The Importance of Risk Management In Your Marketing

The success of your marketing efforts depends on your ability to identify and mitigate potential risks. Marketing risk is the possible failures or losses you are prone to face when implementing your marketing plan.

To reduce your risk exposure when selling products, you should have a risk management plan. A risk mitigation system will enable you to anticipate, prepare, and overcome any challenges that may occur during business.

What is Marketing Risk?

Marketing depends on predictions about customer behaviour, creative assumptions about the type of messaging your target audience will respond to, and some trial and error when it comes to pricing. Marketing risk is the potential for experiencing a failure with one of the main marketing functions or incurring a financial loss due to a marketing activity that was unsuccessful.

Marketing risk can arise at any point along the line of marketing functions, but they are most likely to occur with regard to the following:


Pricing falls under the purview of the marketing department, and setting your product at the wrong price can create a risk of financial loss for your company due to a competitor offering a lower price.


The main promotional activities we usually associate with marketing are all areas where risk could be involved. Selecting the wrong channel to advertise to your target audience, landing on the wrong messaging for that target audience, or even unconsciously offending a segment of your audience are all risks marketing departments run when planning and executing promotions.


If a product is delayed in production or a service is delayed due to a problem with a vehicle in your fleet, this falls under the umbrella of marketing risks because it will impact the ability of products to get into the hands of customers.


With the rise in social media and review sites, marketing departments run the risk of a customer voicing their dissatisfaction with your products, services, sales department, or customer service in a way that could harm your reputation or your brand.


At any point, a marketing department could lose a key member of their staff, either temporarily or permanently, which could impact any phase of marketing execution from sales to event management.


Any of the core processes of the company’s business could shift and impact marketing activities. This could involve an investor pulling out of a project or a factory experiencing a natural disaster like a flood or storm.

While many of these issues might seem unpredictable, many of them can actually be mitigated by the process of marketing risk management. Marketing risk management seeks to identify potential risks and come up with potential solutions so that marketing teams aren’t severely impacted by them if they arise.

The risk management process is meant to reduce the negative impact of adverse events on a business or to prevent these events from happening by creating a marketing risk management plan. The importance of this plan is as follows:

Identifying Risks

One of the benefits of having a risk management plan is to help you identify and define all the challenges your marketing team is likely to face. Anticipating what you’re going to face will help you make the appropriate decisions to avoid the risk or reduce its negative impact. This knowledge gives you confidence when creating and implementing your marketing strategy.

Analyzing Risks

A risk management plan provides you valuable insights about the risks you’re likely to confront when planning your marketing strategies and after implementing your marketing plan. When you examine every risk individually, you’re able to establish its likelihood, magnitude, and how often it will occur.

You’ll then be in a better position to adjust your marketing approach to consider these challenges. Analyzing all risks improves your chances of succeeding in your marketing efforts.

Planning Risk Responses

Many threats are unique and come with challenges that should be addressed differently. A risk management plan enables you to focus on these challenges in the most appropriate way through the development of precautionary measures.

You can choose to tackle the source of the risk, remove all the factors that could lead to the risk, and reduce its impact, or even prevent it altogether. If you find that the marketing messages you want to employ will not help you generate leads, you can choose to adopt an effective technique.

Promotional Risk Management Helps Businesses with their Finances

All businesses would want a wide reach for their promotions and have high levels of redemption, but what happens when you run out of merchandise and your campaign has been over-redeemed?

Pepsi suffered a campaign fiasco in 1992, after promising one lucky customer with a million pesos if they found a bottle cap with the number 349 printed on it – unfortunately, they accidentally printed half a million caps with the supposed lucky number and had to deal with scores of negative press.

The best way to minimize risks associated with implementing any promotional campaign is promotional risk management. Promotional risk management affords you the option to set up a fixed fee, so once your promotional campaign reaches its budget limit, you won’t have to spend any extra penny anymore. This approach guarantees that you are not overstepping any financial considerations.

The solution to the above situation is to adopt a promotional risk management plan and go for over-redemption insurance. This way, you will be covered if your promotion turns out to be more successful than you initially thought.

Having a risk management plan in place for your promotions helps you to avoid spending more on hiring a PR company to deal with negative media coverage if a promotional campaign goes wrong.

This is because the risk management plan takes into consideration the budget, legalities, and feasibility of the promotion allowing you to avoid dealing with bad press and the financial costs that come with it.

In conclusion, promotions are supposed to drive sales for your business, not damage your brand reputation or incur huge losses. Having a plan from the start gives you the peace of mind you need to keep your finances in order should something goes wrong. No promotional campaign comes without risk, but by having a sound promotional risk management plan in place, you will be able to reduce costs and grow your business.

Contact us at 5th Consulting by calling +971 427 780 85, email us, or fill out our contact form to let us know what we can do for you.
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