Business owners don't have to look far to find cautionary tales. All too often overzealous companies rush ahead in the name of progress, only to alienate customers or even run afoul of regulatory agencies or ratings organizations.

While perhaps not as dramatic as some other headline-grabbing stories of corporate hubris, MyPillow managed to earn itself a measure of notoriety recently. The Chaska, Minnesota-based maker of bedding products--known for infomercials featuring mustachioed founder and CEO Mike Lindell--was downgraded by the Better Business Bureau from an A+ to an F rating for consumer trustworthiness, stemming from one of its local promotional campaigns.

What's most remarkable about the situation is just how easily MyPillow could have avoided the situation. Its marketing activities and subsequent dealings with the BBB provide a perfect blueprint for entrepreneurs of what not to do.

The BBB's primary concern was a "buy one, get one free" (or BOGO) promotion, which MyPillow started running in 2015. BBB guidelines dictate that offers involving giveaways shouldn't run for more than six months in any given 12-month period, and customer complaints to the BBB about the confusing nature of the ongoing BOGO promotion were piling up.

Violating the guidelines dropped MyPillow's BBB rating; any rating below a B-minus automatically revokes the company's accreditation. The bureau generates the ratings on the basis of complaint volume and how often companies act on those complaints, but local branches can decide when to reevaluate businesses or give them more time to address concerns.

For MyPillow, that conversation started more than a year ago.

Accusations and defenses

In December 2015, the Minnesota and North Dakota branch of the BBB contacted MyPillow about ads that inaccurately asserted the company's BBB rating involved zero complaints. Lindell agreed to change the ads, according to Barb Grieman, the branch's current interim CEO. The BOGO campaign was also briefly mentioned during the discussion as a potential concern.

By the following August, the BOGO ads were still running, so the BBB filed a formal advertising review challenge with MyPillow. Over the next three months, Lindell and the BBB had an ongoing conversation in which the agency told Lindell that he needed to start selling his products at more accurate prices. "He had been offering this BOGO for so long that we felt it had become the regular price of the pillow," Grieman says.

Lindell denied the "regular price" accusation, and responded that he needed the campaign for the upcoming holiday season. "I want [customers] to get a special for Christmas," he recalls telling the BBB. "I'm not going to charge them full price." On the strength of its ubiquitous ads, MyPillow generated $280 million in sales in 2016, according to a company spokesperson.

In mid-November, the board of the Minnesota and North Dakota BBB branch held a meeting to determine whether to change MyPillow's rating. Lindell was invited to defend his company, and made the 30-minute drive from Chaska to Burnsville, a Minneapolis suburb, to plead his case. But his pitch focused only on the quality of his business, rather than the nature of the ad campaign, according to Grieman.

Following the meeting, MyPillow's BBB rating changed from A+ to NR, or "no rating." That meant the company's grade was under review, to give MyPillow time to update its advertising before a final decision was handed down.

Lindell still continued to run the ads in defiance of the BBB. "I don't believe in anything they're doing," he says. "They have their own agenda." The week after Christmas, Grieman emailed Lindell to make sure he knew MyPillow's rating was about to fall. On January 3, the BBB officially announced the move.

Risking penalty

The Better Business Bureau is a nonprofit, not an enforcement agency, so the most immediate threat following a revoked accreditation is a blow to the company's reputation with consumers. However, at the national level, the BBB automatically refers to the Federal Trade Commission any company that doesn't abide by its final decision, says Katherine Hutt, the BBB's director of communications.

For now, the case remains local, but at the time of publication, the BOGO offer was still publicized on MyPillow's website as a "two for one" special. Lindell says he plans to run different kinds of ads at some point this year, but declines to offer specifics.

Hutt expresses hope the situation will get resolved without the need for a referral to the FTC. "We're happy to work with companies that want to do the right thing," she says.

Lindell, for his part, seems unconcerned by the potential dangers--and even encouraged by the incident's media attention. "I've been on TV enough that the country trusts me," he says. "Business is probably going to get better."

Published on: Jan 11, 2017