Promotions can be risky

Poorly executed promotions can damage finances and brand, points out Adrian Harris

Incentivising companies to buy products or services through the use of special promotions is an excellent way to develop customer loyalty and trust, provided the promotions offer quality incentives and are repeated, with variations if required.

However, if the risks involved are too high, any risk management company that covers the promotion against loss or partial loss may either turn your business down or charge more.

To mitigate risk, you may shy away from promotions or keep them short, especially in difficult trading conditions. But promotions are good for business.

The risks are in the small print, or lack of it. If an offer says it will refund your money or send you a new product or service, and it does not have a way of controlling the number of refunds or replacements, costs can rise, as does the risk of fraud.

Postage costs both ways and package costs one way, with extra staff being employed to process them, or an extra charge levied by any third party that is managing the promotion to cover its own additional resources requirements.

Also, the insurer of a promotion may back off if it believes false claims may be high, and that the promotion has been managed in a way that amplifies the risks.

Utilise terms and conditions that reduce your financial risk, perhaps by using the latest in contactless technology and coupon validation. Perhaps choose a risk specialist that offers fixed fees rather than one charging by the number of returns made.

Controlling costs and risk properly may allow the offer to run for longer, or again at a later date.

A well-conceived, well-managed promotion will not only reduce risks to brand image and finances, it will also help to win and retain further customers.

Adrian Harris is sales director at Opia