All You Need to Know about Promotional Risk Management
- Jun 14, 2016
- By Carl Poxon
- In News
- Comments Off on All You Need to Know about Promotional Risk Management
Promotional risk management is simple. We know the name sounds complicated. We know that many of you don’t see its practical use. We also know that the market perception of this field is changing. As time goes by,more and more companies aiming for financial security start applying for promotional risk management programs.
Yet what is promotional risk management?
Assessing the number of risks and their respective graveness is a key step in risk management.
We’re here to tell all about this increasingly popular risk assessment strategy. We’re going to present to you the great advantages that promotional risk management has for your company. Things like improving creativity and making dreams come true are only samples of what an adequately executed strategy can give to your business.
In today’s overly competitive market, having backup plans can mark the difference between success and downfall. So, naturally, we believe promotional risk management is a must.
1. What Is Promotional Risk Management?
1.1 What Is Risk Management?
1.2 How Does Promotional Risk Management Work?
2. 10 Reasons Why Promotional Risk Management Is Useful
2.1 Promotional Risk Management Terms and Definitions
2.2 Types of Companies that Need Promotional Risk Management
3. Applying for Promotional Risk Management
3.1 Things You’ll Need before Promotional Risk Assessment
3.2 Other Services to Consider
Through promotional risk management, companies increase the security of their operations and, in effect, of their whole business. It takes the smallest pebble to break the corporate structure and down the company. Unassessed risks can grow, fester, and only become apparent once the threat is already too high. So, in order to avoid these situations, the system must be occasionally diagnosed through consistent risk management strategies.
To provide a good overview of promotional risk management, we must first give an adequate definition of risk management and what this sort of business insuring implies.
A high-wire act: don’t drag your business into unnecessary acrobatics. Hire a risk management company!
The elephant in the room is not always so easy to spot. That’s why management teams were invented. Basically, risk assessment is a high-wire act in which a group of highly-trained specialists calculates the level of danger should their employing company go bankrupt. More to the point, they deal with financial risks.
The risk management process by which a company evaluates the level of risk for a business or a promotion implies the following courses of action:
- Setting up a control group. The first step is to establish a control group to test risks upon. This group is generally fictive and based on the experience of the risk management team and/or of the company in need of risk assessment.
- Reviewing the control group. The control group now set up must be tested in order to find risks.
- Identifying the risk. Upon review, all inconsistencies in the flow of a company’s goods or services must be singled out as potential risks.
- Accessing the risk. Accessing a risk is the part where the team focuses on a single risk while ignoring the others. This improves objectivity and allows for distraction-free assessment.
- Assessing the risk. The next step implies identifying to what extent the respective risk is potentially harmful.
- Controlling the risk. The last step implies finding risk management solutions for the respective risk.
Next, a risk management team puts all risks together with their control strategies into a single risk management strategy which shall be presented to the employing company.
Promotional risk management is the application of risk assessment strategies (such as the one presented above) on promotional campaigns. Thus, it is a branch of enterprise risk management. When you and your company are holding a survey with a grand prize of £10,000, for instance, security is of paramount importance.
First, you will want to make sure that there is no possible way that two or more participants in your promotion win a set prize. In the event of such a misfortune, the lack of a consistent risk management plan can really drill a big hole in your budget.
Secondly, even if the above case happens (it sometimes does), you must be prepared. A serious promotional risk management company will offer insurance so that you, as a company, will not have to suffer on account of such an improbable outcome.
Weathering the risk management tempest is challenging. You should not go at it alone.
You do not need to worry about risks when dealing with a professional promotional risk management team such as Umbrella Risk Management. Your public relations team is now free to put their every whim into practice. All PRM companies provide over redemption insurance for the hypothetical situation where your promotion exceeds the expected response rate (see what these jargon terms mean in the next section of this guide).
The following list will present to you the top reasons as to why choosing a professional risk assessment company is useful:
- No more financial risks. Your money is safe. With a coherent promotional risk management strategy, your company is covered. No matter how wild a promotional campaign you decide to throw yourself into, it will be worthwhile.
- Creating a consistent risk management strategy. If you decide to do this on your own, you should be warned that the lack of experience could end up costing you your whole business. Hiring professionals to do the job for you could be far more cost-effective in the long run.
- Assessing the risks. All risks are accounted for. You will be able to sit back and relax. The team will handle everything that could possibly go wrong. If nothing goes wrong – you’re safe. If everything goes wrong – you’re still safe. It’s a win-win situation.
- Budget control. Giving the PRM team your full budget numbers is a key step to your company’s financial security. The more the team knows about your expenses, the more they can help you get the job done.
