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Issue Date: March 2005

Insurance is essential for successful promotions

March 2005

Unlikely as it seems, risk assessment and insurance are critical components of promotional competitions and game shows.

Insurance is essential for successful promotions
Unlikely as it seems, risk assessment and insurance are critical components of promotional competitions and game shows.
This is the opinion of Conceptualise director Ian Kaplan, who claims that, while elements such as concept and execution are crucial because they will attract attention and create buy-in to ensure the promotion adds value to the brand and has a positive impact on the bottom line, an incorrect risk assessment can wipe out all the gains in an instant.
He explains: "People respond to dreams, and their responses to competitions that promise to assist them fulfil those dreams can exceed a marketer's wildest imagination.
"Possibly the best known example of this is an ill-fated 1992 promotion in the United Kingdom. Here, Hoover offered free airline flights with the purchase of one of its appliances. After would-be takers flooded Hoover with demand it could not meet, customers took the company to court, and the resultant fiasco ensured its place in the marketing history books.
"More recently but less dramatically, cosmetics and perfume seller Avon promised a free cell phone with the purchase of a skin cream. When about 750 000 customers in the UK sought to cash in, Avon was short by 690 000 phones. Reports said that four out of five customers did eventually receive vouchers for their phones. The promotion's fine print stipulated that the offer was subject to availability.
"The financial impact on a promotion's profitability when it is forced to pay up for many more prizes than it budgeted for is obvious. But, consumers' negative interaction with the brand, which has failed to deliver on its promise as well as the widespread publicity these instances attract, means that there is also considerable damage to the brand.
"In addition, the actual cost of offering a dream prize can often push a campaign into mediocrity. By this I mean the marketing team believes the budget can't stretch to cover a dream prize, they downgrade and may land-up with a run-of-the-mill promotion.
"All of this can be avoided by ensuring the promotion is scoped by a reputable promotional risk assessor, , and that sufficient insurance is taken out to cover the cost of prize."
A case in point is a recent campaign Conceptualise insured for Getaway magazine. 'Treasure For Africa' was structured to give away almost R2 million in prizes as well as afford one lucky entrant the chance to become an instant millionaire. It required readers to piece together a map from puzzle pieces published between April and September this year, and then to mark the co-ordinates of buried treasure on the completed map.
The first correctly assembled map drawn would earn the reader a Land Rover Defender 110 double cab worth more than R300 000, while the correct co-ordinates on the same map would see the lucky entrant strike gold - in the form of R1 million in cash. Runners-up stood to win another Land Rover, camera equipment from Nikon and Cape Union Mart adventure gear.
Says Kaplan: "Getaway wanted to reward loyal readers with the opportunity to make their dreams come true with a prize of R1 million. However, the cost of offering this could have forced the magazine to make a hard choice - do they offer the prize and have to pay-up big time if it was won, or do they downgrade to a prize of lesser value? After all, very few companies have R1 million sitting in a bank account to hand over on the off chance that it is won.
"Conceptualise structured an insurance mechanism that allowed Getaway to offer the dream R1 million at a fraction of the cost. We created an insurable mechanism, calculated the odds and then insured the prize with international underwriters that are global leaders in promotion risk.
"This allowed Getaway to plan the cost of its prizes to the cent, eliminate budget overruns for higher than expected responses and offer an attention-getting prize without busting its budget ensuring the brand got the exposure of a high impact campaign at a fixed cost."
Kaplan adds that cover can be written for competitions and games, sports based events including golf, rugby, soccer and other formats, performance incentives for individuals or teams, over-redemption protection for coupons and premium offers and internet and e-commerce promotions.

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