Would you bet millions of your company's dollars that the Red Sox won't win the World Series?
Eliot Tatelman will soon find out whether that's a smart wager. His company, Jordan's Furniture , promises customers who buy furniture between March 7 and April 16 that if the Sox take the crown, their purchases are free. Tatelman says he's a lifelong Sox fan who would want nothing more than to see the team go all the way, no matter how much he stands to lose.
Just in case, though, he's got an ace in the hole: an insurance policy. Tatelman won't name his insurer or say how much the policy cost, but it does protect Jordan's from what Tatelman estimates would be "many millions" in payouts to customers if the Sox do win.
"We shopped around and got a quote that we could live with, and based upon the increase in business that we're going to do, it's paying for itself," Tatelman said.
The Jordan's contest is an example of how some companies are turning to contests where the winners are determined by uncontrollable factors such as a sports team's record or even the weather. The hope is that the chance to get an expensive item like furniture or jewelry for free will create enough new business to justify the risk being taken. To cover the bets they're making, some companies are buying so-called prize indemnification insurance, which some executives said can be expensive.
"Companies are finding these types of promotions are very effective in getting new business," said Loretta Worters , vice president of the Insurance Information Institute in New York . The cost of such policies, she said, varies widely depending on the level of risk an insurer believes it is taking on the chance someone wins the contest.
"It's worth it for them to pay that kind of insurance to achieve that kind of marketing."
Jordan's isn't the only local company running a contest to drum up business.
Elyse Jewelers in Reading will refund the cost of a couple's wedding rings if it rains on their wedding day. One couple has "won" so far, but Elyse president Richard Berberian said about 40 others have weddings coming up. He buys an insurance policy on each ring sold in the contest, but says it took months to find an insurer to write the policy.
"Most of them said, 'You want us to insure how many' rings?," he said.
The Elyse Jewelers promotion shows how careful insurers are about calculating the risk associated with contests. When Elyse sells a ring, Berberian tells his insurer the date and time of the wedding. The company then checks weather records to determine the probability of rain on that day, and charges him according to those data and the ring's price.
Insuring a $5,000 ring could cost $200 to $500 , Berberian said, while a $15,000 ring might cost $1,500 or more to insure. Eventually, he wants to self-insure the program, so he sets aside a portion of the money from each sale.
Alpha Omega Jewelers , also a Red Sox sponsor, is planning a similar contest. Details aren't yet finalized, but the plan is to reward couples who buy their engagement rings at one of its four stores on the same day as a Sox home game. If the team wins that day, the couple would get $500 off the ring if the Sox hit a home run or $1,000 off for a grand slam. If the Sox post a no-hitter, the rings would be free.
The contest is slated to run through April .
Nidhi Handa , the company's vice president of communications, said the contest is aimed at boosting its diamond jewelry business. Alpha Omega hasn't decided whether to buy insurance, she said.
Tatelman won't say how much furniture Jordan's has sold since the contest started, but said it has boosted business in a normally sleepy spring season. He's not betting against the Red Sox, he insists, just finding a fun way to drum up business.
It appears to be working. Joe and Jennifer McEachern , a Danvers couple, spent about $12,000 yesterday in Jordan's Reading store on two new bedroom sets, a Barcalounger, and a desk and chair for Joe's home office.
"It would be extra-special if the Sox win this year," he said. "That puts money in my pocket."
Keith Reed can be reached at firstname.lastname@example.org.