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FAQ'S about Sweepstakes, Contests & Games
WHAT ARE PRIZE PROMOTIONS?
Prize promotions are used to support an overall advertising, marketing and sales strategy. They generally are either interactive, online, or traditional ( sweepstakes, contests, games and premiums ) where participants have the opportunity to win a prize or get a prize with purchase as opposed to sampling, and other types of promotions. They commonly are directed towards a large consumer group, targeted towards a specific audience, or used for business-to-business.
WHY RUN A SWEEPSTAKES? WHAT ARE THE BENEFITS?
A sweepstakes can be used for a number of reasons:
1) to help create excitement and awareness
2) to build product, brand image and name reinforcement
3) to stretch fixed or limited budgets
4) to boost circulation
5) to encourage completion of surveys and questionnaires and gather database information
6) to get consumers to register their purchases
7) to build traffic to a website
8) to generate sales leads
9) to reward loyal customers
Consumers love sweepstakes! Research has shown that given otherwise identical offers, a sweepstakes or other prize promotion will draw a higher response rate as much as ten fold, whether its the purchase of a can of soda, or the solicitation of a donation to a charity.
TELL THE THE DIFFERENCE BETWEEN A PRIZE PROMOTION AND A STATE LOTTERY?
A prize promotion consists of three elements: prize, chance, and consideration, which can be defined as money, time or considerable effort. The only promotion that can award a prize, through a random or chance offering, and require consideration, is a state lottery.
A sweepstakes can award a prize, through a random or chance offering, but cannot require consideration.
A contest, on the other hand, can award a prize, can require consideration, but must replace the random or chance element with a skill requirement. To have all three elements in a sweepstakes or contest is a violation of federal lottery laws.
WHICH IS BETTER, A SWEEPSTAKES OR A CONTEST?
Sweepstakes generally get a higher response rate than a contest. This is because of the ease of entry requirements since there are no consideration elements. You may want to focus your promotion on the benefits of your product; asking your customers to take a few extra steps, such as writing an essay, submitting a photograph, or sending in a recipe that uses your product. In this way a contest would be a better vehicle. It would elicit a smaller, but more enthusiastic response. Both contests and sweepstakes are popular prize promotions.
WHAT INDUSTRIES ARE RESTRICTED FROM USING SWEEPSTAKES, CONTESTS & GAMES?
Some businesses are restricted in terms of what they can or can't do promotionally. Sometimes a sweepstakes offers an optionor the only option available to marketers of these products, which include tobacco, ammunition, alcoholic beverages, certain pharmaceutical products, and various petroleum products.
WHAT KIND OF RESPONSE TO MY OFFER CAN I EXPECT?
There are so many factors that can impact a promotions response, from the creative presentation, to the list of recipients, to the product, to the prizes offered. A standard blind direct mail effort will return a 2 to 5 percent response rate, however a targeted sweepstakes, contest or game can return up to 50% or better. The point to remember is that prize promotions have been shown to dramatically increase almost all response rates.
WHY SHOULDN'T I RUN THE SWEEPSTAKES MYSELF? ( i.e., WHY SHOULD I CALL BRANDCOMET? )
Companies who have decided to run their own promotions, often find out mid-way through the promotion that they have overlooked certain legal or tax requirements, or that they do not have specific organizational systems in place to handle the administrative, selection verification, judging, fulfillment, redemption, inventory management, call center, and quality control issues that often are part of running a sweepstakes.
Legal and tax issues are the most important reasons to use a promotional advertising agency. At BrandComet, we are kept aware of the latest legal actions taking place nationally as well as globally, and we design promotions to not only work within the confines of existing laws, but that give you maximum protection.
We have achieved specific efficiencies through tight auditing procedures, establishing checks and balances throughout all our organizational systems. And lets not forget the credibility issue: the use of an independent judging organization tells the world and participants that there will be no "funny business" when it comes to the drawing of winners, or the awarding of prizes. Further, we have certified accountants on staff to ensure that judging is carried out in conformity with both federal and state laws and standards, and in accordance with our strict judging procedures. ( Under certain circumstances, for very large national and international sweepstakes, contests, and games, we use outside CPA firms to add extra creditability to the promotion's judging procedures, which significantly diminishes the chance of fraud, and increases public confidence. )
WHO USES PRIZE PROMOTIONS?
Many of the most successful companies in the U.S., from magazine and publishers, banks, packaged goods companies, health and beauty aids manufacturers, hotel chains, to fast food chains, have conducted a sweepstakes, contest or game at one point in their existence. Prize promotions are for basically anyone trying to gain a competitive advantage. That probably includes your competition. Prize promotions are even being used on the Internet by smart marketers looking to gain the upper hand in this fast moving and ever-changing new medium.
