Launching a promotion is a fantastic way to drive customer acquisition. However, it comes with risks. More often than not, big ideas require taking bigger financial risks. Businesses that want a way to both blow their competition out of the water and attract customers may have to consider their finances carefully before launching any kind of promotional campaign.
The best way to minimize risks associated with executing any promotional campaign is promotional risk management. The way this works is by covering all your bases and preparing for the unexpected, like ensuring you don’t exceed your budget or run out of merchandise.
In this article, Team Umbrella explore the reasons why risk management allows businesses to execute great promotions, whilst staying on top of their finances, too.
It Stops Businesses From Going Over-Budget
Promotional risk management gives you the option to set up a fixed fee, so once your promotional campaign reaches its budget limit, you won’t have to pay a penny more. This approach ensures that you are not overstepping any financial considerations.
Promotions are supposed to have a positive return on investment for your business, so managing your risk beforehand is an exercise of caution, and won’t leave you out of pocket.
It Keeps Businesses Compliant
All businesses would want their promotions to be popular and have high levels of redemption, but what happens when you run out of merchandise and your campaign has been over-redeemed?
There have been cases where customers have complained that they were not able to redeem a promotional offer, simply because they had run out of the product. Take Iceland for example – they ran a promotion with Daily Mail and offered free jars of marmite with coupons that were redeemable in-store. Unfortunately, they were unable to meet demand as they sold out of jars.
After receiving several customer complaints, the Advertising Standards Agency ruled that this was a breach of their code, which was a financial and reputational set-back to Iceland and Daily Mail.
The solution to this is to go down the promotional risk management route and opt for over-redemption insurance. That way, you will be covered if your promotion turns out to be more successful than you initially thought.
It Helps Avoid Costs Associated With Bad Press
Following Iceland and Daily Mail’s campaign breach, they inevitably suffered some damage to their reputation in terms of customer trust.
Pepsi also suffered a similar campaign fiasco in 1992, after promising one lucky customer with a million pesos if they found a bottle cap with the number 349 printed on it – unfortunately, they accidentally printed half a million caps with the supposed lucky number and had to deal with scores of negative press.
Having a risk management plan in place for your promotions can help you to avoid having to pick up extra costs to hire a PR company to deal with negative media coverage if a promotional campaign goes wrong.
This is because the risk management plan is likely to take into consideration the budget, legalities, and viability of the promotion, so you can avoid having to deal with bad press and the financial costs that come with it.
Promotional Risk Management: Peace of Mind For Your Business
To conclude, promotions are supposed to drive sales for your business, not damage your brand reputation or put you out of pocket. Having a plan from the get-go can give you the peace of mind you need to keep your finances in order should something go wrong. No promotional campaign comes without risk, but by having a sound promotional risk management plan in place, you will be able to reduce costs and grow, too.