[dropcap cap=W]hen Erich Gander, head of promotions from KWTH Radio called to talk about plans for the station’s 75th anniversary, Gayle Seaborne was more than happy to chat and was anxious to get involved. Radio advertising had always been highly effective for Seaborne Diamonds, and KWTH had been a loyal partner for the 12 years since Gayle took over the management of the store from her father.[/dropcap]
After much discussion about anniversary spots, barter and exclusivity, Gayle agreed to donate a 1.02 ct. ideal cut diamond to the radio station to offer as a grand prize in their 75th anniversary drawing. The diamond, a hearts and arrows, I color, SI1 clarity had been purchased several months prior from one of the store’s primary suppliers, and had been available for sale at a retail price of $7,100. Seaborne’s “Fair Value” pricing had always been an integral part of their brand differentiation – so Gayle was very comfortable with the stated value of the diamond as it would be repeated over and over in the promotional announcements. The contest was a simple one. Over the course of a month, several times each day, listeners were encouraged to respond to a designated musical signal (a segment of the Seaborne jingle) by calling the station. Each time the trigger was played, the 75th caller would receive a special prize and would be entered into a grand prize drawing for the 1-carat Seaborne diamond.
The contest had just been announced and was a week away from launch when Gayle got a call from Erich at the station. He told her about a federal mandate stipulating that any giveaway with a stated value over $700 be accompanied by a 1099 issued to the winner, making the winner subject to any taxes owed on the piece. He said that the contest rules were published on the KWTH website, and that station management had received several e-mail inquiries from listeners asking about the tax implications of a win. One listener questioned whether the winner would have the option of taking the diamond to another jeweler to get it appraised, and what would happen with the 1099 “value” if the other jeweler put a lower price on the diamond. That inquiry got the station’s management team thinking, wondering about diamond values and questioning whether any inaccuracy could make them look bad or put them and Seaborne’s in an awkward spot. Gayle pointed out the unique nature of the premium cut of the diamond, and reassured Erich that the value would hold up to even the most challenging scrutiny. What she was unsure of, however, was the competence and integrity of a number of local competitors – a concern she chose to keep to herself.
The next morning, Erich called Gayle again to ask on behalf of station management if Seaborne’s would be willing to buy the diamond back should the winner prefer the cash (less taxes) to owning the diamond – and if so, at what price. After asking for time to confer with her accountant and attorney, Gayle sat at her desk thinking about the whole situation. The word “donation” kept running through her mind, along with thoughts about how jaded and cynical people had become. She wondered what happened to the days when a winner would simply be grateful for the opportunity to own a beautiful diamond and wouldn’t have considered things like a second appraisal to confirm value.
[h3][b]The BIG questions:[/h3] Is the station over-reacting? What should Gayle do with regard to the immediate dilemma? Should she put a “cash out” option on the diamond? What about the longer term? Has the promotional giveaway in our industry fallen prey to product liability issues like it has in so many other arenas? [/b]
Editor’s note: Real Deal scenarios are inspired by true stories, but are changed to sharpen the dilemmas involved. The characters should not be confused with real people.
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