RIMS Lecture Series - Risk and Probability
April 8, 2008
Presented By: Robert D. Hamman
Founder and CEO, SCA Promotions
Agenda
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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
Bigger Prizes =
Better Response
“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
“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.”
Response
Rate
$50,000
$100,000
Prize Amount
$1,000,000
- Immediate Success
5
SCA PROMOTIONS
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
:: Over-redemption coverage
:: Online promotions
:: Event promotions
:: Contests and games of skill
:: Sports promotions
:: Games of chance
:: Athlete incentive programs
:: Instant win games
:: Conditional and weather rebates
:: Scratch-and -win cards
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?
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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 coverage
Amplify marketing messages with life-changing prizes
from $10,000 up to $1 million or more - even $1 BILLION
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Reliable and Experienced
Covered billions of dollars and paid over $156 million in
cash and prizes for worldwide promotions since 1986
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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
CONTACT INFO
Robert D. Hamman
Founder and CEO
888-860-3700
bob.hamman@scapromo.com
www.scapromotions.com