RIMS Lecture Series - Risk and ProbabilityApril 8, 2008

Presented By: Robert D. HammanFounder and CEO, SCA Promotions

      

Agenda• Promotion Examples• Identify obstacles in the marketplace• What is contingency promotional risk coverage?• Overcoming obstacles with big-prize promotions• How does this risk differ from your other business risks?• It’s worth it to fix your budget

Taco Bell “Think Outside The Park”

• The sign with the most exposure wasn’t even inside Pac Bell Park!

• Floating “target” in McCovey Cove• A “hit” got free tacos for every U.S.

resident • Four billion brand gross impressions

through PR and media mentions• SCA eliminated the risk of paying for

millions of tacos!

$5 Million Kentucky Derby Prediction Contest

• Contestants selected the exact order of finish for all entries at www.kentuckyderby.com

• $5,000,000 grand prize for a correctly predicted race, paid by SCA

• 1.4 million unique visitors logged on to the game site• Promotion generated a 70% increase in Web traffic

Taco Bell All-Star Game - $1 Million Rapid Fire Contest

• Leverage All-Star Game sponsorship

• Contestant had to throw five baseballs within 30 seconds (from 60 feet away) into a target

• With just one second remaining, he successful threw the fifth ball through the target

Ashley Furniture Offers Free Furniture

• If the University of Memphis men’s

basketball team had won the 2008 National

Championship, Ashley Furniture customers

would have received their purchases for free• To increase sales and capitalize on the

excitement of the 2008 men’s college basketball tournament

• Sales increased above projected goal• Received valuable publicity

Hoover Vacuum‘s “Free Flights Promotion”• Example proves that it is critical to

understand the risk• Is there anything about it that doesn’t “meet

the eye”?• The Hoover Company offered free airline

tickets to customers who purchased more than £100 worth of products

• They did not anticipate the huge response of customers buying products just for the airline tickets

• Overwhelmed by the demand for tickets and cost of the flights

Identify Obstacles in the Marketplace• Consumers are flooded with information and are

starving for knowledge. How will you connect?• Consumers tune you out. How will you get a

message in “edge-wise”?• Too much background noise in the marketplace.

How will your brand / product stand out?• How do you get a second of consumers’ mindshare?

Industry Trends

SCA PROMOTIONS5

“The chance to win is the number one most effective tool to motivate consumers to participate in permission-based marketing efforts.” - eMarketer“82% of consumers will provide private information in exchange for the chance to win.” - Jupiter Research

$10,000

$50,000

$100,000

$1,000,000

Response

Rate

Prize Amount

Bigger Prizes = Better ResponseBigger Prizes = Better Response

“You’ve got to put a prize out better than the next guy. Small prizes won’t generate any excitement - it has to be $50,000, $100,000, or $1 million. SCA helped us do that.” - Immediate Success

Make Your Risk An Opportunity

• Question:

How can you turn a marketing risk into a positive opportunity for your organization?

• Answer:

Contingency Promotional Risk Coverage

Promotion sponsor pays SCA a fixed fee to transfer the risk exposure of the grand prize. If there is a promotion winner, SCA gives the sponsor the money to award the prize.

Overcoming Obstacles with Big-Prize Promotions

• Eliminate your company’s risk and allow marketing to be creative and “think outside the box”

• SCA manufactures a risk. We assume the risk for a predetermined, fixed price

• Cut through the marketing clutter with an innovative, risk-proof promotion

• Does this risk require management? As a risk manager, this is one more term you need to look into

Promotional Risk Coverage

Sponsors pay a fixed fee (a small portion of the prize value) to transfer the financial risk

:: Online promotions

:: Contests and games of skill

:: Games of chance

:: Instant win games

:: Scratch-and -win cards

:: Over-redemption coverage

:: Event promotions

:: Sports promotions

:: Athlete incentive programs

:: Conditional and weather rebates

Example: Client has a $5,000 budget

Award a promotion finalist an all-expense paid trip for two to the “Big Race.” Spend the rest of the promotion budget and offer the finalist a chance to win $100,000 in cash on race day if your driver wins the race!

How Does It Work?• SCA calculates the odds of a

winner(s) and/or estimated response and secures appropriate risk coverage

• SCA and the promotion sponsor enter into a contract to cover the prize

• The majority of risks are placed through commercial insurers (Lloyd’s and North American Specialty, a Swiss Re company)

• Fees are customized based on the prize value, number of attempts, and odds of the event happening

How Does This Risk Differ From Your Other Business Risks?

• Non correlated risk – no causal affect• Manufactured risk• No concentration of risk issues• There is exposure – how should

you approach it?

It’s Worth It To Fix Your Budget

• Ensure that you won’t have to deal with the risk of going over budget

• Budget concerns – how to eliminate overspending and underspending

• You don’t have to pass up ideas to do something on a grand scale that will grab consumers’ attention and drive results

Who Is SCA Promotions?

:: Contests, games, and sweepstakes Behind-the-scenes resource for both offline and online

:: Leading provider of promotional risk coverageAmplify marketing messages with life-changing prizes from $10,000 up to $1 million or more - even $1 BILLION

:: Reliable and Experienced Covered billions of dollars and paid over $156 million in cash and prizes for worldwide promotions since 1986

:: A Partnership

Parent company of SCAinteractive, interactive partner to brands and agencies

:: A Global Resource

Headquarters in Dallas, TX. Offices in London, Calgary, Munich, San Francisco, Las Vegas. International distributors in over six countries

Robert D. HammanFounder and CEO888-860-3700bob.hamman@scapromo.comwww.scapromotions.com

CONTACT INFO