In the early 20th century, French colonial authorities in Hanoi faced a problem: the city was overrun with rats. To tackle this, officials devised a clever plan. They offered a bounty for every rat tail brought to them. The logic seemed sound—more tails meant fewer rats. However, what unfolded became a fascinating lesson in unintended consequences, particularly in the realm of incentives.
This historical event, known as the Great Rat Massacre of Hanoi, holds valuable insights for modern marketers and business leaders. Let’s explore what happened and the critical lessons it offers about creating effective incentives in marketing.
What Happened in Hanoi?
The French colonial government wanted to eliminate the city’s rats, particularly in the sewers. They believed offering a bounty for rat tails would motivate citizens to kill rats. The more tails turned in, the more money one earned.
Initially, the plan seemed successful—people brought in countless rat tails. However, officials began noticing something suspicious: rat tails were increasing, but the rat population wasn’t decreasing.
Why? Many citizens had figured out that killing rats wasn’t necessary to earn the reward. Instead, they captured live rats, cut off their tails, and released them back into the streets to reproduce. Some even started breeding rats specifically to maximize their tail count!
Rather than solving the problem, the incentive program inadvertently worsened it. Hanoi’s rat population ballooned, and the French government’s plan failed spectacularly.
What Does This Have to Do with Marketing?
The Great Rat Massacre illustrates the importance of designing incentives that align with desired outcomes. In Hanoi, the goal was to eliminate rats, but the reward system unintentionally encouraged behavior that undermined this goal.
In marketing, the equivalent of misaligned incentives can manifest in various ways. Consider these scenarios:
- Focusing on Vanity Metrics
Companies often incentivize marketers based on metrics like social media followers, impressions, or website traffic. While these metrics look impressive, they don’t always translate to meaningful outcomes like sales, customer retention, or brand loyalty. Like the rat tails, they’re a misleading measure of success. - Overemphasis on Discounts
Offering steep discounts can drive short-term sales, but over time, it can devalue your product or service. Customers might begin to wait for sales, and your brand’s perceived value diminishes. This is akin to the Hanoi citizens exploiting the bounty system—your incentive may drive activity but not necessarily the right kind. - Misaligned Sales Goals
Sales teams might be rewarded based solely on closing deals, regardless of customer fit or long-term retention. This approach can lead to high churn rates, as customers acquired under pressure may not be genuinely interested or satisfied with the product.
How to Design Better Marketing Incentives
To avoid the pitfalls of Hanoi, marketers must design incentive systems that drive desired behaviors. Here’s how:
- Align Incentives with Strategic Goals
Clearly define the outcomes you want and ensure your incentive structure supports them. For example, if your goal is customer retention, focus on metrics like repeat purchase rates or Net Promoter Scores, not just first-time sales. - Think Beyond Short-Term Gains
Incentives should foster sustainable growth. Instead of rewarding immediate results, consider long-term metrics like customer lifetime value (CLV) or organic growth from word-of-mouth. - Anticipate Exploitation
Like Hanoi’s rats, people are resourceful. Evaluate your incentive programs for potential loopholes or unintended consequences. Test your plans in controlled settings before rolling them out widely. - Measure What Matters
Don’t fall for vanity metrics. Prioritize actionable KPIs that reflect real progress toward your business objectives, whether it’s engagement, revenue, or loyalty. - Regularly Reassess Incentives
Incentives may need to evolve as market conditions or business goals change. What works today might not work tomorrow, so stay agile and adjust as needed.
Conclusion
The Great Rat Massacre of Hanoi is a cautionary tale about the unintended consequences of poorly designed incentives. For marketers, it serves as a reminder to think critically about the behaviors we’re encouraging and the outcomes we’re aiming for.
By aligning incentives with meaningful goals, anticipating potential pitfalls, and focusing on long-term value, businesses can avoid their own “rat tail” situations—and build marketing strategies that truly drive success.
So next time you’re crafting a campaign or sales strategy, ask yourself: are you solving the problem, or are you just collecting rat tails?