FOR COMPANIES THAT WANT TO RUN A SWEEPSTAKES, BUT THE COST OF BUYING THE PRIZES SEEMS EXPENSIVE, WHAT OPTIONS DO THEY HAVE?
There is the use of a co-operatively sponsored sweepstakes, such as the ones created by us. For one low cost, multiple companies can participate and spread the cost of administration, including registrations, fulfilling winners lists and submitting the 1099s for major prize winners to the Internal Revenue Service.
The second option is to use prize insurance where you pay only a tiny fraction of the cost of "Big Prize". Many companies have used this method to grab attention in a cost efficient way.
CAN A SWEEPSTAKES HELP BUMP MY SALES?
While a sweepstakes can give you additional sales, it can also provide you with sales momentum. The whole idea of prize and premium promotions is to deliver sales momentum: e.g., you usually sell ten boxes of brand a week. Do a prize promotion and spike up to 20 or more. The promotion ends, and you can drop down to 15. You do another promotion and spike to 25, then drop to 20 when the promotions over. It ties back to product quality. Get consumers to try your brand through a promotion, and chances are they will like it and you will keep them as customers.
WHAT IF A COMPANY HAS TWO SEPARATE DIVISIONS,WHICH ARE BOTH INTERESTED IN RUNNING A PROMOTION... DO THEY NEED TO RUN TWO SEPARATE SWEEPSTAKES?
No. We have found that promotions can be designed to take advantage of a companys different divisions. These are called umbrella sweepstakes, and allow the divisions to present a united front, and help reinforce corporate identity. They also allow the divisions to allocate the costs according to participation. By designing a flexible prize structure, each division can advertise prizes that appeal to their target audiences. The net result is that each unit receives the benefits of a seemingly independent promotion; yet do not have to run totally separate sweepstakes.
WE HAVE JUST PUT OUR WEBSITE UP AND ARE LOOKING FOR WEB TRAFFIC INCLUDING REPEAT VISITS... COULD A SWEEPSTAKES HELP US?
Yes; one of the ways to keep visitors coming back to your site is to vary your content. By presenting new and useful information, you take the important step to maintain your Web traffic.
Another method is to overlay a sweepstakes on the website and allow multiple entries. This is done by limiting visitors to one entry per day. Currently, in many states, you must offer an option for a mailed entry -- not requiring a contestant to maintain an online or email account -- this is construed as consideration in certain jurisdictions. By allowing multiple entries, it helps encourage your visitors to return often, but potentially having your online entry box jammed. To give you an example grab.com, a new website, wanted to gain traffic so they offered a 1 Billion Dollar Sweepstakes ( insured prize ) grab.com, during the first 15 days of the promotion, averaged 120 hits per second, 24 hours a day, seven days a week. Now that's the power of online sweepstakes and big prize promotions!
DO CERTAIN PROMOTIONS NEED TO BE BONDED? TELL ME MORE ABOUT THIS?
Certain states ( Florida and New York ) require the posting by the promotions sponsor of either a surety bond or the establishing of an escrow account if the promotion requires registration (normally those consumer promotions offering prizes with a total value in excess of ,000 to residents of their states, among other requirements). This is also true of promotions run in the province of Quebec in Canada. In Quebec there are laws for the rules, the disclosure of fees, the promotion text must be in French, disclosure of currency conversion rates and more. Florida is the toughest for filing, abbreviated rules and guaranteed prizes. New York and Rhode Island basically include registrations & fees however in Rhode Island there are laws concerning how the sweepstakes are distributed. Colorado has particular laws concerning direct mail. California has strict laws concerning alcoholic beverages, and "coupon prizes". Tennessee has laws concerning publicity releases. Vermont requires return postage. Arizona has laws about certain skill contests. Michigan has laws about multiple store visits. Minnesota has laws about in-pack and on-pack sweepstakes. Texas has restrictive laws concerning direct mail. Finally, in all states alcoholic beverage promotions are a separate consideration. If you are running an alcoholic beverage sweepstakes, filling is mandatory in 10-13 states, depending on the product category.
There are also other states that have less stringent general requirements, but specific requirements for running a sweepstake promotion; bonds are used in the event the sponsor defaults, the funds are payable to the state, and are used to award the prizes. The key idea here is consumer protection. BrandComet advises its customers on registration requirements, and assists in the process of registering promotions, as well as in filing for the release of the promotion and bond once all winners have been determined and prizes awarded. Sponsors who run promotions in violation of these state and provincial laws are subject to substantial fines and penalties.
DO ALL SWEEPSTAKES HAVE TO BE REGISTERED? WHAT ABOUT ONES BY LOCAL RETAILERS AND MARKETERS?
