize, and you might naturally get the
[7:03] Speaker 1: impression that you have a one in a thousand chance
[7:05] Speaker 1: of winning. Not too shabby and not of course, think
[7:10] Speaker 1: about it, and you'd quickly realize that Pepsi must have
[7:14] Speaker 1: printed far more losing numbers than winning ones, wouldn't they
[7:19] Speaker 1: The true chance of winning was vastly smaller than one
[7:23] Speaker 1: in a thousand. When consumers fail to do the sums,
[7:28] Speaker 1: we get screwed. But what happens when it's the companies
[7:32] Speaker 1: that mess up? As we'll see the answer is often
[7:36] Speaker 1: that consumers still get screwed, often, but not always. An
[7:48] Speaker 1: engineer called David Phillips was shopping in his local supermarket
[7:52] Speaker 1: in Davis, California, in nineteen ninety nine. He noticed a
[7:56] Speaker 1: new promotion by a food brand called Healthy Choice. Send
[8:01] Speaker 1: in ten barcodes from their products and they'd give you
[8:04] Speaker 1: five hundred air miles. They'd double it to a thousand
[8:07] Speaker 1: if you sent them in before a certain deadline. Just
[8:11] Speaker 1: like banana man Phil Calcutt, mister Phillips paused to do
[8:14] Speaker 1: the math. How much is an air mile worth? That
[8:18] Speaker 1: can vary depending on how you redeem them, but Phillips
[8:21] Speaker 1: calculated one air mile was surely worth at least two cents.
[8:27] Speaker 1: His family liked Healthy Choice frozen meals, which cost two dollars.
[8:31] Speaker 1: Ten frozen meals twenty dollars. Send in the barcodes and
[8:36] Speaker 1: he'd get a thousand air miles, also worth at least
[8:39] Speaker 1: twenty dollars. Who said there was no such thing as
[8:43] Speaker 1: a free lunch, Phillips filled his freezer. Then he thought,
[8:49] Speaker 1: what else is in the Healthy Choice product line? If
[8:53] Speaker 1: he could find products for cheaper than two dollars, he'd
[8:56] Speaker 1: be getting back more in air miles than he would
[8:58] Speaker 1: spend on the food. I found Healthy Choice soups that
[9:02] Speaker 1: were less than a dollar tin soup perfect, it would
[9:07] Speaker 1: keep forever and didn't need more freezer space. David bought
[9:11] Speaker 1: all the Healthy Choice soups in his local supermarket. Then
[9:14] Speaker 1: he went to other nearby supermarkets and bought all their
[9:18] Speaker 1: Healthy Choice soups too. Soon he had accumulated eight hundred
[9:22] Speaker 1: cans of soup. By this point, David's wife, Cindy was
[9:28] Speaker 1: wondering if this might all be a little too good
[9:30] Speaker 1: to be true. Are you sure you haven't missed something
[9:33] Speaker 1: in the small print? Maybe there's a limit on how
[9:35] Speaker 1: many miles you can claim. David poured over the terms
[9:39] Speaker 1: and conditions. In return. For every ten barcodes and proof
[9:43] Speaker 1: of purchase, it said Healthy Choice would issue a certificate
[9:48] Speaker 1: for air miles. The certificates could be redeemed with six
[9:52] Speaker 1: different airlines, and while two of them did indeed stipulate
[9:56] Speaker 1: a limit on how many certificates they would redeem, the
[9:59] Speaker 1: other four didn't. In fact, the offer told consumers to
[10:03] Speaker 1: remember there was no limit to the number of miles
[10:05] Speaker 1: they could earn with just three weeks to go. For
[10:09] Speaker 1: the deadline, mister Phillips stumbled on a startling new opportunity.
