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PROMO Magazine, Nov 1, 2001
Highly creative promotion professionals are continuously looking
for innovative promotions that can successfully build a brand. Competition
and clutter require that brands take risks - and taking no risks
can sometimes result in lost opportunities.
Even the most sophisticated marketers, however, can sometimes overlook
things that end up producing red faces, negative publicity, and
millions of dollars in lost sales and legal damages. There are several
notable examples: Kraft Foods had to settle legal claims for about
$10 million after an accidental overprinting of winning gamepieces
resulted in more than 10,000 grand-prize claims for a Dodge Van.
Pepsi faced lawsuits of more than $10 million - and had its factories
damaged and its executives threatened - when more than 500,000 bottle
caps showing the winning number were produced in a promotion in
the Philippines. More recently, McDonald's and Simon Marketing were
apparently duped by alleged criminal acts (October PROMO).
These examples point out the need for the highest possible level
of planning and communication among the parties responsible for
executing promotions. When various disciplines both inside and outside
the marketing company work in concert to manage uncertainty without
creating roadblocks, the promotion's appeal and effectiveness can
often be enhanced.
The main aspects of intelligent risk-taking consist of the following
steps:
- Identify the potential risks in the promotion
All risks should be listed in planning documentation. This can
be done individually or as part of team planning. The goal here
is to identify risks so that they can be reduced, transferred,
or avoided.
- Assess and measure the identified risks
Which of these risks are critical? Critical risks are those which
could materially affect the promotion and have a high probability
of occurring as well as a high negative impact. For example, an
error committed by a gamepiece printer that results in poor color
quality represents a low-impact risk. One where an excess number
of high-level prizes are claimed due to the printer's failure
to follow instructions would be a high-impact risk.
Other potential risks might include prizes awarded to someone
who is ineligible, entries which are mishandled or lost, the infringement
of another party's trademark, copyright, or slogan, or conveyance
of a false impression that the promotion is associated with a
particular person or organization.
- Manage the risks
The tactical part involves determining your risk-assumption capacity
and taking the steps required to Minimize, Transfer, or Avoid
the identified risks.
Lack of oversight and coordination between the promotion agency,
other suppliers, and the marketer is almost always the root cause
of promotions that go bad.
Minimization tactics for a game in which printed gamepieces are
to be produced could include making sure that printing and seeding
instructions are agreed to in writing between all involved disciplines,
and having all parties present at the production, printing, and
the seeding of any rare pieces.
Placing special printer's markings on rare gamepieces to identify
them as valid is strongly recommended. And all print waste should
be immediately shredded and all printing plates and film destroyed
after the gamepieces are quality controlled, accounted for, and
seeded.
Transfer is another important tactic. Certain responsibilities
and activities are often shifted from the marketer to specialist
suppliers. The controlling contract will often enumerate the responsibilities
of the parties and, in many cases, the supplier is obligated to
indemnify or hold the marketer harmless for liability. Suppliers
such as promotion agencies and printers can face legal claims for
damages and expenses that might arise from their failure to provide
professional services - in legal parlance, the commission of a "wrongful
act."
Claims against the agency could come from consumers, other suppliers,
or from its own client. A properly worded Errors and Omissions insurance
policy should be considered. The agency or printer should also cause
the client to be named as an additional insured for possible third-party
claims. Suppliers also should obtain a comprehensive Employee Dishonesty
bond, which responds to improper and illegal acts committed by their
employees.
Marketers should consider an Advertiser's and Marketer's Liability
policy as protection for their own wrongful acts. This form of insurance
is also triggered when the supplier's insurance does not sufficiently
respond to certain legal claims arising out of the promotion.
In addition, marketers can transfer the risk of contingent prize
promotions through a Prize Indemnity Policy and contain the risk
of a higher-than-budgeted rebate or coupon redemption program with
an Over-Redemption Policy.
There may be instances when a highly creative concept or element
is so risky that it should be avoided. But innovative promotions
can help to build brands, so marketers shouldn't be afraid of risks
that can be managed intelligently.
Mark Barry is senior vp-global marketing at HCC Specialty Underwriters,
Woburn, MA. Reach him at mbarry@hccsu.com.
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