Businesses can attract customers from weather promotions!20 Feb , 2012 | 7
As I mentioned in my previous post on the “Future of Meteorology”, weather risk management and weather derivatives are going to play a large role in the future of meteorology. Weather insurance companies have become pretty smart….and some are offering “weather promotions” to many consumer-facing businesses. And it’s a growing trend, too. So what exactly is a weather promotion?
Here’s one example of how it could work…let’s say you’re at the mall and it’s November (around Thanksgiving time) in Wilmington, NC…and you happen to notice a large chain jewelry store. They are running some sort of campaign and there are a lot of people in the store (and perhaps you’re wondering why that is given the economy). The jewelry store is running a weather campaign. They advertise the following:
“If you buy a piece of jewelry between today and 3 weeks from now….and it snows more than 6” in December in Wilmington, NC, we will refund your jewelry purchase.”
You’re possibly more incentivized to buy the jewelry item. Some sort of promotion or crowd “brought you in” to the store. It’s what every jeweler wants…more people in their store so they can convert more sales.
Now this example actually did happen. Here’s the CNN article. (Yes, this promotion made national news)
And what’s awesome for the jewelry store customers (probably not the insurer) is it did snow more than 6” in Wilmington, NC in the month of December that year. And the jeweler had to pay out approximately $400,000 in refunds. But he didn’t worry at all. Here’s why:
The jewelry owner worked with an insurance company to structure a contract. He probably just provided the sales date(s) of coverage, peril date, peril of choice, estimated insured sales amount. Then a computer model from the insurance company would assess the risk, and come up with a premium amount for the jeweler to pay. The premium that the jewelry owner paid in the above example was approximately $10,000. So for $10,000, he received approximately $400,000 in coverage. Generally the rule of thumb is the premium varies from 2% to 5% of level of coverage you need.
And folks keep in mind this is just one example. There are hundreds of campaigns you can run for all types of weather events.
But here’s what’s cool about this entire campaign:
1) It attracts attention. It’s something new and creative to a lot of folks and it gets picked up in the press. It’s a great way to get folks into your business.
2) It can be used for almost any business. Any retail or consumer facing business can utilize weather campaigns to attract more customers.
3) It may increase your sales. In the above example, the jeweler increased sales by 34% due to the marketing campaign. It’s just another form of “advertising.”
4) Hedging the bad weather. And if you want to hedge “bad weather” for your business…(ie no one comes to my car wash when it rains)…you can also structure additional insurance contracts to help protect your profit margins if it rains or snows, etc.
There are some meteorologists that have ventured into this business of providing “weather insurance.” It is yet another option to consider when thinking about which career path in meteorology you may want to take. Obviously this does not involve forecasting, but it does involve sales, historical weather analysis, client management, statistics, risk analysis, and requires excellent communication skills.
Also, if you know of a business that wants to start a weather campaign…feel free to send them my way and I can advise them to whom they should speak to. There are a handful of insurance companies offering weather promotions…and I believe it’s a great way to get more traffic and visitors through your door. (Photo credit: English Blog)