Promotions with big, $100K or even $1M prizes can draw in big audiences and create lots of brand engagement.
And while consumers love chances to win those big prizes, sponsoring companies don’t always love paying the price. So how do brands cash in on big promotions without the big financial liability that’s tied to those kinds of promotions? It’s easy – promotional insurance.
Typical promotions usually involve some kind of guaranteed prize. For example, a general sweepstakes promotion has a draw at the end with a guaranteed prize to be given away. The prize offered could be anything from a weekend trip to a small cash prize. A brand’s budget limits the total prize offering. Insured promotions raise the stakes by adding an additional element of chance that provides an opportunity for someone to win big. Based on the odds of accomplishing a particular task, an insurance policy is issued to cover the cost of a prize payout if a winner emerges. From a trip around the world to one-million dollars, brands can get that wow factor by leveraging their promotions budget.
Promotions insurance can best be illustrated using a scenario from a sporting event. If you’ve ever attended a basketball or hockey game then you’ve likely seen promotions insurance in play. Often these types of events have half-time shows with fan-engagement activities which can include chances to win prizes. Typically, one lucky fan is given the chance to make a half-court shot or net a hockey puck through a cut-out for a big, cash prize. If the ball goes in the hoop or the puck into the net then sirens go off and a big check is presented. In this scenario, promotions insurance can be used such that the sponsor pays a fixed fee to an insurer to take on the risk. If there’s a winner, the insurance pays the big prize, not you.
This video is a great example of the above scenario. Gustavo Angel Tamayo, 23, beat the odds by attempting a basketball challenge with a broken finger, no competitive basketball experience, and a race against the clock. The Bryan College student was challenged to sink a lay-up, free throw, 3 point shot, and half-court shot before 30 seconds buzzed. Incredibly, Tamayo made all four shots with seconds to spare. He went home with $10,000 in tuition money and video of his success has gone global – from NBC News to the UK’s Daily Mail. In this case, the sponsor could’ve used promotional insurance to insure the odds of success and minimize its financial commitment while benefiting from the huge promotional impact.
The same concept can be applied to online promotions. For example, a well-known, quick-service restaurant sponsored an online promotion this past year that gave consumers a chance to win one million dollars. Each consumer who participated in the promotion entered online and was asked to select a number between 1 and 100. At the end of the promotion, one potential winner was drawn from the pool of entries. A random, computer drawing then selected a number between 1 and 100. Had the winner’s number selection matched the random draw number, the participant would’ve won the one-million-dollar prize. In this case, the sponsor paid a premium amount for prize insurance. The insurer then took on the risk – if the potential winner’s number had matched the random draw number then the insurer would’ve paid out the million-dollar prize.
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Disclosure: We have no material relationship to any brand or person named in this post.
- Promotional Insurance