It snowed nearly five inches last New Year’s Day in Edmonton, Alberta, and no one was happier than Crowley’s Jewelers & Goldsmiths. Why? Because Crowley’s could give 4,000 customers their money back – and let them keep their purchases, too.
That’s not a misprint. Like a growing number of jewelry stores, Crowley’s had bought “weather promotion” insurance. This lets a store offer customers a gamble: that if there’s a certain type of weather on a specified day, the store will refund the price of all purchases made during a weeks-long special promotion period leading up to that day. In the unlikely event the store must make good on its promise, the insurance covers all the payouts.
In Crowley’s case, the Canadian store had promised refunds for purchases made during the six weeks ending Dec. 26 – if it snowed 7.5 cm (almost 3 in.) or more on New Year’s Day.
As the big day approached, odds seemed heavily against the customers, given that Edmonton, like much of North America, was enjoying an unusually mild winter. People even played golf on New Year’s Eve. But then that very evening it started to snow. Mary Martin, Crowley’s co-owner and manager, recalls the moments when the snow began. She was dining in an expensive restaurant, and she and her friends were cheering, “Come on, keep it up! Keep it up!” And so it did.
The snowflakes that continued into New Year’s Day added up to good news for Crowley’s and its customers. Store sales during the promotion shot up 30% over the same six weeks in 1996, and customers received full cash refunds for the $500,000 (in Canadian dollars) they had spent. On top of that, the first quarter of 1998 brought in revenues 40% over the ’97 level because nearly a third of the lucky customers immediately respent their winnings.
Publicity attracted dozens of new customers, as well, because one of the dividends was intense media attention. Crowley’s store was featured on virtually every Edmonton television newscast for three days in a row, in the Edmonton Journal, and on local and national radio newscasts. Martin was interviewed live by the BBC twice – “as if I were a marketing guru,” she recalls with glee. News segments aired on German and Italian radio stations. The story was even picked up by a newspaper in Hong Kong.
Clear benefits. Crowley’s experience with the weather promotion mirrors that of a growing number of jewelry retailers. Sales typically leap 30% or more, according to Jewelers Mutual Insurance Co. in Neenah, Wis. In mid-1997, Jewelers Mutual began marketing what’s known as “weather-event insurance” to customers through an affiliation with Customized Worldwide Weather Insurance Agency Inc. in Manhasset, N.Y. Known as Worldwide Weather, the firm is the market leader for this type of coverage.
Since Worldwide Weather began offering weather promotion insurance in 1991, it has made only four payouts. (One was to customers of Ayres Jewelry in Casper, Wyo., where winds exceeded 40 mph on Dec. 31, 1996.) But it doesn’t take a payout for jewelers to benefit. They get a turnkey promotion that boosts sales without the profit-draining discounts that can undermine customer confidence in everyday prices. The intangible benefits can be significant, as well: competitive differentiation, goodwill, and a way to build visibility and a working relationship with local news media.
Premium rates are linked to the probability that the weather event will occur and can vary with the event, location, period of coverage, and limit of indemnity. The average premium cost for coverage through Worldwide Weather is 2.5% of sales, says Sue Fritz, director of corporate communications for Jewelers Mutual. According to Sheppard Insurance Service Inc. of Edmonton (which provided insurance for the Crowley’s promotion through Lloyd’s of London after comparing policies offered by a number of different insurance carriers), rates for these types of policies vary widely and can range from 1% to 12% of sales.
Outshining the competition. The weather promotion held at Koehn & Koehn Jewelers Inc. in West Bend, Wis., in November and December might have salvaged the store’s Christmas season, says president Andy Koehn. One of Koehn & Koehn’s two main competitors in this town 30 miles north of Milwaukee held a three-month going-out-of-business sale featuring 70% discounts on jewelry. “These kinds of discounts are very hard to combat,” says Koehn. “Thanks to our weather promotion, we maintained our competitive position and posted a 10% increase in sales.”
The “Let It Rain” event held by Crescent-Westwood Jewelers Inc. in Los Angeles likewise had a significant impact: Sales skyrocketed 400% over the same period in the previous year. During the two-week promotion, the store offered to pay refunds if it rained 1 in. between 9 a.m. and 5 p.m. on George Washington’s birthday (Feb. 22). The store booked $250,000 in sales, roughly 10% of its annual revenues – not bad for a $5,000 policy and minimal marketing expenses. The store simply sent out a press release, mailed 4,200 postcards to customers, and placed an ad in the UCLA student newspaper.
“Let It Rain” caught the imagination of local news media, garnering coverage in the Los Angeles Times and the local NBC television affiliate, which ran continuous news reports and “teasers” about the promotion during its duration. “In L.A., God knows what has to happen to get that type of media attention. It probably would have to be a hostage situation,” says Jeffrey Abell, vice president of the firm.
He and Linda Abell, his business partner and wife, ran the promotion with only 30 days’ lead time. “We had just put off planning our Valentine’s Day promotion,” he recalls. “We had heard about the weather promotions in the past and been intrigued, but it seemed a little too gimmicky. Then we saw a Jewelers Mutual newsletter that mentioned the affiliation with Worldwide Weather and decided this is the time to do it. It’s an El Niño year. The rainfall was much greater than normal in California. There was flooding, landslides, and lots of negative news about the rain. The promotion provided a positive juxtaposition.”
