When Toro Company a snow blower manufacturer decided to introduce the promotion they were indeed taking a gamble and this was bound to tag along a number of risks. This was a marketing strategy that was meant to see the sale of the snow blower hit a record high but on the contrary it posed a bigger risk that the company would not have met if the purchasers were to get to the company and lay claims (Donaldson, S. 2007).
The first risk that the company was taking was that of pegging their luck in the weather man. They calculated that when winter would hit America it would come with lots of snow and necessitate the purchase of the snow blowers (Alexander, Britton and Jorissen. 2010). Winters had come and gone in the past and those who had thought it worthy had purchased the equipment, further more the number one purchaser of the snow blowers is the government, this meant that the company was not likely to sell any more snow blowers and this thus made the risk they took necessary. In the time of the promotion of course the sale of the equipments received a boost with individuals showing interests in the equipment, but whether the company had considered what would have happen had the snow not fallen still remains a question of concern to many marketers. Most of their clients could have brought back the equipments to the company and laid claim of the refund and the refund was to be effected with the client keeping the already purchased machine and this could have ended up being a marketing suicide to the renowned market leader.
The other great risk that the company took was to run the promotion in the entire United States. This was in a bid to expand their sales but with a wider region the level of risk heightens. The risk is made even larger with fact that weather patterns are not similar in all the states ion the United States. Snow would begin to fall in Atlanta but the weather stay warm in New York or the intensity of the snow vary from one state to another and this would mean that the buyer from a state that receives no or little snow fall would be tempted to lay claim for compensation.
Following the promotion the insurance company that covered the manufacturing company increased their rates and this was a back up plan. The insurance provider also had their fate pegged on the weather man. There was a likely hood of the purchaser to bring back the equipments to the firm and this would mean that they would foot the bills. In providing insurance to the snow blowers purchased by clients they increased the rates so as to cover themselves against the expected increased claims as the new owners of the snow blowers would begin laying claims against accidents that the machines would hit.
The consumer on the other hand also faced certain risks, there was a possibility that they would invest in the purchase of the machines that would not serve them much. The government takes care of major roads and high ways and all that they would be left with would be their back yards and alleys leading to their homes and with every neighbor owning a snow blower would lie idle translating into a loss for the buyer (Badaracco, J. 2003). But even the government who is the number one purchaser just as any other buyer still had the risk of having to part with a lot more money to the insurance service provider who from the begging of the promotion had announced plans to raise their rates. The rates became abnormally high and they were doing this so as to discourage more people from purchasing the equipments and thus minimize their risks. A fair insurance rate should be set on the basis of the price of the equipment being covered and should spread over a span of time most preferably the installments after the fifth year of cover provision should be equal to the initial price of the equipment.
Alexander, Britton and Jorissen . 2010. International Financial Reporting and Analysis (5th edition) . Oxford: oxford university press
Badaracco, J. 2003. Defining Moments: When Managers must choose between right and wrong. Harvard; Harvard University Press. (Print)
Donaldson, S. 2007. Income taxation of individuals: cases, problems and materials. Thomson West; St. Paul University Press. Print