Contingency Plans

EVERYONE loves a great big cash prize. Most consumers will play to win one — and they remember the brand behind it. When PROMO asked 2,000 consumers which brands’ promotions they participated in, the No. 1 response was the Publishers Clearinghouse sweepstakes. n But there’s a misconception among marketers that a big cash prize is too expensive. It would be painful to give away $1 million if a brand’s annual promotion budget is only $3 million.

Here’s a little secret: Every prize need not be given away. So a grand prize of a million dollars — or even a billion — is more feasible than you might think. Offer contingency prizes, and cover yourself against the chance that someone might actually win.

Contingency games specify upfront what has to happen for prizes to be awarded — a winner has to find a rare game piece, or score from the 50-yard line. Guaranteeing that a prize will be won costs five to 15 percent of the prize, depending on the probability that someone will win, and the difficulty in procuring the prize.

“It all began 16 years ago with prize coverage for local hole-in-one contests,” says Donald Silberstein, senior vp-strategic marketing at contingent-prize guarantor SCA Promotions, Dallas. “Radio stations would offer $1,000 to listeners who could sink a hole in one. Most listeners didn’t make it, but some did, and companies jumped in to help the radio stations budget their expenditures.” Instead of paying $1,000 to each winner, stations paid a small fee to the prize coverage company for every contest held, and the company made payouts to any winner.

Prizes — and creativity — have grown. Last spring, SCA covered Irvine, CA-based Taco Bell for its Mir Hits the Target promotion: The fast-food chain promised to give everyone in the U.S. a free taco if the Russian space station hit a target floating in the ocean upon its re-entry into Earth’s atmosphere. SCA worked with Taco Bell to minimize risk and cost, which could have reached $10 million. Mir landed outside the station’s expected entry zone. Consumers unhappy? No, intrigued. Mir did not hit the target, but sales of tacos did — especially when Taco Bell offered a “consolation prize” of two tacos for 99 cents.

The biggest prize ever was $1 billion in an Internet sweeps from Grab.com and guaranteed by SCA. Millions visited the fledgling site — but no one won.

Fine print

Success of a contingency game centers on clear communication. As long as the sponsor makes clear that winning is contingent upon certain circumstances and the odds are stated upfront, the program is legal.

Consumers aren’t put off by long odds. Millions of us buy lottery tickets (and every ticket-holder fantasizes about what he’ll do with the winnings). People know their chances are slim, but they still have a real chance to win. Consumers overestimate their chances of winning and underestimate the costs of participating. And this is the cornerstone of contingent prize development: Someone could, and sometimes does, win.

Sweepstakes are about chance; contests have consideration — a fee, or required skill. As long as your promotion doesn’t have both, you can offer contingency prizes. It’s a simple distinction, but any error can carry severe consequences. It is critical to retain a company skilled in games regulations. Many fulfillment houses, prize guarantors, and bonding or law firms can help you structure an exciting program within legal boundries.

Don’t let misconceptions about costs limit creativity. A compelling idea might find its way to market — within a predictable, and reasonable, budget.

Sara Owens is president of Promo Pros, Inc., St. Louis. She can be reached at [email protected].