SHANGHAI (AdAge.com) -- An April sales promotion involving coupons downloaded from China's largest e-commerce site has left KFC scrambling to recover from a PR fiasco after consumers tried to redeem versions of the coupon copied by other sites.
The Yum Brands division, China's largest fast food chain with more than 2,000 outlets, planned to distribute coupons for three different menu items. Each offered a 50% discount, and could be downloaded on KFC's online store on Taobao.com at 10 a.m., 2 p.m. and 4 p.m. last week.
The coupons were half-price offers for chicken nuggets, certain chicken burgers and the Family Big Box, representing savings of up to $4.70.
KFC's food is considered inexpensive by most Western consumers, but in developing markets such as China, KFC is relatively pricey for all but affluent consumers. Even so, the chain's chicken-centric menu caters to the palates of Chinese consumers, making it one of the country's most beloved and successful restaurant brands -- until now.
Confusion leads to property damage
The trouble started when news of the discounts circulated around the internet. Coupons were republished on other sites, where they were downloaded and redeemed at restaurants, far surpassing the volume anticipated by KFC.
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Store employees began refusing the coupons, claiming they were illegally produced from unauthorized sites -- but the explanations provided to consumers by confused staffers varied from store to store, exacerbating an already tense situation.
Consumers reacted angrily, and in some cases violently, and police rushed to some restaurants to maintain order.
The Global Times, a Chinese state-owned newspaper, reported that customers stormed the KFC at the China World Tower in Beijing, "flipping chairs and tables and refusing to leave after their coupons were denied, the branch's manager said."
In an apparent attempt to humiliate KFC, China Daily, another state-run paper, wrote that about 30 customers whose coupons were rejected at a KFC store on Wujiang road in Shanghai last week sat at tables waiting for an explanation while a McDonald's delivery boy was called in with their lunch.
Yum Brands could not be reached for comment, but the company issued this statement: "KFC has reported the case to local police, and we'll cooperate with the investigation. KFC is sorry for the disturbance. If consumers insist that their coupons are from official sources, they are required to show evidence."
But the widespread complaints and protests have damaged more than KFC property. The outcry over the failure to honor the coupons has also hurt the brand's relationship with thousands of outraged consumers. The most vocal complaints were posted on blogs and social-media sites in Shanghai, Nanjing, Chengdu, Guangzhou and Beijing.
Agencies that work with KFC on other projects denied being involved in the coupon fiasco.
McDonald's Corp., meanwhile, is not celebrating KFC's problems. The Chinese government ordered the U.S. chain, which has about 1,100 outlets in China, to cease promotion of its own coupon program to avoid a repeat of the disturbances affecting KFC.
Realizing that Chinese consumers don't associate chicken items with McDonald's menu, the burger chain was running a McWings promotion created by Tribal DDB in Shanghai. It allowed consumers to redeem coupons for chicken wings at rival chains for discounted McWings at McDonald's.
Other advertisers hurt by online protests
Other multinational marketers have found their brands on the firing line of Chinese internet users for a wide range of reasons including safety issues, nationalist fervor and claims of false advertising.
Procter & Gamble Co. made headlines in 2005 when the company agreed to pay a $24,000 fine assessed by a watchdog bureau in China's Jiangxi Province. The fine stemmed from an ongoing lawsuit filed by a female customer, Lu Ping, who claimed P&G's ultra-pricey SK-II anti-aging De-Wrinkle Essence failed to live up to advertised claims.
And public pressure by bloggers forced Starbucks to closing its outlet in Beijing's Forbidden City in 2007.
"Brands should be aware that an internet-based promotion, especially for offers which have a low entry barrier with high value, can have a huge impact," said Sam Flemming, chairman of CIC, a Chinese social media analytics firm in Shanghai. At this point, KFC should just bite the bullet and offer a similar, better-executed and managed deal in compensation to restore their credibility."