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| September 18, 2014

Should I Self-Insure My Promotion?

Giving back to your customers is a great business decision – it shows customers that you’re willing to reward them for their patronage, while also serving as a great way to boost sales or other forms of engagement. Many companies use redemption or conditional rebate programs to stimulate business and reward winners, with prizes such as airline tickets, free products, or even cash. With proper planning, everyone wins, right? The company sets aside the assets needed and doles them out accordingly. But, if the promotion becomes too popular, it could be a financial disaster.

One promotion disaster with a large redemption miscalculation was with Hoover in 1993. The vacuum company had too much inventory on hand and needed to liquidate it. To entice potential customers, the company awarded airline tickets to those who purchased products over £100. What Hoover underestimated was the appeal of the airline tickets instead of their low product prices. Ultimately, the division of Hoover responsible for the promotion was estimated to have lost more than $50 million.

Companies should never be scared of having a promotion that’s too successful. After all, standing out and achieving media exposure is the reason you’re considering a promotion in the first place. SCA Promotions offers over-redemption coverage to ensure that a successful promotion will be celebrated with champagne … and not budget cuts to cover the unexpected costs. SCA will determine the estimated amount of redemption, and if redemption goes over the estimated amount, we will pay for the difference. No gimmicks or hoops to jump through, just assurance that if your promotion catches fire you’ll still be able to sleep at night.

A recent promotion gave an Ashley Furniture HomeStore in a small Texas town national media attention overnight. The furniture store offered its customers a FULL REFUND on purchases from August 16 through August 27 if the Aggies won by 10 points or more. This resulted in more than ONE MILLION DOLLARS of free furniture but since Ashley Furniture HomeStore secured promotional risk coverage, they experienced ZERO risk to their bottom line. The store owner and marketing team could sit back and relax while they reaped millions of dollars in free publicity with featured broadcasts in media outlets like ESPN, Fox Sports, Yahoo, and Good Morning America.

Ashley Furniture HomeStore achieved record sales, bolstered brand loyalty, and garnered millions of brand impressions – a clean sweep for an exciting promotion. “Our store had the best month of sales in the eight years it has been open,” said a representative for Ashley Furniture HomeStore. “More than 600 people bought items during the promotional period totaling more than $1 million in sales.”

Your company doesn’t have to calculate and assume risk. Not only does it require specialized knowledge and experience to calculate the odds accurately, but assuming too much risk is a quick path to red ink and an accounting department scrambling for cash. Promotions are a tried and true method to gain new business and reward current customers. If you already have a promotion lined up and simply need a fixed budget, or if you’d like to build a complete promotion from the ground up, contact us today and we’ll work with you to complete your goal. With more than 28 years of promotions experience in a number of industries, we are more than prepared to make both your customers and bottom line happy.


A Few Partners Who Like to Win
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