Guide toPROMOTIONAL RISK MANAGEMENT

PROMOTIONS

By eliminating the financial risk associated with higher than expected redemption rates, promotional risk management encourages creative freedom and allows innovation to thrive.

It helps to plan promotional expenses, eliminate budget overruns and add or increase high prize values – all while keeping promotional budgets fixed and secure.

Involve SCA Promotions right from the planning stage and we can help make standard, run of the mill promotions a thing of the past. We will work closely with you and your agency to brainstorm various mechanics and prize ideas, helping to make your budget work harder while limiting the financial risk.

SCA Promotions supplies three main risk management products:

– The best way of providing the maximum level of protection for a promotion that can cover a variety of costs such as sourcing the incentive, logistical management, and the risk of over-redemption from 0 -100%, all for a fixed fee.

– Protects against the financial liability of a promotion redeeming above and beyond the expected response rate. Promoters can secure any range of coverage up to 100%.

– Provides coverage for high-value prizes for games, contests and promotions, enabling promoters to add or upgrade a grand prize from $10,000 up to $1 million or even more for just a fraction of the prize’s value. We cover the payout in the event of a winner.

PROMOTIONS

Call us at 888-860-3700 or visit us at www.scapromotions.com

This book contains information on various types of promotion mechanics along with specific hints and tips for each.

The following general guidelines should be considered for any promotional mechanic.

can increase awareness of a promotional activity and therefore the response rate. (e.g. advertising that supports a campaign can increase redemptions between 10% – 35%)

in the market place and the propensity of its consumers to redeem. This can depend upon age, regional variations or socio-economic groups.

- certain products always redeem higher than others. (e.g. beverage products always achieve higher than average responses while snack products are generally much lower)

PROMOTIONS

Call us at 888-860-3700 or visit us at www.scapromotions.com

Free Mail In – Off-Pack

Free Mail In – On-Pack

Instant Wins

Try Me Free

Taste Challenge / Quality Challenge

Money Back Guarantee

Self/Partial Liquidating Premiums

Buy One, Get One Free

Direct Mail Coupons

Magazine and Newspaper Coupons

Sampling and Coupons

e-Demption

The consumer obtains an offer via off-pack media and mails in Proof of Purchase (POP) to receive a gift.

There is an increasing trend towards other forms of media for free mail-ins other than on-pack.

POP vs. average consumption of product during promotional period. Also, compare the amount spent on the product vs. the perceived value of the offer.

The synergy between the brand and the gift or offer.

Timing of promotion. If a product has seasonal variations in sales, this could affect consumption and redemptions.

Is the offer restricted to one application per household?

Each promotion will vary due to the impact of the combination of media (e.g. leaflets) and amount of product available during the promotional period (see below).

If a promotion is communicated off-pack, it is important to evaluate the response by calculating the redemption levels as a percentage of pack opportunities available and by media/communication opportunities. The final assessment of responses should reflect a comparison of both calculations.

If the POP is easy to remove from the pack, ensure some other form of POP is also requested. (e.g. receipt)

Collect six POPs from packs of baked beans to receive a free dish towel.

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Any on-pack promotion where the consumer is required to mail in POPs to receive a gift.

Traditionally one of the most popular types of promotion.

POP vs. average consumption of product during promotional period. Also, compare the amount spent on the product vs. the perceived value of the offer.

Timing of promotion. If the product has seasonal variations in sales, this could affect consumption and redemptions.

Is the offer restricted to one application per household?

1 POP 15% to 30%2 POPs 6% to 15%Several POPs 4% to 12%

Are POPs restricted to promotional packs only?

If not, some allowance should be made for the impact of the additional packs available during the promotional period.

If the POP is easy to remove from the pack, ensure some other form of POP is also required. (e.g. receipt)

Collect four POPs from packages of biscuits to receive a free house plant.

Mail in one POP from a 12-pack of beer for a free T-shirt.

from a 12-pack T-shirt.

An on-pack or in-pack promotion where the consumer searches for a winning/losing message within the pack.

Incorporate SMS or Web Entry mechanics into PIN-based instant win promotions to keep response rates (and budget) low. Expect higher responses without this mechanism.

Difficulty of finding the winning message.

Type of product. Products consumed outside of the home (e.g. snacks/soft drinks/candy), tend to have much lower responses than those consumed within the home.

Value of prize offer.

10% to 90% – primarily dependent on how difficult it is to find the winning/losing message.

If the winning message is found, all major prizes will be claimed. However, for smaller prizes such as T-shirts, an element of slippage should be built into the calculations.

The prize structure and method of distribution is subject to SCA Security review. Additional security requirements may be needed.

Check underneath soft drink bottle caps to win vacations.

Check inside a box of cookies to win cars.

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A promotion that offers consumers a cash back rebate equal to the value of the purchase without needing to write a letter about why he or she is not satisfied.

Very popular mechanic that achieves high response levels resulting in a high cost.

Value of the product - the higher the value, the higher the response.

No postage necessary offer or not?

POP requirement – UPC label or UPC label plus receipt?

Is offer restricted to one per household?

10% – 40%

The way in which the offer is communicated on-pack can have a major impact. (e.g. Forms displayed on shelf tend to have much lower responses than a message printed on the label.) The positioning and size of the communication is important.

If POP is easy to remove from package, ensure some other form of POP is also required. (e.g. receipt)

Coffee

Salad Dressing

Cleaning Product

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Consumers can claim a refund for the full value of the product but must write a positive or negative statement about why they liked or disliked the product.

Halfway between a try me free and a money back guarantee. Perfect for a new product launch or an existing product with a change in the ingredients.

Size and specific wording communicating the offer on-pack, particularly the use of the word “free”.

POP requirement – UPC label or UPC label plus receipt?

