Is Tesco’s refusal to honour its iPad price glitch the right decision?

Tesco has announced it will not honour its £49.99 iPad price glitch, but to what impact on the brand's reputation? And what can we learn from their handling of the mistake?

Earlier this week, shoppers scrambled to Tesco’s website to snap up a bargain after the supermarket accidentally advertised the new Apple iPad for 49.99.

Tesco Direct offered customers a 90% discount on the recommended retail price of £500 on pre-orders for the tablet after the site suffered a computer glitch. The news spread across social media sites Twitter and Facebook, with ‘every little helps’ trending on the micro-blogging network, and resulting in the crash of Tesco’s website.

Realising its mistake, the shop suspended sales. However, in a move that is likely to anger purchasers and could jeopardise Tesco’s reputation, the global retail chain announced that it will not honour the £49.99 iPad purchases and will refund customers that placed orders for the tablet. The retailer did not reveal how many tablets were bought before sales were suspended.

A Tesco spokesperson said: “We always look to offer our customers unbeatable value but unfortunately this is an IT error that is now being corrected.”

Legally, Tesco is within its rights to do so as the supermarket’s terms and conditions state: ‘If, by mistake, we have under-priced an item, we will not be liable to supply that item to you at the stated price, provided that we notify you before we despatch the item to you.

‘In those circumstances, we will notify the correct price to you so you can decide whether or not you wish to order the item at that price.’

History lesson

It’s perhaps not surprising Tesco has declined to honour the price agreements with 2012 already proving a difficult start for the retail giant – in January Tesco posted its first profit warning in 20 years after poor Christmas sales. However, history indicates that the supermarket's decision to save every penny could end up costing the business in reputational damage.

Marks and Spencer encountered a similar situation earlier this year after a computer error left 3DTVs worth £1,099 sold at £199 – a fifth of the price. Hundreds of customers purchased the bargain TVs before M&S suspended the sales and initially, like Tesco, refused to honour the deal and instead offered a £25 ‘goodwill voucher’.

But the British retailer received a backlash from customers on social media sites such as Twitter and Facebook, forcing M&S to reverse their decision. M&S then emailed shoppers that had made the purchases, asking them to confirm their order at £199.

Online retailer Zappos is another retailer familiar to this issue. In 2010 a pricing bug on its site saw goods worth thousands listed with a price of $49.95. But in keeping with its stellar image for service, Zappos understood that the price of its reputation far outweighed the hair-raising $1.6m it lost and it honoured the purchases made during this time.

Reputation damage?

Customers who purchased the £49.99 iPad have already launched two Facebook campaigns calling onTesco to honour the agreement. Many of the users on one page have also posted comments that despite the supermarket cancelling their orders, £2 has been taken from their accounts, whilst another campaign is calling on customers to sign a petition, report their complaints to BBC Watchdog via Twitter and complain directly to Tesco Direct. 

Both campaigns have drummed up some 300 likes to date - but there is little sign that this will be enough for Tesco to climb down over its decision and honour its agreement.

Steven Dodds from {united} believes that Tesco's biggest mistake has not been the original pricing error, but the way in which it has handled the aftermath.

He says: “Tesco has failed to offer a strong apology and blamed it on a technical hitch – the serial scapegoat. This is not sufficient in standing up for its values. Brands are allowed to make mistakes but they must stand to account and admit defeat – this creates a forum for openness between them and its customers; it gives customers a reason to invest trust. People want 'humanity and humility' from brands, across all channels (social and otherwise)."

He adds: “Tesco would have created much more positive feeling and warmth by honouring the offer, admitting they cocked up, and using that as the starting point for a socially-led response.” 

But not everyone thinks that Tesco should be given a hard time over this whole affair.  

Chris Bucholtz, CRM evangelist at SugarCRM, believes that with the speed that bad news is carried by social media, customers need to become more forgiving - and businesses must be extra vigilant to minimise the damage.

“Customers also have to understand the web and social media in situations like this. Most people, when they saw a £50 price tag, realised it was unusual. Many, I would wager, realised it was an error. But customers have to cut businesses some slack – we all know how rapidly social media moves, and no one can achieve eternal perfection, buyers or sellers.

“How long was the erroneous offer up? If it was spotted quickly, then Tesco is doing something right – they're monitoring social media. It can be your best alarm system, as long as you can spot trends quickly and then act to remedy them,” he concludes.