Managing Promotional Risk
Editor’s note: The FBI’s investigation into the game scandal at McDonald’s and the media debate that followed have heightened awareness about the potential risks involved in promotion. The following is a look at various aspects of planning and execution that marketers should consider when putting a program together.
As you execute a campaign, two critical types of risk emerge. The first is the one associated with the effectiveness — or lack of effectiveness — of the promotion in meeting its objectives. The second is the risk associated with unforeseen or unpredictable costs. These costs may be tangible, such as budget overruns, or intangible, such as negative p.r.
The following is a collection of thoughts about emerging trends in promotion marketing that can help effectiveness and manage associated risk — while also adding some innovation to campaigns.
“Technology, increased promotional prize value, and consumer sophistication have come a long way since we started with contingent prize (e.g. hole-in-one) and over-redemption coverage 15 years ago,” notes Bob Hamman, founder and chairman of SCA Promotions, Inc., Dallas. “As the Internet emerges as an important promotional medium, the number of factors that must be controlled has increased dramatically. When we dealt with the combination of Internet and the first billion-dollar prize in history last year, there was no room for error. It comes down to vigilance and experience.”
Here are seven issues for consideration to help you think through your promotions:
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Getting the Desired Response: A promotion that gets no attention has failed to meet objectives.
“We all have to watch out for becoming too conservative. It is essential to think broadly and creatively up front, or you will end up repeating tired promotions,” says industry veteran Sara Owens. “You should also apply analytical tools and process management to support the promotion’s execution and eliminate as much risk as possible.”
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Managing Over-redemption: Can your promotion end up being too successful?
Yes. Unexpectedly high response rates can put your budget out of control in a hurry. The most effective programs allow simultaneous achievement of two goals: high excitement plus a fixed budget.
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Budgeting for prize and reward claims: Remember to play out all “What if?” scenarios.
Sweepstakes and event-based promotions typically deal with a specific situation in which the awarding of large-value prizes is contingent upon certain outcomes. Systemic rewards more often are part of loyalty, affinity, or rebate programs in which the leverage lies in response rate rather than one specific occurrence.
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Avoiding supply chain disruption: You don’t want a promotion to diminish efficiency and drive up costs.
“New technologies for on-packs and in-packs allow for better blending of your supply chain needs with the executional details of promotions,” says Dave Bunnell, president of Prism Group, Dallas.
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Security: This is not the place for wishful thinking.
Take the time and get the expertise to put the necessary processes in place. Then, follow them. Each time a variable changes, review the process again.
“You can’t make assumptions and you can’t underestimate the human factor. We still admire the old advice: Trust everyone, but cut the cards,” says Norman Beck, SCA’s director of security and claims.
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Public relations: If claims are made, it is critical to be able to evaluate them and pay quickly, or you can turn a p.r. windfall into a p.r. nightmare.
Upfront investment and design in planning is the best preparation for a smooth claims process.
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Multiple media: Despite recent turbulence in the marketplace, the Internet is here to stay.
More than ever, the communication and delivery of promotions tend to exist across multiple media — print, broadcast, phone, and online. Even the mix of devices for sending and receiving those communications is increasing at a remarkable pace. This gives new power to reach markets.
As you construct your promotions, harness that power. Remember to think through your choice of media with respect to both content and ability to reach targeted segments. Market penetration or installed-base targeting are two common ways to think through utilization of a given medium into the audience you are attempting to reach.
Donald Silberstein is senior vp at SCA Promotions, Dallas. Reach him at [email protected].
SCA will host a session on managing promotional risk at PROMO Expo, which will be held Oct. 22-24 at Chicago’s Navy Pier. For more information, visit promoexpo.com.
