Print Job

Specialty printing, especially for sweepstakes and games, is rebounding after a slump triggered by lawsuits between McDonald’s Corp. and Simon Marketing following the theft of McDonald’s game pieces from the mid-90’s to 2001.

Marketers backed away from sweeps with high-level game pieces because of the resulting negative publicity, but they return to sweeps in full force this quarter — including McDonald’s, with its first game since the Monopoly debacle. This time, however, marketers have tighter security protocols, fatter insurance policies, and a clearer understanding of the printing process.

The lawsuits cast a long shadow. Oak Brook, IL-based McDonald’s charged that Simon was responsible because its security director, Jerome Jacobson, led the embezzlement ring. Simon, Los Angeles, charged McDonald’s with breach of contract and defamation, among other things (December 2001 PROMO). McDonald’s suit against Simon was dismissed in September 2002, and the status of Simon’s suit against Big Mac remains unresolved. Original counsel Fogel, Feldman, Ostrov, Ringler & Klevens of Santa Monica, CA, “subbed out of the case months ago,” coinciding with the federal court’s dismissal of McDonald’s complaint, says a firm spokesperson, who didn’t know if the case continued with new counsel. Executives of Simon, which has since folded, could not be reached for comment.

After the debacle, McDonald’s created an independent task force, and has anti-fraud and game security experts review all promotions since the August 2001 make-good game that gave away $10 million in stores over five days.

The whole episode precipitated a hard look at printing security for game pieces and other specialty projects. Brand marketers lead the charge, tightening their internal security procedures and requiring higher insurance coverage from agencies and printers. Right after the lawsuits were announced, marketers asked suppliers for $10 million in coverage for errors, omissions and liability. That sent insurance rates into the stratosphere for nearly a year.

These days, however, marketers are happy with policies good for $1 million to $5 million. “If [marketers] are contracting with a promotional agency, they’re really saying to the agency, ‘We want higher levels of liabilities,’” says Mark Barry, senior VP at insurance underwriter ASU International, Woburn, MA.

Marketers also want printers hired by their agencies to be insured at least at the same level as the agencies themselves. Certain responsibilities and activities have been shifted from marketers to suppliers, obligating them to pay for disasters and getting marketers off the hook. “It’s a trend that’s been going on for a while, but it definitely quickened from Simon Marketing,” says Barry. Big spenders like General Mills, Minneapolis, now read suppliers’ insurance policies “to make sure safeguards are in effect,” he adds.

The newest trend in promotions policies is a pick-up in crime insurance. Typical policies held by agencies and suppliers cover criminal activity up to $50,000, but increasingly clients are looking for criminal policies with $1 million payouts. Barry recommends suppliers also get comprehensive employee dishonesty bonds.

Meanwhile, ASU scrutinizes more closely those companies seeking its policies. Clients’ policy requests were underwritten immediately in the past; now ASU exercises caution in granting new policies, investigating prospective clients’ promotion histories and any consumer complaints about past contests.

Too grim for games

Marketers also held back on games in the wake of Sept. 11 attacks.

“Promotions are something to make people feel good,” says Val Stark, senior VP-sales and marketing for St. Louis-based Fleming Promotional Graphics. “No one wanted to be the first ones out there having fun, and promotions are built around that. The nation needed a grieving period.”

Stark says the anticipated boom in promotions this year — starting with a first quarter richer in gaming than fourth-quarter 2002 — reflects consumers’ desire for a return to normalcy and economic confidence. “Promotions are going to be on the upswing in 2003,” he says. “The grieving period for Sept. 11 and the failing economy have gone hand-in-hand, and haven’t helped the promotions business. Now I know many consumer-product manufacturers adding promotions dollars to their budgets.”

With spending comes education: Marketers who were in the dark about the nitty-gritty of sweepstakes execution have taken pains to learn how games — especially game piece printing and seeding — are controlled.

McDonald’s woes gave Fleming a “stronger suit to go out in and tell people, ‘This is how we do it. We’re not fraught with the same problems they had at Simon,’” says Stark. “We had an enhanced ability to go out and sell what we were always doing.”

In fact, game piece security was never an industry-wide problem, and doesn’t need more attention now, says Stark: “Most of us felt we had all of our i’s dotted and t’s crossed. The situation with Simon made everybody in the industry just sit back and look at their processes.”

Good printers and agencies already had checks and balances in place, and didn’t have “the same people involved with all of the processes all of the time” like Jacobson was at Simon, Stark says.

Still, marketers that historically handled printing security internally with their agencies, trusting agency services, have occasionally contracted with outside firms to double-check printing protocol. For example, Promotion Watch of Livonia, MI, is sometimes asked to monitor Fleming’s work. Promotion Watch expects this to be a record quarter after 10- to 15-percent growth every year since it opened in 1988, says President Pat McEvilly. (FSI leader Valassis founded Promotion Watch to pay for its in-house security department.)

“Demand for services is way up,” McEvilly says. “Security has become an integral part of planning a promotion.”

Marketers, including McDonald’s and Anheuser-Busch, involve Promotion Watch in their planning, printing and fulfillment. Still, most of the company’s clients are fulfillment companies and specialty printers like Fleming that like to have Promotion Watch’s former federal agents (licensed and bonded) provide another eye on sweepstakes seeding.

And many brand marketers now send representatives to game piece press runs. Agencies and suppliers welcome that; some have always invited clients along, and are relieved that now marketers take enough interest to visit the pressroom.

New technology changes security concerns (see sidebar), but McEvilly still sees a need for third-party services. “Printers are doing a very good job, but they need someone to protect the client,” he says. Many clients do not have insurance policies on their in-house security staff to cover their own fallibility, and “computers can make mistakes, too.”

And even when technology is error-free, consumers still try to submit bogus prize claims. Promotion Watch helps root out fraudulent claims: “It’s not unusual for someone to send in an empty envelope and claim it contained a winning game piece,” says McEvilly.

The McDonald’s mishap occurred simultaneously with a Canadian promotions scandal in which a plate mistakenly remained on the printer, stamping out 60,000 grand-prize winning tickets. The game was pulled and the marketer didn’t have to pay all the “winners,” but Pollard Banknote — which mostly prints lottery scratch-off cards — fielded calls from nervous marketers and agencies referred by state lottery regulators.

“People were gun-shy of doing scratch games,” says Nancy Tovell, sales manager at Winnipeg-based Pollard. “You never get back customers you lose through publicity.” But instant-win scratch cards are popular again, a cycle that lasts about three years, she says. This year will see a resurgence of instant-win game pieces, backed by tougher security, heftier insurance — and more visits to the printing plant.

Run for the Border

Some marketers have headed to Canada, where state and federal regulations make specialty printers accountable for higher security. Pollard Banknote, Winnipeg, Alberta — which mostly prints lottery scratch-off cards — saw its promotional printing business increase 50 percent in the past year. (Its prices reflect heightened security measures.)

Agencies and marketers also are upgrading to safer technology. Pollard, for example, uses only variable imaging technology: Ink-jet heads are programmed by computer to lay data on automatically fed forms, at the rate of 18,000 feet per minute, rather than on traditional sheet-fed forms. Because there are no printing plates, there’s no need for witnesses during a print run. There can be no more winners than there should be, and audits can be conducted immediately after printing, by computer. “We have taken a lot of human error out,” says Pollard sales manager Nancy Tovell.

All Pollard employees must pass security checks, and security cameras pervade the plant. “Previous to McDonald’s, people would use the printer down the street,” Tovell says. “The scandal actually got us an increase in business.”