Businessweek has a very interesting case study and analysis of a recent problem at Travelocity.
When a misprinted fare-Fiji for $51-got snapped up by hundreds of travelers, Travelocity CEO Michelle Peluso had to decide whether to honor the fare at a cost of almost $2 million or run the risk of damaging the company's customer-friendly branding campaign.
Go read the entire thing and see if you agree with the CEO's decision.
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In terms of how it worked out for Travelocity, I think it was great. They preserved (probably enhanced) their brand. They were ignited to develop a system that will likely save them a large amount of money from mistakes in the future. And lastly they got a PR talking point to puff up their customer service advantage, at a time when they were planning on launching a campaign to promote this image anyways. The timing is actually quite ironic if you consider this last point.
Now if it were me, I would have probably honored the mistake in the form of a $300-$500 credit for any flight of the customers choosing. I think this would have appeased the brand and customers and limited the cost hit by another 80% or so. Of course, the PR mileage wouldn’t have been the same but that’s what I would have done.