A Case Study in Handling Corporate Screw-Ups

A Case Study in Handling Corporate Screw-UpsWe've written posts offering general guidance on how to handle a corporate screw-up, as well as our thoughts on various companies' responses to public misfires and mistakes, but sometimes nothing is as illuminating as a real life case study. Last week, Business Week offered an interesting look at how Travelocity responded when an erroneously uploaded fare allowed hundreds of travelers to purchase tickets to Fiji for just $51 (offer not ongoing).

The relevant facts:

  1. The mistake wasn't Travelocity's fault, and they were not legally obligated to honor the fare, which was posted by the airline or outside reservation system. The company's user agreement protected them from such mistakes.
  2. The cost of honoring the fare would be almost $2 million.
  3. Travelocity was about to launch a branding initiative to differentiate the company from its competitors based on customer service, which the company had been working on for 18 months.
Travelocity CEO, Michelle Peluso, needed to negotiate among various audiences within the organization with conflicting opinions about what should be done. While the general counsel fretted about the precedent that would be set by honoring the fare, the chief marketing officer, who was about to spend over a million dollars on the new branding campaign, insisted that the company needed to avoid angering customers and generating negative headlines.

To find out how Peluso handled the situation, check out the Business Week feature which includes a video of Peluso discussing her decision as well as video of Samantha Lucas, Managing Director of Burson-Marsteller, offering analysis on the case.

(Image of Fiji by Brian Vo, CC 2.0)