October 25 2007

Littlewoods recharges customers for use of online vouchers

In an unprecedented move Littlewoods has demanded that online vouchers (in the form of discound codes) it issued and accepted be repaid by its customers who obtained the discount codes from chat rooms and and consumer voucher-exchange sites. Liverpool Trading Standards are apparently satisfied that the retailer's operating within its rights, but this is the first time we've heard of vouchers not only being declined but actually charged back to customers.

The £25 voucher was intended for a specific group of customers who were sent a code. This is of course entirely standard practice to segment promotions.

In this case, however, some customers posted the codes in internet chat rooms. Other customers (whom Littlewoods did not intend to incentivise) obtained the codes and found that they "worked", giving them £25 credit.

The lessons for Littlewoods are clearly to either use a "tear off" voucher approach (where a code, once used, can't be used again) or to have front-end validation that checks whether the code is valid (this should be discernable from the customer's details which of course they need to enter in order to check out).

That neither the front-end validation was in place nor the effort to print/create a single code per recipient indicates that the promotion was either ill-considered or was not of sufficient size to merit this care.

A Littlewoods spokesman told the BBC:

"A £25 discount code was created for a small group of specific customers.

"This code was then circulated, without our authorisation, through a number of websites resulting in around 3,000 customers obtaining a discount for which they were ineligible.

"As a result, in accordance with clause 2.3 of our online terms and conditions we have re-charged this discount back to their accounts and have written to them individually to explain."

Hm - so let's do the math here, as they say... £25 x 3,000 = £75,000. This is hardly enough of a promotional knock to dent the £400million online turnover.

If the Marketing team at Littlewoods had calculated their promotions correctly one would hope that even with a promotional offer the trigger threshold would be sufficient to make a profit, or at least break even. So many promotions go "accidentally viral" that the suspicion is that it's a calculated ruse to extent adoption of the promotion. When Threshers had a voucher distributed widely via the web it was claimed that a million people used the 40%-off voucher. At the time a spokesperson said

It could end up hitting our profit margins.

Note - "hit our margins" not "make a loss"...

The suspicion must be therefore that the promotion was not marginally profitable in Littlewoods' case.

Littlewoods is fortunate in that it has a significant corpus of account customers. These are customer who charge purchases to a rolling credit account, rather than paying for each transaction upon checkout with a credit card. This means that it's relatively easy for Littlewoods to apply a charge or reverse a discount without having to go via a credit card company.

Anyway, the unnamed Littlewoods spokesman concluded:

we are looking at a number of ways of ensuring this doesn't happen again.

I'm not sure whether s/he's referred to 'getting promotional calcualtions wrong', 'not having a voucher validation system' or 'being heavy-handed with customers'... Maybe all of the above.

Ian Jindal

Disclosure: Ian was for a while Group eCommerce Director at Littlewoods Shop Direct.

Do you have any stories about vouchers that have "gone viral"? Was this on purpose? What did you do? Please spill the beans - either in the comments or in strictest, anonymised confidence to us at press at internetretailing.net

by Ian Jindal