Prize promotions are a great way to grow your brand, and they come in many forms, including lotteries, raffles, contests, and, of course, sweepstakes.
Each type of prize promotion involves its own set of legal regulations. It’s crucial to understand the meaning of sweepstakes and the rules that govern them.
Below, we cover everything you need to know about sweepstakes. We explain what they are, and we explain what makes them different from other promotions.
We also discuss the laws that regulate them, as well as how to run one. That way, you can ensure sweepstakes are the right promotion type for your business.
The Meaning of Sweepstakes
Sweepstakes, also called giveaways, are a type of prize promotion in which promotion hosts give prizes at random to entrants who take a free-of-charge action.
By definition, giveaway means the promotion host cannot require a purchase to enter. They also can’t choose the winner based on merit.
In other words, you can’t force people to buy your product in exchange for entry. You also have to pick a winner at random; you can’t judge the entries in any way.
If you want to judge entries, it becomes a contest. And if you’re going to charge for entry, it becomes a raffle or lottery. Contests, lotteries, and raffles have different rules and legal regulations,so it’s crucial to understand that sweepstakes are not the same thing.
If you want to require photo submissions, video submissions, writing prompts, or skills-based questionnaires, you’re probably not picking the winner at random. Those are good indicators that you should host a contest, not a sweepstake.
To sum it up, sweepstakes always:
- Give participants a chance to win a monetary prize or something of value.
- Choose a winner at random.
- Allow for entry by any member of the general public, free of purchase or other forms of consideration.
Laws and Regulations
When running a sweepstake, there are a few laws you need to pay attention to.
Multiple agencies, including the FTC (Federal Trade Commission), USPS (United States Postal Service), FCC (Federal Communications Commission), and several state agencies regulate sweepstakes and giveaways.
No Purchase Necessary Laws
Luckily, we can sum up most of those regulations in a set of laws called No Purchase Necessary laws.
No Purchase Necessary laws state that you cannot ask entrants to make a purchase or provide some other form of consideration if you’re picking a winner at random.
In many states, No Purchase Necessary laws don’t apply to contests. Nebraska, Colorado, Maryland, Vermont, and North Dakota arethe only exceptions.
So, many companies choose to run contests rather than sweepstakes. That allows them to ask for photos or videos of customers with their products.
Alternate Means of Entry (AMOE)
Of course, you can encourage people to purchase your product while running a sweepstake by providing a primary means of entry on your product involving a purchase, along with an alternate means that requires no purchase.
The Pepsi Play for a Billion sweepstake in 2003 was a famous example. Pepsi customers could locate codes inside Pepsi bottle caps. Entering these codes online gave them access to various cash prizes, including a one million-dollar prize. The million-dollar winner would then play a game on a live TV show hosted by Drew Carey to try to win the billion-dollar prize.
Because the Pepsi Play for a Billion sweepstake’s primary means of entry was via the purchase of Pepsi products, they had to offer an alternate means of entry.
An alternate means of entry (AMOE) could be:
- An online entry form
- An email entry
- A text message or phone entry
- Via social media platforms like Facebook, Instagram, or Twitter
- In-person entry at stores, offices, or events
In the case of the Pepsi Play for a Billion, those who wanted to enter could use an online form rather than purchasing a Pepsi product.
Keep in mind that you have to list all the alternate means of entry in your sweepstake rules. You also have to ensure that entrants who use an AMOE have the same chances of winning your giveaway as any other entrants.
You can’t give an advantage to entrants that use the primary means of entry.
On top of No Purchase Necessary laws and AMOE requirements, a few additional regulations apply to sweepstakes. With every sweepstake, the promotion host must:
- Announce the opening and closing dates of the contest.
- Disclose the process for choosing and notifying winners.
- State when you’ll award the prizes.
- Contact all winning entries. If you can’t reach a winner after a specified time, you may disqualify them and draw a new winner instead.
- Provide a list of winners to any member of the public upon request.
- Follow the rules of the hosting platform. If you’re hosting the sweepstakes on social media, each platform has its own rules.
You can check out all the finer details on sweepstakes rules and regulations in this video.
Why Run a Sweepstakes
Sweepstakes are ideal for many companies’ marketing strategies. They can help create brand awareness, allow you to collect customer data, and may directly increase product sales. On top of that, they’re reasonably easy to run.
Create Favorable Brand Awareness
Sweepstakes with valuable or exciting prizes can generate a massive uptake in favorable brand awareness. People don’t always respond well to brands that are constantly making claims of greatness.
A sweepstake is different because you’re offering a chance to win something valuable. That gets people’s attention without making them annoyed with your brand for over-advertising.
Collect Customer Data
Running a sweepstake also means you’ll be able to collect customer data. You have to contact the winner, which means you’ll need basic information from each entrant such as their name and e-mail address.
You can also ask questions about your customers’ hobbies and interests. You cannot require entrants to answer them, but optional questions are okay. And many people are willing to volunteer information when you’re offering a prize in return.
If you advertise a product purchase as a primary means of entry, sweepstakes can also directly benefit your bottom line. Though many people will still use an AMOE, many more will be incentivized to make a purchase. tAnd even those that use an AMOE often become actual customers after they have entered the sweepstakes.
Maybe the best part of running a sweepstake, though, is how simple it is! It costs very little to run, especially if you get creative with prizes. All you need is an online form. That makes running sweepstakes one of the easiest and most effective marketing strategies.
How to Run a Sweepstake
So where do you start in running a sweepstake? Begin by picking a prize.
You should aim for a prize that aligns with your target market’s interests, wants, or needs. TrustSpot can help you determine those needs with a customer experience survey.
Sending out a branded survey to small groups of engaged customers can help you pick a prize that truly incentivizes people to enter your sweepstakes. The better your prize, the more growth you’ll get from your giveaway.
Next, you need to write down the official rules. Be sure to check legal requirements for sweepstakes in your state. Some states are very specific about things like font size, verbiage, and legal disclaimers.
Once you’ve got the logistics in order, you can announce the giveaway. Make sure you include the start and end date, along with any AMOEs.
Use all your available marketing channels for advertising the sweepstakes, including social media, email, and paid advertising. If your prize aligns with your market, you’ll also get great word-of-mouth marketing. Customers who enter will likely tell their friends.
Announcing and contacting the winner may seem like all that’s left. But after you do that, there’s one more thing to pay attention to. You need to put your newly gained insights to use.
Analyze the customer data you collected and start engaging with new fans. Let them know about your range of product offerings, and keep them interested with a solid marketing plan.
Sweepstakes can be extremely beneficial to companies of all sizes. Running a sweepstake is an excellent way to improve brand recognition, increase sales, and get to know your customers. By following the tips outlined above, your sweepstake is almost sure to be a success and will help you effectively grow your brand.