The stakes are particularly high as many advertisers increasingly turn to promotion for a quick fix in a weakened economy. Last year, marketers raised their sweepstakes expenditures 9% from 1999, while promotional marketing as a whole surpassed $100 billion in revenue, according to Promo magazine.
For the marketing industry, the million-dollar question-or $13 million, in the case of McDonald's Corp.-is whether last week's events will force changes among marketers relying on promotion and whether consumers' existing sweepstakes skepticism will cause a backlash among major advertisers that use these tactics extensively.
As reported first on AdAge.com, Kraft Foods, which was using Simon for 13 promotions, fired the agency Aug. 23, as did Philip Morris Cos. sibling Philip Morris USA.
Kraft, which plans to continue working with its various other promo shops including Interpublic Group of Cos.-owned DraftWorldwide's D.L. Blair; Gage Marketing; and Promotions.com, is no stranger to contest controversy. In 1989, the food behemoth had a printing error in its game promotion, "Ready to Roll," that resulted in the printing of too many winning game pieces. After that "we significantly strengthened our security measures," said Kathy Knuth, a Kraft spokeswoman, who said consumers at the time viewed Kraft as the "victim."
Kraft's 1989 fiasco did not deter it from using sweepstakes, and it remains one of many major marketers embracing the tactic. This year, Kraft launched its largest-ever back-to-school promotion across 25 brands, offering kids the chance to win cash prizes totaling $1.5 million. Coca-Cola Co. this summer is running a $5 million pop-the-top giveaway, a promotion it started last year and handled through D.L. Blair, which also works with M&M/Mars. The candy maker is devoted to sweepstakes for its M&Ms brand because they "are an incentive for the consumer to participate and purchase the product," an M&M/Mars spokesman said.
"You can't walk down the grocery aisle without seeing some kind of game going on," said Bruce Hollander, senior VP at independent sales promotion agency Don Jagoda Associates, Melville, N.Y., which has managed contests such as PepsiCo's $1 million Pepsi under-the-cap promotion. "I don't see this going away; I just think that these games are going to become more and more popular."
But the recent McSwindle is prodding marketers to take a closer look at their own programs and the companies that manage them. Several promotional agencies last week received calls from concerned clients questioning the security of their own marketing activities, and some shops sent out e-mail memos proactively to clients to help quell fears.
"We're rechecking security to make sure all the groups on board are complying," said one executive at a games-administration company, speculating that the McDonald's disaster could cast a shadow on the industry. "How's a client ever going to trust another agency when something like this can happen to McDonald's?" the executive asked. "How can you ever guarantee this can't happen to you?"
Most industry experts maintain McDonald's was a rare victim in an industry typically conducted honestly and legitimately and policed by many private and public watchdogs. "This type of problem really shouldn't have an enormous amount of backlash," said Craig O'Keefe, CEO of Interpublic's Marketing Drive Worldwide, Chicago, "because it's just not the norm. It's so rare that something like this happens."
Tom Conlon, president-chief operating officer of D.L. Blair, which has managed marketers' sweepstakes and games since 1959, said: "The major marketers who use sweepstakes and games as key marketing tools are not going to walk away. But they are certainly going to do their due diligence."
Contributing: Hillary Chura, Kate Fitzgerald, Kate MacArthur and Stephanie Thompson