[10:15] Speaker 1: One supermarket chain grocery outlet had started selling Healthy Choice
[10:20] Speaker 1: chocolate puddings for just twenty five cents. Remember, Healthy Choice
[10:26] Speaker 1: was effectively offering air miles worth at least two dollars
[10:30] Speaker 1: on every one of those puddings. There was no time
[10:33] Speaker 1: to lose. I drove to about fifteen grocery store outlet
[10:37] Speaker 1: stores in a weekend. I filled up my van with
[10:39] Speaker 1: chocolate pudding. After that, I made contact with a local
[10:42] Speaker 1: grocery store outlet manager had him special order me sixty
[10:46] Speaker 1: more cases. David Phillips now had over twelve thousand chocolate
[10:52] Speaker 1: puddings and a problem. Two problems in fact, how would
[10:57] Speaker 1: his family ever eat all those puddings? The second problem
[11:02] Speaker 1: was more pressing, how would he managed to peel off
[11:05] Speaker 1: twelve thousand barcodes in just three weeks? But mister Phillips
[11:11] Speaker 1: was a resourceful man, and he realized he could solve
[11:14] Speaker 1: both problems at once. He contacted his local food bank
[11:19] Speaker 1: and offered to donate all the chocolate puddings if their
[11:22] Speaker 1: volunteers would do him the favor of taking off the
[11:25] Speaker 1: barcodes for him. They said yes. Phillips meticulously organized his
[11:31] Speaker 1: barcodes into bundles of ten and filled in the claims
[11:35] Speaker 1: forms over a thousand of them, enough for over a
[11:39] Speaker 1: million air miles. That would basically be all the long
[11:43] Speaker 1: haul holidays his family could ever want. David Phillips posted
[11:48] Speaker 1: off his barcodes and waited. There was no immediate reply
[11:55] Speaker 1: from Healthy Choice, but he had read the small print
[11:58] Speaker 1: that said it would take six to eight weeks for
[12:00] Speaker 1: the air mile certificates to arrive. Six weeks past, then
[12:06] Speaker 1: eight weeks. Now, Phillips was to get worried. With still
[12:11] Speaker 1: no response from Healthy Choice, he phoned them up Disaster.
[12:18] Speaker 1: They said they had no record of receiving any barcodes
[12:22] Speaker 1: from him at all. Cautionary tales will return after this message.
[12:39] Speaker 1: After Channel two News announced that three four nine was
[12:43] Speaker 1: the winning number on the Pepsi bottle tops, crowds of
[12:46] Speaker 1: jubilant customers descended on Pepsi plants to claim their prizes.
[12:52] Speaker 1: It soon became clear that something had gone horribly wrong.
[12:57] Speaker 1: How much would it cost Pepsi to honor all the prizes?
[13:02] Speaker 1: Upwards of fifteen billion dollars It was roughly half the
[13:08] Speaker 1: Philippines gross domestic product. More to the point, it was
[13:11] Speaker 1: close to the entire market capitalization of the Pepsi Corporation,
[13:16] Speaker 1: not just in the Philippines but the whole world. There
[13:20] Speaker 1: was simply no way that Pepsi could afford it. Panicked
[13:25] Speaker 1: executives held a crisis meeting at three o'clock in the morning.
[13:29] Speaker 1: They apologized for the computer glitch. They pointed out that
[13:33] Speaker 1: every bottle cap also contained a security code, and explained
[13:37] Speaker 1: that this would identify the two bottle caps they had
[13:40] Speaker 1: intended to be winners, and for everyone else with a
[13:43] Speaker 1: three four nine bottle top, they decided to offer a
[13:46] Speaker 1: goodwill payment of five hundred pasos, a mere twenty dollars.
[13:55] Speaker 1: The bottle tops came flooding in four hundred and eighty
[13:58] Speaker 1: six thousand, one hundred and seventy of them. The goodwill
[14:02] Speaker 1: payments cost PEPSI about ten million dollars, five times what
[14:07] Speaker 1: they'd initially budgeted for the tire number fever campaign, but
[14:11] Speaker 1: it wasn't enough to quell everyone's outrage. Thousands of people
[14:16] Speaker 1: kept hold of their three four nine bottle tops. They'd
[14:19] Speaker 1: thought their lives were about to change forever. Now they
[14:24] Speaker 1: were being offered just twenty dollars. That wasn't going to
[14:28] Speaker 1: buy their goodwill. They were determined to make PEPSI pay.
