You can’t predict the unpredictable, but you can guard against it
If there is one thing the current Fifa World Cup in Brazil has proved, it’s that life – and particularly sporting events – can be unpredictable. A month ago, the odds of Spain, England and Italy all being out of the competition at the end of the group stage would have been astronomical.
Imagine you were running a promotion around the event and suddenly found yourself having to pay out on the back of this. That could be very costly.
This unpredictability isn’t just restricted to the World Cup. At the start of the English Premiership season, Liverpool were 33-1 outsiders to win the title, yet they ran it to the wire with Manchester City. While this makes for a great spectacle – once you’ve got over the pain of seeing your team go home, or not quite make it over the line – there are salient lessons for brands.
Big sporting events – not just football – have always been considered a powerful draw for brands, especially when it comes to promotions, and there is a growing belief that sport + product = sales. But it’s not just a case of designing a clever promotion around your chosen event and then going to market. As the events in Brazil this year have shown, the unpredictability of sport means there can be serious issues regarding protecting your brand from excessive costs and over-redemption if you’re not planning ahead.
Of course, while the unpredictability around sporting events is very raw and prominent at the moment, it is only one part of the promotions landscape that can make life uncomfortable for brands.
In the past two to three years, the way brands have adopted social media channels such as Facebook and Twitter has changed dramatically. We are now seeing marketers using these channels to really engage their audiences with their promotions. Whereas once it could take several weeks for a promotion to reach its full audience, today that point can be reached almost instantaneously.
Furthermore, it just takes a favourable mention on Twitter or an appearance in the chatroom of a money-saving website and a promotion’s redemption rate can explode. In the past, if a promotion was supported by a large national TV campaign we would expect to see high redemption rates – today social media is taking these redemptions to a whole new level. Ultimately, this means brands need to be more informed of the risks than ever.
Despite this, many brands remain unaware of the gauntlet they are potentially running with their promotions. With so much affecting redemptions being totally out of their control, brands need to make sure they are getting the right advice and are covering themselves against all eventualities. This means insurance needs to be an upfront consideration at the concept stage, not a last-minute bolt-on. This is particularly true of promotions based around sporting events, as the cost of cover will get more expensive as the event gets closer.
Undoubtedly these are exciting times for brand owners and they should enjoy the new levels of speed and response their promotional activities have access to. However, they need also to be aware of the risks involved, and the potential damage that can be done to their brands if they don’t have the funds to honour redemptions.
There are essentially three options available to brands to protect themselves: self-insuring and accepting all costs of consumer redemption to whatever level and managing the logistics of redemption; buying limited levels of over-redemption insurance; or choosing a fixed-fee option which covers the cost of all redemptions, as well as all logistics to deliver the reward to consumers.
For the majority of brands, the latter is the perfect answer. It not only gives brands peace of mind that they are covered against all risks, but it also gives them access to the insurer’s expertise and guidance in what is an ever-changing market.
With so much at play in the market, you can never predict exactly what is going to happen with a promotion, but you certainly can avoid nasty surprises.
Industry Insights features highly accessible and practical content from experts in the marketing services sector providing you with tools and resources to improve your business performance. If you would like to submit a report to the section contact firstname.lastname@example.org