The Coors Brewing Co. has taken steps to protect its marketing budget as it dangles $1 million in cash and prizes over the heads of its consumers.That's because specialty insurance is backing the "Zima Survivor Challenge," a sweepstakes that links its Zima alcoholic beverage to the "Survivor: Marquesas" television show.This type of risk management is enabling the Golden, Colo.-based brewer to make

The Coors Brewing Co. has taken steps to protect its marketing budget as it dangles $1 million in cash and prizes over the heads of its consumers.

That's because specialty insurance is backing the "Zima Survivor Challenge," a sweepstakes that links its Zima alcoholic beverage to the "Survivor: Marquesas" television show.

This type of risk management is enabling the Golden, Colo.-based brewer to make a big promotional splash without depleting its budget.

"This is an attention-grabber," Hilary Martin, company spokeswoman, told Brand Marketing. "When we develop partnerships, we look to engage and excite the consumers. This sweepstakes does that. It's a fun consumer promotion." The object of the contest is to get brand exposure with 21- to 29-year olds, Zima's target market.

Specialty insurance can help marketers better plan promotional expenses, eliminate budget overrun, protect against huge prize payouts and stretch their promotional budgets. The use of this coverage comes at a time when prize values are increasing for sweepstakes, games and contests. Seven-figure giveaways are commonplace, and there's even interest in higher rewards, some amounting to $10 million to $20 million.

While used in many different areas of the consumer goods industry, big prizes are especially prevalent in the nonalcoholic and alcoholic beverage categories. Last summer, for instance, the Coca-Cola Co., Atlanta, gave away five $1 million prizes via a 25-year annuity. Consumers could win by finding a prize-winning message under the cap of specially marked Coca-Cola classic, caffeine-free Coca-Cola classic, diet Coke, caffeine-free diet Coke or Sprite bottles or by opening special "pop-top" cans and finding a prize-winning disk under a false lid.

Coverage lets companies offer bigger prizes than they thought they couldn't afford, according to specialty insurers. That's because insurers basically assume the financial risk for the outcome of the event. Insurers figure the odds of a winner or the expected response, and secure coverage for the prize or over-redemption program through risk partners or commercial re-insurers, like Lloyd's of London.

High-value prizes gained speed during the dot-com boom, when Internet companies offered big rewards. While the tactic took a hit after the dot-com bust, there's been renewed interest by both click- and brick-and-mortar companies, according to Mark Barry, senior vice president of marketing, ASU International, Woburn, Mass., a coverage provider that is handling the Zima promotion.

"We're now seeing a number of major brands coming back and offering sweepstakes, games and contests as a key promotional tactic," Barry said.

One reason manufacturers favor high rewards is that they help create a one-on-one communication with consumers, said Don Silberstein, senior vice president, SCA Promotions, a Dallas-based company that provides prize coverage. This is done in several ways, including through-game entry forms, which often require name, address, e-mail and other information.

"More and more, companies are using contests and sweepstakes as a mechanism to get direct-to-consumer communication and, in some cases, consumer data," Silberstein said.

A big prize also heightens awareness about a promotion -- and the sponsoring brand.

"People expect big brands to do something big," noted Barry.

Silberstein of SCA agreed.

"You need an incentive that's sufficient enough to gain consumer interest," he said. "In an environment where consumers are focused on Enron, the Middle East and the economy, you need to cut through the fog."

There are several different types of specialty insurance available. Among them:


This type of policy lets marketers offer a big prize, but cap their liability, said Barry. The cost for this can run from about 1% to about 40% of the prize being offered, depending on the odds and support of the promotion, like advertising and in-store spending, according to Barry.

Odds vary greatly depending on how the contest is structured. Insurance for an instant-win, or guaranteed, contest will cost more than a nonguaranteed. In a nonguaranteed event, a prize is usually contingent on a certain action, like collecting "x" amount of game pieces.

This is how the Zima sweepstakes is structured. Consumers must first get a code that's printed under the caps of Zima and Zima Citrus 6- and 12-packs. Consumers can also get a code by sending a self-addressed envelope to Coors. Consumers enter the code on a special Web site. The promotion began in February and runs through July. Coors officials were unavailable to comment on the insurance aspects of the contest.


If a company wants to protect itself in case more people redeem a guaranteed prize than expected, over-redemption coverage could be the answer.

Individually, prizes may be fairly modest rewards. But if there's an unexpectedly high response rate, a marketer could experience a serious budget overrun.

"Over-redemption of game pieces can be a significant liability to everybody involved in a promotion," said Barry.

Frito-Lay, Plano, Texas, opted for this type of insurance for a Super Bowl promotion last year, according to ASU. It purchased over-redemption coverage to prevent a budget overrun in case more people claimed the reward than anticipated.

Under the promotion, insured by ASU, game pieces were placed inside chip bags. Each piece was printed with a play that might happen during the game. If the play actually occurred, consumers could send in their pieces to claim prizes, which ranged from bags of chips to Super Bowl merchandise to $100 Visa gift cards, according to Barry. Unexpected response rates are more likely in today's marketplace because of the growth of Internet promotions.

"With the Internet, there's no history that you have with other mechanisms, like a mail-in offer, so it's more difficult to predict what the response will be," said Silberstein.

Sony also opted for over-redemption insurance for a Sony Movie Cash offer, according to Silberstein. To increase sales of its videotapes, audiotapes and other recording products, it offered Movie Cash inside its Sony audio and video products worth $3.50 off the price of a movie ticket. Because there were no restrictions, Sony could have faced a huge payout. To stay in budget, it secured over-redemption coverage from SCA for a portion of each cash certificate.


This will protect a marketer for printing and other errors that happen during a promotion. If, for instance, a brand intends to give away one $1 million game piece, but, due to a printing error, inadvertently sends out 10 winning pieces, the company could be liable for $10 million. Errors-and-omissions coverage would protect the company should this happen.

"More and more marketers are interested in insurance that protects them and their subcontractors, like printers or agencies, from mistakes," Barry said.


The sporting industry gets big support from car manufacturers in the form of games, contests and sweepstakes. But there's also plenty of participation from consumer goods companies.

Of those that do get involved in this area, some choose a hole-in-one contest. This is usually a high-profile golfing promotion in which a sponsor offers a big prize to a player who makes a hole-in-one. Hole-in-one insurers pay the prize if there's a winner.

"People love to compete, especially when it's a sports-skill challenge," said Sam Schachter, special events marketing director, National Hole-In-One Association, Dallas, which organizes and insures hole-in-one contests. "There's almost a state-fair mentality. Games are basically impossible to win, but people want to try. That's why brands have sweepstakes."


What's useful about specialty insurance is that it can benefit both big and small brands. For instance, for big brands, it can help them make better use of their budgets. A brand may have, say, a $1 million budget. Instead of using the entire $1 million as a prize, it can take a fraction of it and purchase prize indemnity insurance and use the rest to execute the promotion or to offer more guaranteed, lesser-value prizes.

Insurance also benefits smaller brands on a tight budget. Depending on how a sweepstakes is structured, they, too, can afford a $1 million prize, said Barry.

"It's very impactful to get your prize in the $1 million area -- and even a lot of smaller brands can do that," he said.

Along with getting insurance, companies can increase the size of the reward by paying out the prize over several years, rather than in a lump sum. One option would be to award a $1 million prize over 20 years, paying out $50,000 each year.

Coors opted for a route similar to this with the Zima/Survivor sweepstakes, which awards two winners a chance to win $500,000 in 20 annual installments without interest.