[14:38] Speaker 1: David Phillips was determined two. He'd gone to all that trouble,
[14:43] Speaker 1: buying eight hundred tins of soup and twelve thousand chocolate puddings,
[14:48] Speaker 1: organizing all the barcodes, filling in all the forms, and
[14:52] Speaker 1: now he learned that the package he had sent to
[14:55] Speaker 1: Healthy Choice had apparently gone missing. This seemed pretty incredible,
[15:00] Speaker 1: given that I mailed the package registered and someone on
[15:03] Speaker 1: their end signed for the package. But would a man
[15:07] Speaker 1: as meticulous as David Phillips failed to plan for that
[15:11] Speaker 1: eventuality Not likely. Phillips had photocopied everything. He'd even videotaped
[15:19] Speaker 1: himself buying the chocolate puddings and stacking them up in
[15:22] Speaker 1: his house, just to be on the safe side. Presented
[15:26] Speaker 1: with this evidence, Healthy Choice quickly caved. Mister Phillips got
[15:32] Speaker 1: his air miles think for a moment about what David
[15:37] Speaker 1: Phillips did. He hadn't just done one calculation, the numerical
[15:43] Speaker 1: one that showed the sums on the chocolate puddings didn't
[15:45] Speaker 1: add up. He'd made a second kind of calculation, too,
[15:50] Speaker 1: a pragmatic calculation about how things work in the real world.
[15:55] Speaker 1: All along, I was somewhat worried that Healthy Choice wouldn't
[15:58] Speaker 1: honor the deal. Packages do sometimes go missing, It's true,
[16:03] Speaker 1: so he'd taken practical steps to make it expensive for
[16:07] Speaker 1: Healthy Choice to refuse him his air miles, ensuring that
[16:11] Speaker 1: if the company tried to back out of the deal,
[16:13] Speaker 1: the media would have a field day with the story. Companies, too,
[16:18] Speaker 1: make both kinds of calculations about their marketing offers, numerical
[16:23] Speaker 1: and pragmatic. Sometimes they fall down on the numbers. It
[16:27] Speaker 1: makes no sense to pay shoppers to buy bananas, But
[16:31] Speaker 1: on some marketing offers, they know the numbers wouldn't add
[16:35] Speaker 1: up if everyone took advantage, and they rely on the
[16:38] Speaker 1: pragmatic calculation that many customers won't bother. That's what's happening
[16:43] Speaker 1: when retailers offer rebates on a purchase. Rather than simply
[16:48] Speaker 1: reduce the price, they make you pay full price, then
[16:52] Speaker 1: mail off the receipt or the barcode to claim your rebate.
[16:56] Speaker 1: Whether such promotions pay off depends on what proportion of
[17:00] Speaker 1: customers actually do claim. There's even a term of art
[17:05] Speaker 1: for the percentage of consumers who fail to follow through
[17:09] Speaker 1: a breakage rate. Marketing professors Tim Silk and Chris Yanishevski
[17:15] Speaker 1: study the factors that affect breakage rates. There are principles
[17:19] Speaker 1: from psychology textbooks, such as hyperbolic discounting. That's the tendency
[17:24] Speaker 1: to put higher value on more immediate rewards. Promise a
[17:28] Speaker 1: rebate check quickly and you'll motivate people to apply. Promise
[17:32] Speaker 1: it in six to eight weeks, and maybe they won't
[17:35] Speaker 1: bother then there are sneaky little tricks putting the barcode
[17:39] Speaker 1: on tough, thick cardboard that's hard to cut with household scissors.
[17:44] Speaker 1: Increasing the breakage rate is a serious and cynical business.
[17:50] Speaker 1: When the UK branch of Hoover launched a big new
[17:53] Speaker 1: promotion in nineteen ninety two, they gambled on a high
[17:57] Speaker 1: breakage rate. They were offering two free flights to Europe
[18:02] Speaker 1: to anyone who spent one hundred pounds on a Hoover appliance.
[18:06] Speaker 1: That's about two hundred and fifty dollars in today's money.