Is offer restricted to one per household?

3% – 12.5%

Postage paid by consumer or no postage necessary offer?

Receipt, POP and a statement (minimum of 15 words).

Cheese

Marinades

10

A promotion communicated on-pack or at point of sale where the consumer receives all his or her money back if the consumer writes a letter telling the manufacturer why he or she did not like the product.

Promotion perceived as a statement of product quality rather than a true sales promotion.

Retail price of the product.

Quality of product - is it one of the best in its sector?

Is offer restricted to one per household?

0.15% – 3%

Make sure offer is truly represented as a money back guarantee - not a try me free (which does not require a letter from the consumer).

Consumer must state in no less than 12 words why he or she does not like the product.

Sales receipt is required.

For high value items over $7.00, the consumer should return the product partially used, if feasible.

Cereal

Diet Soft Drink

1111

A promotion where most, if not all, the redemption costs are accepted by the customer.

It is usual for promotions of this nature to require a very low POP requirement.

Amount contributed by the consumer.

Number of Proof of Purchases.

Strength of offer.

0% – 8% (average 1 – 2%)

If the item offered is rare, (e.g. offer not available in store, only via offer), response can be higher.

To have a reducing impact on responses, consumer must be asked to contribute at least $3.00.

If the POP is easy to remove from the pack, ensure some other form of POP is also required. (e.g. receipt)

Biscuits 1 POP + $3.00 for a branded dish towel

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The consumer is offered a coupon equal to the value of the purchase.

A useful alternative if a try me free promotion looks too expensive.

Value of product. The higher the perceived value, the higher the response.

Requirements for redemption - Consumers mail in UPC code and sales receipt in order to obtain coupon.

8% – 30%Responses usually 10% to 20% less than equivalent try me free

The way in which the offer is communicated on-pack can have a major impact. (e.g. Forms displayed on shelf tend to have much lower responses than a message printed on the label.) The positioning and size of the communication is important.

Is offer restricted to one per household?

If communication on-pack is easy to remove, be certain to require a sales receipt and/or UPC code.

Liquid Dish Soap

Soft Drink

6 Pack of Beer

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Money off next purchase coupon sent in a letter, specifically addressed to a household.

Always ask fulfilment house for the range of expected redemption levels for the appropriate product sector.

Value of coupon vs. retail value of product.

Targeting of the direct mail piece.

Frequency of product purchase.

Whether the coupon is store specific.

10% – 25%

Quality of direct mail targets. (e.g. Are the recipients from the promoter’s own database or purchased from an external list?)

If there is more than one coupon on the direct mail piece, there is a much greater chance of misredemption of certain coupons. The tendency is for all coupons to be redeemed at the same time.

$.50 coupon off a cleaning product$.75 coupon off batteries

atteries

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Money off next purchase coupon placed in magazines and newspapers.

Always ask fulfilment house for the range of expected redemption levels for the appropriate product sector.

Obtain data for particular magazine or newspaper, if possible.

Value of coupon vs. ARV (approximate retail value) of product.

The higher the percentage, the higher the response.

Frequency of purchase.

Whether the coupon is store specific.

Magazine: 2% – 8% Newspaper: 0.5% – 3.0%

Pay particular attention to the profile of the magazine and newspaper readership compared to the promoted product.

Be aware of high value coupons (higher than the value of the publication).

$.50 off hair color product

$.25 off tea

Free chocolate bar

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Product samples are distributed with a Money Off Next Purchase (MONP) Coupon to encourage future purchase.

Particularly effective for new product launch to generate awareness.

MONP amount.

Concentration of sampling.

Location and quality of sampling.

10% – 40%

Be aware of misredemptions. Not so prevalent due to advances in the Catalina system but it becomes a predominant factor for high coupon values.

In-store sampling is discouraged due to the unpredictability of response rates. Response is dependent on the quality of sampling and communication which is a factor outside of SCA’s full control.

No specific comments.

Outside store 20% off ARV

An on-pack communication that drives consumers online to register for an e-coupon; or consumers receive coupons electronically via email.

The mechanic is used to increase traffic to a brand’s Web site or offer an alternative means of claiming a coupon.

Can target specific consumer groups.

A method of obtaining detailed consumer data.

Value of coupon vs ARV (approximate retail value) of product.

Quality of emailing list.

Frequency of purchase.

2.5% – 20%

Limitations on use should be considered. (e.g. One per IP address)

Coupons should have a short validity and relatively low value to discourage extensive misredemption.

Coupon offers should have individual codes and include consumer’s name and zip code. This helps to prevent misredemption by tracking consumer redemption behavior.

On-pack free product coupon vs another product in the brand portfolio

$1 MONP coupon distributed via email to a cold database

SCA Promotions makes it easy to enhance promotions that will engage and motivate your consumers. With promotional risk coverage, you can offer high-value prizes from $10,000 up to $1 million or even more without incurring a large financial risk. We cover the payout in the event of a winner.

Since 1986, SCA has estimated promotional response rates and provided coverage for tens of thousands of promotions across the globe. Our enviable wealth of experience enables us to successfully guide your promotional strategy, adding value and maximizing return on investment.

We offer the biggest brands and agencies peace of mind on their fixed fee promotions: if the promotion is more successful than anticipated, SCA will pay the excess cost and the promotion budget is guaranteed to stay intact.

Other prize coverage services:

PROMOTIONS

Sports Contests

Interactive

Retail and Special Events

Gaming

Media

I t ti

R t il d S i l E t

G i

M di

Call us at 888-860-3700 or visit us at www.scapromotions.com

PROMOTIONS

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3rd Floor

Dallas, Texas 75234

telephone: 888 860 3700

email: scainfo@scapromo.com

website: www.scapromotions.com

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