Plus, “People could really buy into this and believe that a payout could happen.” And they did. “It was insane. There was just this great sense of excitement for the whole two weeks. Our promotion really caught everybody’s imagination, we were just lucky to have been the ones to do it at the right time,” Abell says.
Though the Abells were concerned that customers would be disappointed and angry that there wasn’t a payout – it didn’t rain much on the target day – their worries proved groundless. “People called up the next day and asked us to run the promotion again. They just had so much fun,” he says. “It was just mind-boggling what this did for our store.” Abell notes that they plan to repeat the event next year.
An annual event? Though about 80% of Worldwide Weather’s clients repeat the weather promotion for a second year, the percentage of repeat promotions drops with each subsequent year, according to the firm. The decline may reflect diminishing customer interest as the years go by without payouts. Still, many jewelers continue with the promotion because it has become a part of their stores’ identity. Robert Scott Sr., owner and president of Robert’s Jewelers in the Long Island community of Southold, N.Y., has held a Winter Snowfall Madness sale for five consecutive years. The biggest sales boost occurred during the first year: a 100% gain. In subsequent years, the store’s sales increases during the promotion have ranged from 10% to 23%.
Why continue so many years in a row? “It’s a great promotion that has become synonymous with my store,” Scott notes. He hasn’t had a payout yet. “Even though it has become a little bit of a mundane promotion for me, I’ll keep holding it until one year after it snows. After all, how many years do you buy lotto tickets without winning?”
Other retailers take the opposite approach. Popo Flanigan Ruch, owner of Popo Designs, a store located in a northwestern suburb of Philadelphia, held a Rainy Day Refund promotion this spring. The bet: that it would rain a quarter-inch on May 8. After it rained 1.4 in., breaking an 1886 record, she refunded $40,000. “But I wouldn’t do the promotion again. Now that customers have won, I wouldn’t want people to bank on it. To me that would almost feel like taking advantage of my customers. If they bought something just because they thought they’d win, and then don’t, they might get mad.”
Still, the store garnered so much publicity and goodwill as a result of the promotion that Popo Designs is hiring another full-time sales associate. She says she is expecting the long-term impact on sales and store traffic to be “incredible.”
Timing is key. Ironically, the biggest risk associated with weather promotions may be their very success. In a given market, the first retailer to hold a weather promotion usually has the greatest impact – both with customers and with news media. After that, the excitement tends to wear off. Still, this isn’t always the case. Timing also plays a role, as in the Crescent-Westwood case; the store may not have been the first retailer to hold a weather promotion in Los Angeles, but the news value of the story was sky-high because of El Niño-related rains in January and February.
Though an insurance company generally sells weather promotions with a promise of exclusivity, that won’t keep other insurers from selling to your competitors, nor will it keep your own insurer from selling a policy to a different type of retailer in your own community. Gary Megel, co-owner of Megel & Graff Jewelers Ltd. in Colorado Springs, has held weather promotions for the last five years. In both the first and the second year, sales jumped 50%. But the event stalled in years three and four when a large furniture store staged a similar event that ended just two weeks before Megel & Graff’s began.
Commenting on Megel & Graff’s experience with the exclusivity issue, Michele Borday, director of promotion at Worldwide Weather, states that “we can only give exclusivity by the type of retailer. Every case is handled individually.” She also notes that the guarantee of exclusivity for Worldwide Weather’s promotions does not and cannot extend to policies sold by competing insurance companies.
In 1997, nearly 300 jewelry retailers throughout North America held weather promotions with coverage from Worldwide Weather, up from around 200 annually in 1994, 1995, and 1996. The company began offering coverage in 1991.
The total number of weather promotions offered by all insurance companies can’t be determined. Worldwide Weather wouldn’t disclose the names of its competitors. Grant Sheppard, an account executive with Sheppard Insurance Services Inc., recommends that retailers find such coverage through an insurance broker with commercial risk-management experience, since this coverage typically can’t be purchased directly from the underwriter anyway.
Taking the plunge. Retailers interested in holding a weather promotion for the first time may find it useful to check with insurance providers to see how many other jewelers and other types of retailers in their area hold similar events. They should also check their local, state, or provincial laws against gambling.
Also, consider your comfort level with a no-refund policy. Policies for weather promotions are priced based on a percentage of sales made during the event. Robert’s Jewelers was taken to court by a customer seeking a refund for a purchase made during one of the store’s weather promotions. The case was settled in the store’s favor. “The fact that all sales are final is the ‘unfun’ part of the whole thing,” Scott notes. “But all you have to do is have customers sign vouchers that explain the rules so there’s no misconception.”
The involvement of Jewelers Mutual is expected to boost the popularity of weather promotions, most of which occur in December but might benefit jewelers more if they were held during slower periods. “We’ve had a number of jewelers say they’d considered a weather promotion but were trying to figure out whether it was a gimmick,” says Fritz of Jewelers Mutual. “By attaching our name, we provide credibility for it.”
Both Worldwide Weather and Jewelers Mutual provide marketing support to participating retailers. Fritz cautions, though, that “if you don’t get the word out, you won’t be successful. You have to be visible. Weather promotions don’t promote themselves. They’re simply the basis of a promotion.”