[18:10] Speaker 1: It's not a bad deal at all. In fact, it's
[18:13] Speaker 1: such a good deal that Hoover knew they couldn't afford
[18:16] Speaker 1: for too many customers to take up the offer, so
[18:19] Speaker 1: they made it logistically difficult. You had to snail mail
[18:23] Speaker 1: the receipt for the item you'd purchased and wait for
[18:25] Speaker 1: Hoover to send you a form, fill that in, and
[18:28] Speaker 1: wait for Hoover to send you a voucher. Then you
[18:31] Speaker 1: had to choose three possible dates and destinations and wait
[18:34] Speaker 1: for Hoover to let you know if any of them
[18:36] Speaker 1: were available, and on and on. Only the most determined
[18:43] Speaker 1: customers had the patients to persevere to the point where
[18:47] Speaker 1: they actually got on a plane. It looks like Hoover
[18:50] Speaker 1: managed to keep the breakage rate high enough to make
[18:53] Speaker 1: their giveaway deal profitable. Then Hoover became overconfident they decided
[18:59] Speaker 1: to expand the offer to include flights to America. This
[19:04] Speaker 1: was a much bigger incentive to return. Flights from Britain
[19:08] Speaker 1: to America cost about five times the price of a
[19:12] Speaker 1: Hoover vacuum cleaner, and Hoover's pragmatic calculation about breakage was
[19:18] Speaker 1: way off. Beam far more people applied for flights than
[19:21] Speaker 1: they'd expected. Crucially, the applicants also proved far more tenacious
[19:27] Speaker 1: than Hoover had hoped, many initially heard nothing back. When
[19:32] Speaker 1: they followed up, Hoover said their application forms must have
[19:35] Speaker 1: been lost in the post. They became frustrated and suspicious.
[19:42] Speaker 1: David Dixon, a horse trainer in Cumbria, was among the
[19:45] Speaker 1: disgruntled customers who had bought a Hoover appliance a washing
[19:49] Speaker 1: machine in his case, and then had trouble claiming his
[19:53] Speaker 1: free flights to America. I have fucked them, I have
[19:56] Speaker 1: retner them, I have formed them, And then, to add
[20:00] Speaker 1: insult to injury, his washing machine broke down. Hoover sent
[20:05] Speaker 1: a technician who failed to sympathize with mister Dixon and plight.
[20:10] Speaker 1: According to the technician, the offer was obviously too good
[20:13] Speaker 1: to be true. Mister Dixon should surely have realized there
[20:16] Speaker 1: must be some kind of catch. If do you think
[20:19] Speaker 1: bang a washing machines are going to get you two
[20:20] Speaker 1: tickets to America, you must be an idiot, an idiote.
[20:26] Speaker 1: We'll see about that. While the technician was fixing his
[20:30] Speaker 1: washing machine, mister Dixon drove his horsebox in front of
[20:33] Speaker 1: the Hoover truck, blocking it in. He told the technician
[20:38] Speaker 1: to walk home and pass on a message to his employers, well,
[20:42] Speaker 1: I'll get me tickets. They'll get there vun. Mister Dixon
[20:46] Speaker 1: became something of a folk hero. The BBC meanwhile sent
[20:51] Speaker 1: an undercover reporter to investigate what was going on. She
[20:56] Speaker 1: got a job in the agency that was processing the
[20:58] Speaker 1: applications for free flights on who was behalf. It went
[21:02] Speaker 1: something like this, So what would you like me to do.
[21:06] Speaker 1: Here's a list of people, contact them and offer them
[21:08] Speaker 1: flights London. These people all live in Glasgow. That's four
[21:12] Speaker 1: hundred miles from London. That's right. But the person sitting
[21:17] Speaker 1: next to me is phoning people who live in London
[21:19] Speaker 1: and telling them we can only offer them flights from Glasgow.
[21:22] Speaker 1: He gets you one fast love. When the BBC investigation
[21:27] Speaker 1: was broadcast, it did not play well for Hoover. They
[21:31] Speaker 1: eventually begrudgingly bought over two hundred thousand flights at a
[21:37] Speaker 1: cost of over seventy million dollars. The majority of customers
[21:42] Speaker 1: had given up without getting their flights, but the company's
[21:45] Speaker 1: reputation had taken a hit, so had their market share
[21:49] Speaker 1: in the UK. Part of the problem was that anyone
[21:52] Speaker 1: who wanted a Hoover appliance could find plenty of attractive
[21:56] Speaker 1: deals in the classified ads never used still in their
[22:01] Speaker 1: original packaging. People had bought them just to get the
[22:04] Speaker 1: air tickets. No wonder Hoover's parent company, the executives who
[22:10] Speaker 1: had approved the promotion and quietly sold off the European
[22:14] Speaker 1: arm of the company for a knock down price. For
[22:19] Speaker 1: Pepsi executives in the Philippines, merely getting fired might have
[22:23] Speaker 1: seemed like a relief compared to the continuing disaster of
[22:27] Speaker 1: number fever. They were getting so many death threats they
[22:31] Speaker 1: needed round the clock security. Pepsi erected barbed wire barricades
[22:36] Speaker 1: around its processing plants. Dozens of its trucks were attacked.
