Consumer businesses

Developing promotions that stand out from the crowd is hard: offer a 20% discount and someone else will offer 30%.

Offering a full refund linked to the result of a sports event creates impact, engages customers and reinforces the link between players, teams, events and the company making the offer. Such promotions work and create value. But they also create uncertainty. If the nominated result happens the cost of refunding customers will outweigh the benefits.

SportingWins writes contracts that eliminate this uncertainty by covering the full cost of the potential refund at a price agreed before the promotion starts. For example:

• A football club makes the following offer: “Buy a team shirt before the start of the season and get your money back if we win the League”.
• The potential refund to each customer is €50 and SportingWins assesses the chance of the club winning the League at 16%.
• The club enters a Hedging Agreement to cover the cost of refunding customers for consideration of €8 per shirt sold (16% of €50).
• The club sells 12,000 shirts and the potential refund is therefore €600,000. The club pays SportingWins €96,000 to hedge the €600,000 risk.
• If the club wins the League, SportingWins pays the club €600,000, which covers the cost of the club’s obligation to refund its customers.
• Hedging Agreements do not require clients to prove loss or undergo a claims process, so there is no unnecessary bureaucracy or delay in payment.

This means that in all cases the cost of the promotion is known and can be budgeted for. Value created by the offer is not destroyed if the team wins. Instead, winning increases publicity and gener ates customer goodwill.