- Coverage for all types of promotions. No matter what the promotion will consist of, a promotional risk management company will make sure you forget the risk definition and focus on the important stuff like running the company. A “buy one get one free” or a “prize event”, a basic “prize draw” or a “survey sweepstake”, all of these are accounted for.
- On-demand assistance. Need help with your risk management on the double? No problem. The contract will often feature full work-hours assistance.
- Assigning specific consultants for every contract. Because all their clients are important, they all get one or more consultants that they can talk to at any time. A consultant handles the communication between the two parties.
- Providing a prize coverage. For a small fee paid each month, the company will give you the money in the event something disastrous happens.
- Providing Redemption Insurance. Over redemption is a threat to all companies running promotions. That’s why there exist specific teams of people whose task is to estimate the number of participants. Over Redemption Insurance is a failsafe for if more than the expected number of participants enter the promotion.
- Boosting creativity. Choosing a promotional risk management company will help your employees work. Lack of stress is a key factor in boosting creativity.
A metaphor: employees shouldn’t clean their own work tower’s windows. It’s a job for professionals.
There are a lot of confusing dictionary terms specific to this field of work. For the sake of convenience, we figured that you might want to know precisely what they mean. For those that are not used in this article, we will also provide an example of their relevance to the area of promotional risk management.
A promotional risk management term. When a promotion prize limit is exceeded and the company is forced to pay more than it had initially estimated.
Expected Response Rate
The projected interest that the public will have in the promotional campaign. A key concept in financial risk management, this must be calculated as precisely as possible for optimal results.
The history of promotional campaigns run by the company. Were they successful? How many people participated? This information is used in projecting a response rate.
How much a respective demographic is interested in the brand, its products and/or services, and the promotion itself.
One of the key elements of the risk management plan, brand power tells the risk manager the initial steps towards risk assessments.
To define the term loyalty-building, we need to go back to perceived interest and brand power. Basically, any campaign by any company must set building loyal customers as a priority to increase both the perceived interest and brand power.
Some companies often need more promotional risk management than others. These are enterprises that frequently organize customer surveys, promotions, and prize draws. Here’s a general list of these:
- Retail store chains. More often than not, retail stores have at least one promotion going on. Most of the times, they have more than one. These mammoth enterprises need really strong promotional risk management teams to work out their financial risks.
- Gaming companies. Video games are a trend that just keeps on rising. Therefore, gaming companies continue to profit from this by launching promotions for new and old games alike. This, in turn, needs consistent risk assessment so that the company does not reduce a specific game price too much.
- Digital companies. Businesses that have to do with the internet often make promotions for their end-users. To make sure that the millions of potential participants are accounted for, strong risk management needs to be employed.
- Sporting companies. Big sports companies need promotions in order to keep their customers’ fidelity or for loyalty building. However, this area of the market is also filled with uncertainties. Therefore, risk management teams are crucial.
Remember, though, that these are simple examples of the companies that need to know how to manage risk management most. However, all enterprises need risk management, just as all companies that hold promotions need promotional risk managing.
The four key points in the risk management process.
Applying for a promotional risk management plan is not as easy as calling a company and telling them that you want your risk management monitored. You will have to do your own internal homework before making the important call.
Here’s a small but important checklist of the main aspects you should focus on before applying for promotional risk management:
- Comprehensive knowledge of your company. We don’t just mean that you need to have all the finances and papers in check (which you obviously do need). You also need to have your promotion or promotions clearly defined.
- A good promotion. Coming up with the ideas beforehand is a good way to save time.
- An idea of what promotional risk management is about. Don’t call risk management and expect miracles. Things won’t happen overnight. If your promotion is already on a collision course with disaster, there’s little a risk management company can do. That’s why it’s important to set up the contract ahead of launching the actual promotion.
- Decide what type of promotion you want. Your specific promotion needs to be of a specific type. Mail in, call in, SMS – all are valid. Choose the one that best suits your demographics. As I said, you need to know every little analytic detail about the end-users.
Remember that risk management companies don’t just offer promotional risk management for your business. They have several other services to offer that are just as splendid. Here are a few that can also be found at Umbrella Risk Management:
- In case the budget element suffers some unexpected change, insurance can be negotiated at the signing of the contract.
- Promotional consulting. Risk management can be a pain if the promotion was not thought of in a prudent way from the get-go. That’s why promotional consultants are sent to participate in promotional meetings.
- Multi-national packages. Multi-national corporations often have lots of promotions going on at once. Some promotional risk management companies offer services that monitor all promotions from all regions of the globe in which a multinational operates.
The way towards adequate risk management can be a treacherous one. Have someone else map it out!
This has been a complete guide to promotional risk management. Any other queries should be addressed directly to us. We will strive to answer any and all questions in a professional manner.
Image sources: depositphotos.com – no attribution require
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