[22:41] Speaker 1: In one tragic case, a grenade thrown at a Pepsi
[22:45] Speaker 1: truck in Manila bounced off and killed a schoolteacher and
[22:50] Speaker 1: a five year old girl. The small print of the
[22:54] Speaker 1: number fever adverts did mention the existence of a security
[22:58] Speaker 1: code on the bottle tops, but was it sufficiently clear
[23:01] Speaker 1: that the prize depended on the security code, not just
[23:05] Speaker 1: on the three digit number. PEPSI found itself fighting thousands
[23:10] Speaker 1: of lawsuits after this message. Cautionary tales will return, even
[23:24] Speaker 1: as the number fever lawsuits raged on. Pepsi found itself
[23:29] Speaker 1: once again in a numerical dispute described in Matt Parker's
[23:33] Speaker 1: book of mathematical mishaps, Humble Pie. This dispute followed yet
[23:39] Speaker 1: another promotion called Pepsi Points, this time running in the
[23:43] Speaker 1: United States. A thirty second advert starts with the caption Monday,
[23:50] Speaker 1: seven fifty eight am and an external shot of an
[23:53] Speaker 1: ordinary suburban house. Cut to the inside of the house,
[23:58] Speaker 1: A cool young dude is wearing a T shirt with
[24:00] Speaker 1: a Pepsi logo. He slicks back his hair, T shirt
[24:04] Speaker 1: seventy five Pepsi points flashes the on screen caption. He
[24:09] Speaker 1: dons a leather jacket. Leather jacket fourteen hundred and fifty
[24:14] Speaker 1: Pepsi points, ongo, the sunglasses one hundred and seventy five
[24:18] Speaker 1: Pepsi points. Then a voiceover the introduce Pepsi stuffed chaveler.
[24:26] Speaker 1: Now the more Pepsi a drink club, more of great stuff.
[24:29] Speaker 1: You're going again. Meanwhile, on screen, there's a school classroom.
[24:35] Speaker 1: From outside, there's some kind of loud noise and strong
[24:38] Speaker 1: wind blowing books and papers everywhere. Other students watch in
[24:42] Speaker 1: amazement as the cool dude arrives in a Harrier jump
[24:47] Speaker 1: jet doing a vertical landing in the school yard. He
[24:51] Speaker 1: steps out sipping a can of Pepsi, and on screen
[24:56] Speaker 1: Harrier Fighter seven million Pepsi points. Sure beat the bush? Yes,
[25:08] Speaker 1: very good? Held on? Has anyone done the math on this?
[25:13] Speaker 1: A can of Pepsi was one point, but once you
[25:16] Speaker 1: had a few points from Pepsi purchases, you could buy
[25:18] Speaker 1: additional points for ten cents apiece, So a T shirt
[25:22] Speaker 1: at seventy five points was effectively seven dollars fifty fair enough,
[25:27] Speaker 1: a leather jacket one hundred and forty five dollars not unreasonable.
[25:32] Speaker 1: And a Harrier Fighter, let's see seven million times ten cents,
[25:37] Speaker 1: that's seven hundred thousand dollars. Doesn't that sound cheap for
[25:43] Speaker 1: a fighter jet? The US military paid over twenty million
[25:48] Speaker 1: dollars for each of its AV eight Harrier two jump jets.
[25:52] Speaker 1: If you could get one from Pepsi for seven hundred
[25:55] Speaker 1: thousand dollars, that would be an absolute steal. There are
[26:04] Speaker 1: a few cultures now very rare, whose counting words only
[26:08] Speaker 1: cover one two big number, but that's because they rarely
[26:14] Speaker 1: need to talk about large numbers. Modern marketing executives do,
[26:19] Speaker 1: and yet when it came to the Harrier, Pepsi's decision
[26:23] Speaker 1: makers were helpless. Once those Pepsi points started mounting up,
[26:28] Speaker 1: all they could seem to think was big number. Enter
[26:33] Speaker 1: twenty one year old business student John Leonard. He somehow
[26:37] Speaker 1: raised seven hundred thousand dollars, which he deposited with a lawyer.
[26:42] Speaker 1: He bought fifteen cans of Pepsi and sent off his
[26:45] Speaker 1: fifteen Pepsi points with a check for seven hundred thousand
[26:50] Speaker 1: and eight dollars and fifty cents. That was to cover
[26:54] Speaker 1: the remaining six million, nine hundred ninety nine, nine hundred
[26:58] Speaker 1: and eighty five Pepsi points plus the ten dollars delivery charge.
