RIMS Lecture Series - Risk and Probability April 8, 2008 Presented By: Robert D. Hamman

1. RIMS Lecture Series - Risk and Probability April 8, 2008 Presented By: Robert D. Hamman Founder and CEO, SCA Promotions

2. Agenda • Promotion Examples • Identify obstacles in the marketplace • What is contingency promotional risk coverage? • Overcoming obstacles with big-prize promotions • How does this risk differ from your other business risks? • It’s worth it to fix your budget

3. Taco Bell “Think Outside The Park” • The sign with the most exposure wasn’t even inside Pac Bell Park! • Floating “target” in McCovey Cove • A “hit” got free tacos for every U.S. resident • Four billion brand gross impressions through PR and media mentions • SCA eliminated the risk of paying for millions of tacos!

4. $5 Million Kentucky Derby Prediction Contest • Contestants selected the exact order of finish for all entries at www.kentuckyderby.com • $5,000,000 grand prize for a correctly predicted race, paid by SCA • 1.4 million unique visitors logged on to the game site • Promotion generated a 70% increase in Web traffic

5. Taco Bell All-Star Game - $1 Million Rapid Fire Contest • Leverage All-Star Game sponsorship • Contestant had to throw five baseballs within 30 seconds (from 60 feet away) into a target • With just one second remaining, he successful threw the fifth ball through the target

6. Ashley Furniture Offers Free Furniture • If the University of Memphis men’s • basketball team had won the 2008 National • Championship, Ashley Furniture customers • would have received their purchases for free • To increase sales and capitalize on the • excitement of the 2008 men’s college basketball tournament • Sales increased above projected goal • Received valuable publicity

7. Hoover Vacuum‘s “Free Flights Promotion” • Example proves that it is critical to understand the risk • Is there anything about it that doesn’t “meet the eye”? • The Hoover Company offered free airline tickets to customers who purchased more than £100 worth of products • They did not anticipate the huge response of customers buying products just for the airline tickets • Overwhelmed by the demand for tickets and cost of the flights

8. Identify Obstacles in the Marketplace • Consumers are flooded with information and are starving for knowledge. How will you connect? • Consumers tune you out. How will you get a message in “edge-wise”? • Too much background noise in the marketplace. How will your brand / product stand out? • How do you get a second of consumers’ mindshare?

9. Industry Trends Bigger Prizes = Better Response “The chance to win is the number one most effective tool to motivate consumers to participate in permission-based marketing efforts.” - eMarketer “82% of consumers will provide private information in exchange for the chance to win.” - Jupiter Research $10,000 Response Rate $50,000 “You’ve got to put a prize out better than the next guy. Small prizes won’t generate any excitement - it has to be $50,000, $100,000, or $1 million. SCA helped us do that.” - Immediate Success $100,000 Prize Amount $1,000,000 SCA PROMOTIONS 5

10. Make Your Risk An Opportunity • Question: • How can you turn a marketing risk into a positive opportunity for your organization? • Answer: • Contingency Promotional Risk Coverage • Promotion sponsor pays SCA a fixed fee to transfer the risk exposure of the grand prize. If there is a promotion winner, SCA gives the sponsor the money to award the prize.

11. Overcoming Obstacles with Big-Prize Promotions • Eliminate your company’s risk and allow marketing to be creative and “think outside the box” • SCA manufactures a risk. We assume the risk for a predetermined, fixed price • Cut through the marketing clutter with an innovative, risk-proof promotion • Does this risk require management? As a risk manager, this is one more term you need to look into

12. Sponsors pay a fixed fee (a small portion of the prize value) to transfer the financial risk :: Online promotions :: Contests and games of skill :: Games of chance :: Instant win games :: Scratch-and -win cards :: Over-redemption coverage :: Event promotions :: Sports promotions :: Athlete incentive programs :: Conditional and weather rebates Promotional Risk Coverage Example: Client has a $5,000 budget Award a promotion finalist an all-expense paid trip for two to the “Big Race.” Spend the rest of the promotion budget and offer the finalist a chance to win $100,000 in cash on race day if your driver wins the race!

13. How Does It Work? • SCA calculates the odds of a winner(s) and/or estimated response and secures appropriate risk coverage • SCA and the promotion sponsor enter into a contract to cover the prize • The majority of risks are placed through commercial insurers (Lloyd’s and North American Specialty, a Swiss Re company) • Fees are customized based on the prize value, number of attempts, and odds of the event happening

14. How Does This Risk Differ From Your Other Business Risks? • Non correlated risk – no causal affect • Manufactured risk • No concentration of risk issues • There is exposure – how should you approach it?

15. It’s Worth It To Fix Your Budget • Ensure that you won’t have to deal with the risk of going over budget • Budget concerns – how to eliminate overspending and underspending • You don’t have to pass up ideas to do something on a grand scale that will grab consumers’ attention and drive results

16. Who Is SCA Promotions? • ::Contests, games, and sweepstakesBehind-the-scenes resource for both offline and online • ::Leading provider of promotional risk coverageAmplify marketing messages with life-changing prizes from $10,000 up to $1 million or more - even $1 BILLION • ::Reliable and Experienced Covered billions of dollars and paid over $156 million in cash and prizes for worldwide promotions since 1986 • ::A Partnership • Parent company of SCAinteractive, interactive partner to brands andagencies • :: A Global Resource • Headquarters in Dallas, TX. Offices in London, Calgary, Munich, San Francisco, Las Vegas. International distributors in over six countries

17. CONTACT INFO Robert D. Hamman Founder and CEO 888-860-3700 bob.hamman@scapromo.com www.scapromotions.com