A Promotion Budget Including Promotion Insurance Can Save Your Job & Reputation

Planning your promotion budget may just be the thing that saves your job, when you remember to include one very important item: Promotional Risk Coverage.

Let's say you want to launch a promotional contest that offers a large cash prize. You know that giving away $20 isn't going to get anyone's attention, but you're worried your promotion budget can't handle giving away a free car either.

Or can it?

That's where promotional risk coverage becomes an important addition to your promotion budget. Basically, you insure your contest against someone actually winning the prize.

Let's say you're running a contest at your Chamber's annual golf outing, and you're giving away a new car if someone hits a hole-in-one on the 14th hole. You decide to save on your promotion budget by risking that no one will actually hit a hole-in-one. After all, the odds of someone actually hitting it are quite high — the United States Golf Register says it's anywhere from 1 in 20,000 to 1 in 33,000.


Pretty decent odds. You could probably offer the car, knowing that no one will hit it. But what if they do? What if someone makes that 1-in-33,000 shot? It could happen. People get lucky all the time, so why not at a golf contest where the hole-in-one prize is a $25,000 car?


That's when your promotion budget, your job, and possibly your company, are in the toilet. That's when you wish your promotion budget had promotion insurance.


You can see examples of smart promotional risk coverage all the time, in big prize contests both online and offline. And in most cases, those companies didn't have the big promotion budget to give away that new car, trip to the Pro Bowl, or a brand new house. Sure, those companies are hoping that no one wins those big prizes. But they're being very careful in case someone does.


Promotion insurance only costs a fraction of what the actual prize is worth. It's based on the value of the prize, the odds of someone winning, and the number of chances a customer gets to win. A promotion budget expert in promotional risk coverage will suggest a promotion — and a prize — that will fit within your promotion budget.


Promotional risk coverage is also important to prevent over redemption of your coupon offerings, and insures a bad contest doesn't get worse. That's when your promotion budget can really take a hit.


Case in point: Marsh Supermarkets is a small chain in Central Indiana. Last summer, they ran a Facebook coupon campaign that gave $10 off any purchase of more than $10. Coupons were given only to their Facebook fans. There was no real promotion budget, no planning, and no legal disclaimers in case they needed to end the campaign early.


Some marketing experts described what happened next "like that episode of WKRP in Cincinnati where they threw turkeys out of the plane."


The store had 2,200 fans on Facebook, so at most, the campaign should have cost $22,000. But people over-redeemed the coupons — 45,000 or so — for a purchase as low as $10.01. (Remember that the coupon was for any purchase over $10.) So Marsh canceled the promotion after a few days, and angered a lot of their customers.


Lesson number 1 is that you always need to talk to someone in marketing risk management with experience in prize insurance, before running a major contest. But lesson number 2 is you need to make sure your promotion budget includes promotional risk coverage.


While we don't know if they had any promotion insurance in their promotion budget, this could have at least mitigated the losses the store experienced. If they had spoken to a promotional risk coverage professional first, they might have avoided a lot of the problems and backlash they experienced.


As you can see, including promotional risk coverage in your promotion budget will not only let you run a bigger campaign, but in the case of Marsh Supermarkets, can save your reputation and your job.

--Julie Ross, Rostin Ventures