[27:04] Speaker 1: Pepsi wrote back politely, the item that you have requested
[27:08] Speaker 1: is not included the catalog or on the order form
[27:11] Speaker 1: the Harrier jet and the Pepsi commercials. Fanciful. We apologize
[27:15] Speaker 1: for any misunderstanding or confusion that you may have experienced.
[27:19] Speaker 1: Mister Leonard had his lawyer swing into action. Your letter
[27:24] Speaker 1: of May seven, nineteen ninety six is totally unacceptable. We
[27:28] Speaker 1: have reviewed the videotape at the Pepsi stuff commercial and
[27:32] Speaker 1: it clearly offers the new Harrier jet for seven million
[27:37] Speaker 1: PEPSI points. This as a formal demand that you honor
[27:41] Speaker 1: your commitment and make immediate arrangements to transfer the new
[27:46] Speaker 1: Harrier Jet to our client. The case went to court,
[27:51] Speaker 1: where District Judge Kimba Wood had to decide if the
[27:54] Speaker 1: advert was serious. She came to the understandable conclusion that
[28:00] Speaker 1: it wasn't. The callow youth featured in the commercial is
[28:05] Speaker 1: a highly improbable pilot. The teenage's comment that flying a
[28:11] Speaker 1: Harrier Jet to school sure beats the bus evinces an
[28:16] Speaker 1: improbably ensusian attitude toward the relative difficulty and danger of
[28:23] Speaker 1: piloting a fighter plane in a residential area as opposed
[28:27] Speaker 1: to taking public transportation. Might some other court take a
[28:32] Speaker 1: different view? Probably not, But Pepsi decided to edit its
[28:37] Speaker 1: commercial just in case. Harrier now cost seven hundred million
[28:42] Speaker 1: PEPSI points. Again big number, but this time big enough.
[28:51] Speaker 1: I assume John Leonard knew that his chance of winning
[28:54] Speaker 1: the case was small, and that if he lost, there'd
[28:56] Speaker 1: be lawyers fees to pay. It must have been a
[28:59] Speaker 1: calculated gamble. Judge Kimbawood summed up why she wasn't letting
[29:04] Speaker 1: that gamble pay off. An objective reasonable person would conclude
[29:10] Speaker 1: that purchasing a fighter plane for seven hundred thousand dollars
[29:15] Speaker 1: is a deal too good to be true. Fair enough,
[29:20] Speaker 1: But can we predict if a corporate marketing bungle is
[29:23] Speaker 1: likely to have a happy ending? Can we come up
[29:26] Speaker 1: with a taxonomy of the too good to be true
[29:29] Speaker 1: from these stories? Perhaps we can. It's all about that
[29:34] Speaker 1: pragmatic calculation. Imagine if you will a tool beloved by
[29:39] Speaker 1: marketing types, a two by two matrix, how much will
[29:43] Speaker 1: it cost the company to pay up and how bad
[29:46] Speaker 1: will it make the company look to wriggle out? In
[29:50] Speaker 1: one corner, expensive promises with an easy get out. In
[29:55] Speaker 1: this corner is John Leonard with his video of the
[29:57] Speaker 1: Pepsi staff ad Harrier jets are expensive and did it
[30:02] Speaker 1: make Pepsi look unreasonable to fight the case? Not really.
[30:07] Speaker 1: At the other extreme, cheap promises with no means of escape,
[30:12] Speaker 1: here stands David Phillips with his stack of chocolate puddings.
[30:17] Speaker 1: Giving one customer a pile of air miles wasn't especially
[30:21] Speaker 1: expensive set against the entire healthy choice marketing campaign, and
[30:26] Speaker 1: thanks to his videotape, they could hardly wriggle out. The
[30:30] Speaker 1: other two corners of the two by two matrix are
[30:33] Speaker 1: more ambiguous. Giving Tesco club card points to banana man
[30:37] Speaker 1: was a trivial expense, but nobody would have cared much
[30:41] Speaker 1: if they'd refused. The financial stakes were low, and so
[30:45] Speaker 1: were the publicity stakes. It could have gone either way.
[30:48] Speaker 1: Tesco's one crate banana limit seems a reasonable compromise. It
[30:54] Speaker 1: can also go either way when both stakes are high.
