Often businesses take out insurance in case those stunts end up costing a company big money, as it might when a fan hits that lucky half-court basketball shot.
Inside sports business
Talk about biting off more than you can chew.
Ruth’s Chris steakhouse in Ann Arbor, Mich., ran a “Big Score” promotion tied to Michigan Wolverines football. It offered a percentage discount equal to the Wolverines’ victory margin over weekly opponents.
But then, the Wolverines beat Rutgers 78-0.
Suddenly, the prospect of serving up $5 filet mignons by the hundreds loomed. Not so fast, said the restaurant, claiming it had capped the discount at 50 percent and was “fully booked” the rest of the week.
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Irate fans noted the restaurant hadn’t initially posted the restriction on its Facebook page announcing the promotion.
The steakhouse apologized for the omission but held firm. Some questioned whether the restaurant was truly booked, accusing it of avoiding having to honor more discounted meals.
Which got me thinking about sports promotions tied to on-field performance and the line between those that work and blow up. Being up front about rules would appear paramount.
The Miami Marlins neglected that last summer in offering a percentage discount on tickets for the remainder of the season tied to home runs hit by slugger Giancarlo Stanton at the All-Star Home Run Derby. Stanton hit a record 61 homers, prompting fans to demand a 61 percent ticket discount the rest of the year.
Marlins president David Samson quickly intervened, citing an MLB rule capping such promotions at 23 percent. The Marlins hadn’t mentioned the rule beforehand, but stuck with the cap and likely irked more fans than they won over.
One-time Mariners vice-president (marketing) Stuart Layne, who later served in that capacity with the Boston Celtics, says teams and companies often seek insurance policies for major promotions.
“It depends on your risk,’’ said Layne, now the executive director for the State of Illinois’ bicentennial celebrations. “If you’re a national company and you can benefit from the marketing, then the amount of risk isn’t as great. If you’re a regional franchisee and can’t handle the risk, then it could be troublesome.’’
Layne told of a spring 2007 promotion by Jordan’s Furniture in Boston, offering full rebates if the Red Sox won the World Series. They did win and Jordan’s wrote furniture rebate checks for $35 million to 24,000 customers.
“But much of that was insured,’’ Layne said. “Not all of it, but some of it. They took the hit, but they got incredible recognition.’’
Layne said NBA teams insure contests offering cash prizes for sinking a half-court free throw. Most limit prizes to $25,000 to get insurance premiums as low as $400 per game. But that still adds up over 41 home games.
“It becomes whether you pay the premiums or take a chance on absorbing the $25,000 hit,’’ he said.
Bigger corporations can handle steep one-time losses. But there’s also reputation to consider.
McDonald’s offered scratch cards tied to the 1984 Olympics in Los Angeles. For every U.S. gold, silver or bronze medal, customers received a free Big Mac, fries or Coke.
But the U.S. team proved stronger than anticipated. Aided by an Eastern Bloc boycott, it won 174 medals — including 83 gold.
Free food flowed and McDonald’s was ridiculed. A 1992 parody episode of The Simpsons showed Krusty the Clown’s burger chain losing $44 million on an Olympic promotion after a Soviet boycott.
Krispy Kreme, though, scored big-time image positivity off a Kansas City Royals giveaway, even when the team exceeded performance expectations. A dozen free doughnuts had been offered whenever the Royals amassed at least 12 hits.
In the promotion’s first year in 2003, the Royals took off offensively and hundreds of thousands of doughnuts were given away.
But Krispy Kreme continued the promotion for years, citing positive fan association and additional store traffic. Royals fans would chant “We want doughnuts!’’ once the team approached 12 hits.
In Seattle, Delta Air Lines recently launched a 12Status promotion awarding one frequent flier SkyMile for every Seahawks passing yard at home. Delta vice-president (Seattle) Mike Medeiros said 15,340 fans have registered, with 10,550,870 miles given away.
The promotion appears tailored to account for the unexpected. Even if Hawks quarterback Russell Wilson equaled the NFL passing yardage record of 554 every home game, participants would each collect 4,432 SkyMiles at most.
The cheapest “free’’ Delta flights require 10,000 SkyMiles, meaning additional flight purchases would usually be needed to reach that threshold. Also, the promotion is attracting new program members — some undoubtedly from rival Alaska Airlines.
Mariners vice-president (corporate business) Joe Chard said his team seeks promotions based off easily understood stats — like home runs, doubles or runs scored — with prize targets calculated to be attainable without yielding unexpectedly harmful results.
A Papa John’s promotion provides half-priced online pizza when the Mariners score four runs or more. Jack in the Box offers 2-for-1 burgers when the Mariners turn a double play.
Chard says the team has used insurance policies on bigger promotions. During Kingdome days, fans could win $10,000 by homering off a pitching machine — though none did.
“You have to do things, like make sure the pitching machine was throwing a minimum of 65 or 70 mph,’’ Chard said. “The person participating also couldn’t have played college baseball the past five years.’’
Longtime sports marketing executive Layne agrees it’s about researching probabilities and mitigating risk. Layne says such promotions continue to be popular — even if they occasionally go wrong.
“If you think about it, you and I could probably not name another Michigan Wolverines sponsor,’’ he said. “But we know that Ruth’s Chris is now.”