In 1992 a free flights promotion cost Hoover almost £50m and resulted in the UK division being sold. Don’t be sucked into the same trap – think about over redemption insurance to protect your promotions, says Oval’s Ross Beard.

It’s the most infamous consumer promotion to date; when Hoover promised free airline tickets to customers who spent over £100, it ended up costing the company nearly £50 million. The court cases lasted until 1998, the UK division of Hoover was eventually sold to Italian manufacturer Candy and all involved lost their jobs.

As hindsight dictates, it seemed like a good idea at the time. It’s not just large companies that can fall victim to their own marketing promotions. Just recently we’ve seen a small bakery that had to supply 102,000 cupcakes on the back of an oversubscribed offer - and lost a packet. Then there is the oven-cleaning business that got into a similar tangle and made a substantial loss on each special offer fulfilled.

From newspaper coupons and the dear old buy one get one free (or BOGOF) to text message campaigns, incentives encouraging consumers to buy products and services are commonly used techniques. This shows how compelling a consumer offer can be, and with the proliferation of the internet and e-mail the ability to reach a large audience quickly not only has it’s advantages but also can result in promotions spinning dangerously out of control. Granted, a well orchestrated campaign will maximise exposure to your target audience, but occasionally the offer is just too good to ignore and the costs can end up causing you a massive headache as well as costing you a fortune.

Luckily there’s a flexible, cost-effective alternative
There’s a simple solution that protects you: it’s called over redemption insurance. It enables you to protect your promotion budget by setting accurate costs and avoid extra expense should a campaign be more successful than planned. You define the limits of the promotion, providing piece of mind that any unanticipated run on the promotion will neither cause you a red face nor give your bottom line the rudest of shocks.

It’s flexible too. It’s not just customers taking advantage of the promotions that can cause a marketing budget to blow out, but conditions of the offer might also affect the uptake – for example the weather. We recently placed over redemption cover for a large drinks company running a promotional campaign using smartphones. If the weather reached a certain temperature over the summer, subscribers could claim a free drink by showing their phone at a participating pub. A sustained hot spell could have cost the company a fortune: with over redemption cover, the risk was mitigated and controlled to prevent a possibly expensive mishap beyond the client’s control.

Over redemption insurance is one of the unique insurance policies offered by Oval Insurance Broking’s Media team. We have been providing bespoke solutions to cover the risk and insurance requirements of the advertising industry, production and post-production companies, TV companies and the film industry for over 20 years.

We also address all the needs of the Advertising Producers Association (APA) and Institute of Practitioners of Advertising (IPA) contracts – from death and disgrace to livestock protection – underpinned by a personal 24/7 claims and helpline service.

So wherever you are and in whichever time zone, you can rest assured there will always be someone to talk to when you need it most.