[30:58] Speaker 1: That's why some Hoover buyers got their flights and some didn't.
[31:03] Speaker 1: It was the worst possible combination for any company. They
[31:07] Speaker 1: looked awful for trying to wriggle out of their own promises,
[31:10] Speaker 1: and those they were forced to keep were ruinously expensive.
[31:15] Speaker 1: But perhaps Hoovers marketers had always had their doubts deep down.
[31:20] Speaker 1: The tagline for their free flights campaign was two return
[31:25] Speaker 1: seats Unbelievable. In the Philippines, number fever left the three
[31:33] Speaker 1: four nine bottletop holders facing their own pragmatic calculation. Take
[31:38] Speaker 1: Pepsi's goodwill twenty dollars or fight. Fifteen thousand Filipinos joined
[31:46] Speaker 1: a pressure group called Coalition three four nine, set up
[31:50] Speaker 1: by Vicente Delfiero junior, a public relations consultant and a
[31:54] Speaker 1: fiery preacher. Mister Delfierro flew to New York to file
[31:59] Speaker 1: yet another lawsuit against Pepsi, modestly describing himself as a
[32:04] Speaker 1: Philippino or Don Quixote, a biblical David growing up again
[32:09] Speaker 1: Stagg Global Goliath. The Pepsi three for nine fiasco mirrors
[32:14] Speaker 1: how irresponsible multinational organizations abuse consumers in developing countries. Vicente
[32:22] Speaker 1: del Piero was tapping into a sense of injustice that
[32:26] Speaker 1: runs much deeper than one botched soft drinks promotion. Recall
[32:32] Speaker 1: what the thought of winning a million pasos had meant
[32:35] Speaker 1: to Victoria Angelo. You can finish school, we can buy
[32:39] Speaker 1: a real house. These shouldn't be unrealistic ambitions for anyone.
[32:47] Speaker 1: But it's hardly Peps's fault that life is so unfair.
[32:51] Speaker 1: And was it ever really likely that a court would
[32:54] Speaker 1: make PEPSI pay a sum that was almost its entire
[32:57] Speaker 1: market value? Remember, nearly half a million bottletop holders had
[33:02] Speaker 1: accepted the good will payment, far more than joined mister
[33:06] Speaker 1: Delfierro's coalition. The aragmatically calculated that this was the most
[33:11] Speaker 1: PEPSI could reasonably be expected to do after well over
[33:15] Speaker 1: a decade of legal wrangles, the courts agreed it would
[33:21] Speaker 1: be wonderful to imagine a bottletop printing error lifting hundreds
[33:25] Speaker 1: of thousands of Filipinos out of poverty. That that was
[33:29] Speaker 1: always going to be too good to be true. Key
[33:41] Speaker 1: sources for this episode include reporting from the Los Angeles Times,
[33:45] Speaker 1: the BBC, and The Independent, and a paper on consumer
[33:48] Speaker 1: rebates in the Stamford Journal of Law, Business and Finance.
[33:52] Speaker 1: For a full list of references, see Tim Harford dot com.
[33:57] Speaker 1: Cautionary Tales is written by me Tim Harford with Andrew Wright.
[34:02] Speaker 1: It's produced by Ryan Dilley and Marilyn Rust. The sound
[34:05] Speaker 1: design and original music is the work of Pascal Wise.
[34:09] Speaker 1: Julia Barton edited the scripts. Starring in this series of
[34:13] Speaker 1: Cautionary Tales Helena Bonham, Carter and Jeffrey Wright, alongside Nazzar Elderazzi,
[34:20] Speaker 1: Ed Gochen, Melanie Gutteridge, Rachel Hanshaw, copnaholbrook Smith, Greg Lockett,
[34:27] Speaker 1: Messiah Munroe and Rufleus Wright. This show wouldn't have been
[34:31] Speaker 1: possible without the work of mil LaBelle, Jacob Weisberg, Heather Fane,
[34:36] Speaker 1: John Schnarz, Carlin mcgliory, Eric Sandler, Emily Rostick, Maggie Taylor
[34:42] Speaker 1: and Yellow Lakhan and Maya Kanick. Cautionary Tales is a
[34:48] Speaker 1: production of Pushkin Industries. If you like the show, please
[34:52] Speaker 1: remember to rate, share, and review.

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