Some Insurance Executives Aren't Sleeping Well - The Sequel
Last year I wrote about a Red Sox promotion run by Jordan’s Furniture, a local furniture company. The promotion was catchy: if the Red Sox won the World Series, all purchases made during a specified period (March 7 – April 16, 2007) would receive a full refund. Over 24,000 customers had “skin in the game” as the Red Sox progressed through the season and decisively won the World Series. Covered by an insurance policy, the estimated payout was between $20 – $30 million of free Jordan’s furniture.
Jordan’s ran a similar Red Sox promotion this year. The only catch being that this time, the free furniture payout would only occur if the Red Sox win the World Series and the added “beating the spread” requirement of doing so by sweeping the series (winning the first four games). Well…the Red Sox have made it to the 2008 American League division playoffs, creating yet another reason for insurance executives to toss and turn at night.
If you are thinking about offering a pricing promotion, you ought to consider some type of sweepstakes. Kate Zeima wrote a great New York Times article on the increased popularity of sweepstakes and lotteries during hard economic times. It’s interesting, as consumers’ budgets are shrinking, they are exhibiting “trading down” purchasing behaviors. Luxury product spending is being trimmed and consumers are switching to private labels over branded products. But as Kate reports, at least 29 out of the 42 state lotteries are reporting increased sales, 22 of which set sales records.
In particular, I was surprised that the 2007 per capita lottery sales volume in my home state of Massachusetts was $707. Since I don’t play the lottery, that means one of my neighbors spent $1,414 on the lottery last year. A key contributor to Massachusetts lottery bonanza was its $20 instant scratch off ticket. While 1 in 3 of these cards offered some type of payoff, 10 lucky grand prize winners won $10 million each. Hmm…$20, a few scratches, and $10 million instantly. OK…I understand the appeal.
John Mikesell, a professor at Indiana University, found that between 1983 and 1991, lottery sales tended to rise with unemployment rates. The simple truth is that during hard times, consumers are looking for a quick fix.
So instead of yet another 10% to 15% off sale – yawn - tap into your customers' current mindsets. How about offering a “Free” promotion if a random event occurs: it snows more than 12 inches in a 24 hour period or the Indianapolis Colts win the Superbowl. Or run a frequent buyer sweepstakes, like McDonald’s perennial Monopoly promotion where last year landing on “Boardwalk” yielded a lucky fast food patron a million bucks.
Your consumers are looking for a “Hail Mary” pass or in Red Sox terms, a Big Pappy home run. A lottery type pricing promotion may just be the key to riding out these challenging economic times.
