DUMMIES GUIDE

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  • With the compliments of

    Limited Edition Protect your marketing budgets

    FREE eTips at dummies.com

    Promotional Risk

    Management

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  • By Mando

    A John Wiley and Sons, Ltd, Publication

    Promotional RiskManagement

    FOR

    DUMmIES

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  • Promotional Risk Management For Dummies

    Published byJohn Wiley & Sons, LtdThe AtriumSouthern GateChichesterWest SussexPO19 8SQEnglandFor details on how to create a custom For Dummies book for your business or organisation, contact CorporateDevelopment@wiley.com. For information about licensing the For Dummies brand for products or services, contact BrandedRights&Licenses@Wiley.com.Visit our Home Page on www.customdummies.comCopyright 2011 by John Wiley & Sons Ltd, Chichester, West Sussex, EnglandAll Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechani-cal, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London, W1T 4LP, UK, without the permission in writing of the Publisher. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, England, or emailed to permreq@wiley.com, or faxed to (44) 1243 770620.Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc. and/or its affiliates in the United States and other countries, and may not be used without written permission. All other trade-marks are the property of their respective owners. Wiley Publishing, Inc., is not associated with any product or vendor mentioned in this book.

    LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER, THE AUTHOR, AND ANYONE ELSE INVOLVED IN PREPARING THIS WORK MAKE NO REPRESENTATIONS OR WAR-RANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE. NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS. THE ADVICE AND STRATEGIES CON-TAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION. THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES. IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT. NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HERE-FROM. THE FACT THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE. FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ.

    Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books.ISBN: 978-0-470-97572-5Printed and bound in Great Britain by Page Bros, Norwich10 9 8 7 6 5 4 3 2 1

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  • Introduction

    W elcome to Promotional Risk Management For Dummies, your step-by-step guide to protecting your promotional budget.Fixed fee. Over redemption cover. Prize indemnity. Assessing and evaluating insurance options for a pro-motional campaign, or whether you need to cover at all, can be a mind-boggling task. This book takes you through the process from a risk managers point of view so you can see what he sees, and understand the questions he might ask you.

    The more you understand about managing the risk in a promotion, the more control you have over the sepa-rate budgetary elements of a campaign, and not just those connected with risk. By looking at the individual components you can see which ones really matter, and which are having the greatest influence over consumer behaviour.

    About This BookThis book aims to provide you with information to make the right choices when it comes to managing promotional risk. Its full of useful tips and hints about where the risk lies in your promotional strategy, and how you can use that risk to make your brands budget work harder.

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  • Foolish AssumptionsIn writing this book, we made some assumptions about you:

    You work in promotional marketing.

    You work in an agency or for a brand.

    You know that some promotions carry financial risk thats linked to the level of uptake of the offer by your target customers.

    How This Book is OrganisedPromotional Risk Management For Dummies is divided into five small but perfectly-formed parts:

    Chapter 1: Identifying Risk. Go here to see where the risk is lurking in your strategy, and how to manage it to your advantage.

    Chapter 2: Assessing Risk. Understand whats inside the head of your risk manager and why hes asking you all those questions; we look at whats in the quote.

    Chapter 3: Managing Risk. In this part we run through the ways you can manage risk and how to choose the right experts to help you.

    Chapter 4: Looking at Risk Management in Action. Here we give you examples of promotions such as scratch cards and coupons.

    Chapter 5: Ten Steps to Promotional Risk Management Success. This succinct list leads the way to success.

    2

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  • 3

    Icons Used in This BookWe highlight crucial text for you with the following icons:

    The Dummies man indicates real-life examples to illustrate a point and inspire you.

    The knotted string highlights important infor-mation to bear in mind.

    Home in on the target for tips to enable you to understand your risk better.

    Where to Go from HereAs with all For Dummies books, you can either read this guide from cover to cover or flick straight to the sec-tion that interests you. Whether you read it in small doses using the section headings or all in one go, youll find plenty of information to get you on your way to managing bigger, safer, better-protected promotion marketing campaigns.

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  • Chapter 1

    Identifying Risk

    In This Chapter Knowing why promotional marketing can be a risky

    business Understanding the different types of risk Discovering how promotional risk management

    works

    The problem with promotional marketing is that if you do it really well, it can cost you a lot of money. If you create an offer that consumers find irresistible, not only will your products fly off the shelves, but your costs for honouring that offer could run out of control.

    Risk management isnt just about financial risk; it also covers logistical issues surrounding your campaign and ensures you can deliver it within the terms of the promotion.

    Effective use of risk management techniques can enhance the creative process, allowing you to make stunning offers within even modest budgets.

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  • 5

    Understanding Where Risk Comes FromYour risk management strategy depends on your pro-motion. You can determine the risk during the develop-ment of the campaign by looking at elements such as communication routes, brand history and the redemp-tion process. Most important of all is the budget.

    Budget Your fixed costs often affect consumers aware-

    ness of the promotion, but your variable costs are related to how much they like it. Intrigued? This section explains all.

    Only some parts of your budget are open to risk. Your total campaign may include elements such as advertis-ing, pack printing and PR. These elements are fixed irre-spective of the uptake of your promotion, so you need to put them to one side when deciding the proportion of your budget that can be allocated to variable costs.

    However, the risk assessor needs to know your fixed spend before agreeing a quote because these elements affect the audience awareness of your promotion and so affect its uptake. In fact, youre likely to find your risk assessor can help you here, suggesting changes to fixed cost activities to enable you to meet your variable budget.

    Some promotional costs are very much dependent on how many people participate in the offer. These include coupon refunds, data capturing applications and postage to send out prizes. If your promotion is successful, these costs can mount up quickly.

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  • 6

    It is this variable budget that dictates the rest of your promotion and how it is made up. It determines your prize fund or premium choice, it affects the participa-tion rates or winning rates you need to target, and it affects the redemption routes you have available to you.

    Your risk assessor can advise you on budgets. Indeed, she could suggest changes to the pro-motion if your budget is too low for the type of offer in the brief.

    Brand profileThe personality of your brand is a consideration in any promotion when determining the uptake of your offer. For example, a t-shirt with a Coca-Cola slogan may have mor