It's all about avoiding problems before they start. Sales promotions such as coupons, cash backs, instant wins, and gift with purchases can increase sales, build brand awareness, encourage loyalty, increase the frequency or weight of purchase, combat competitor activity or encourage trial of a product but they can also be very costly if participation is high!
Your biggest challenge with these sort of promotions is managing the budget, how do you know how much to put aside for the cost of redemptions?
The reality is, no matter how experienced you are at running promotions, you can never be 100% certain how many people will take advantage of your offer and so generally your budget is based on a best guess.
What happens if this guestimate isn’t enough? How do you pay for the spiralling cost of the promotion?
Fixed Fee is a cover EMIRAT provides to companies running promotional activities on their brands, products and services. It’s a one off upfront payment and it covers all the costs regardless of how many choose to participate. Because you are only charged for what we think will be claimed, you only pay a small fraction of the potential cost of the prizes and rewards.
How we calculate the Fixed Fee is very simple. EMIRAT estimates the likely number of responses to the promotion. This estimated number of responses is then applied to the variable costs of the promotion, which include gift or reward costs, handling and fulfilment and postage where necessary.
The estimated response is largely based on past promotional history of the same or competing brands, employing the same sales promotion technique. This history can either be held by EMIRAT or declared by the client when briefing EMIRAT. Slight adjustments are sometimes made to the redemption percentage to take account of any differences between the new promotion and the comparative data.
For example, differences in how the promotion is supported above the line can have an effect on response rates, which need to be accounted for.
Having applied the estimated number of responses to the variable costs, we then have a total expected cost of the promotion. A contingency margin is then added to this figure and the resulting sum is the Fixed Fee.
This Fixed Fee is all you pay for the promotion, regardless of what happens. It is then up to EMIRAT to pay for the rewards if they are won or claimed, however large or many they are.