KFC and Oprah – A Lesson in Demand Forecasting

If you’ve worked in channel marketing for more than a few weeks, you know what out-of-stocks are, and you know how damaging they can be. When your customers don’t find your brand on the shelves, they may buy your competitor’s product or a private label equivalent and, having sampled the substitute, they may not come back. Or, your retailer reminds you icily, they go to another store.

A great many OOS situations are the result of hiccups in the supply chain. But far too many occur because of poor forecasting on promotions. When that occurs, you not only run the likelihood of creating sales lift for your competitors (at great cost to you) and upsetting your retailer – now you have also angered the most important person of all, the consumer, who feels you have lied to her.

Which is why good demand forecasting is so essential.

I’m not telling you anything you don’t know, of course. It’s just that we had such a beautiful example this week of demand forecasting gone awry and creating an epic out-of-stock situation, complete with outraged customers, that it seemed a good time to bring it up again.

KFC (nee Kentucky Fried Chicken) has a new product line that is grilled instead of fried. Good move – providing a healthier alternative on their menu. They want to get lots of sampling during the introductory period, so they decide to run a promo giving away free meals via the Oprah Winfrey show. Good move, I guess – it sounds expensive, but it will certainly achieve the goal of getting broad sampling. At this point, did anyone ask, “How many pieces of chicken should we ship to each location?” Did they do bad forecasting, or none at all?

I suspect we’ll never know, because I doubt anyone involved will want to talk about it. What we do know is that the result was the mother of all out-of-stocks:

Customers at a New York City KFC hoping to redeem coupons for a free meal were disgruntled when the fast-food restaurant ran out of its new grilled chicken, but Internet rumors of a riot were unfounded, a Kentucky Fried Chicken spokeswoman said Wednesday.

"Some customers were upset because they couldn't get their chicken, but there was no riot," said Laurie Schalow.

You know something? When you have to deny that your customers are rioting, things aren’t good.

Lessons for our readers:

1. If you don’t currently have the right tools and processes for forecasting, get them.
2. Be thankful none of your OOS situations have ever been quite as bad as this one.
3. If you go on Oprah and say “Free!” be ready for riots if you can’t keep your word.