The answer is no for all states except Florida, New York, and Rhode Island, and in Florida and New York, only when the total retail value of all prizes is over , and in Rhode Island, when or more and is involved with a retailer.
CAN I MAKE SURE PRIZE WINNERS BUY MY PRODUCTS?
While you can request that consumers make a purchase or donation, you cannot require it in a sweepstakes. To do so is in violation of lottery laws. If you want to require a purchase, you can run a contest, but you must lose the random chance element of the promotion. We also recommend promotions such as gift with purchase. These types of promotions have been very successful in luring customers to buy more.
DO TRADE-DIRECTED SWEEPSTAKES HAVE TO BE REGISTERED? DO CONTESTS HAVE TO BE REGISTERED?
No, except in Arizona, and only when the purchase of a product or an entry fee is required.
WHAT CAN YOU TELL ME ABOUT GAME PROMOTIONS AND PREMIUM OFFERS?
They are extremely popular. As a child, you may have had a Happy Meal with a toy inside the classic "gift-with-purchase" promotion. Remember the excitement when you went to pull out that little toy? That same kind of excitement still helps draw consumers into fast food restaurants, automotive supply stores, encourage them to purchase a specific brand of pet food, or watch a certain television show. The prospect of winning something instantly is a powerful motivator; there is no waiting until the promotions is over to find out if you have won a prize. The prizes that go unclaimed during the run of the promotion can be given away through a second chance drawing, essentially giving the participant multiple opportunities to win!
HOW DO I RUN A SWEEPSTAKES FOR KIDS?
Promotions directed at kids heighten legislative scrutiny, it is wise to proceed with caution, especially if you want to run an online promotion. We currently work with a number of high-profile marketers targeting this segment, and are aware of industry recommendations and guidelines. We will work with you, to design a fun and exciting promotion that appeals to kids, while advising you away from potential pitfalls.
CAN ANYTHING GO WRONG WITH MY PRIZE PROMOTION?
Yes. The use of an experienced promotional advertising agency, however, can reduce that possibility. Our experienced professionals know how to plan promotions to avoid those ugly incidents, those incidents that can have your boss and customers screaming at you.
IS THE "NO PURCHASE NECESSARY ALWAYS REQUIRED?
You can request proof of purchase to be sent in with a sweepstakes entry, but you can't require it as the only means of entry. When drafting rules, you can ask for a proof-of-purchase, but must have a free alternate means of entry.
Do Sweepstakes entries that are not accompanied by a proof-of-purchase have as good a chance of winning a prize as ones that are not?
Yes, if the sweepstakes is properly conducted. All forms of entry, whether write-ins, via the Internet, and with or without a proof-of-purchase, must be drawn on a random basis, and have "equal integrity before the law". To conduct a proper sweepstakes a proportionate chance of winning, regardless of form of entry, must be administered.
DO ALL PRIZES IN A SWEEPSTAKES HAVE TO BE GIVEN AWAY?
No, provided your Official Rules clearly state that fact, similar to "unclaimed prizes will not be awarded". Plus, you must describe what the conditions are for the awarding of prizes.
WHERE YOU HAVE TO PAY TO PARTICIPATE, LIKE CHARITY EVENTS SUCH AS CHARITY EVENTS LIKE CHURCH RAFFLES AND GOLF TOURNAMENTS LEGAL?
It varies by state, and sometimes county by county. They are generally O.K., as long a predominant degree of skill is involved, such as a putting contest, a "hole in one" competition, etc. The money must benefit a bona fide charitable organization. If chance is involved, there must be an alternate entry option except in cases they are pre-approved by the state or local governing body.
WHAT KIND OF PRIZES DO PARTICIPANT WANT TO WIN?
Overall...
1st Cash
2nd Cars
3rd Trips
Most importantly, consider the audience and what market research tells you is most desirable to them.
CAN THE END DATE OF A SWEEPSTAKES BE EXTENDED?
No. Once the promotional dates have been announced, and you decide to change them, perhaps because you haven't reached a particular goal you had in mind, you are basically distorting and lowering the odds of winning of those individuals who entered in good faith, prior to the extension date. In effect, you are violating the "deal" you made with the public, when you first announced the start and end dates of the program.
The same holds true with game card programs. You can't simply print some more if the program is going better or faster than expected, as you will be changing (again, lowering) the stated odds of winning.
How specific can your entry requirements be?
You can limit participation by age, gender or form of media For example: If you are using direct mail to a male audience, you can state "you must be a male, 21 years of age or over, and a recipient of this mailer to enter this sweepstakes."
You can also limit trade participation. For example this sweepstakes is open only to licensed internal medicine M.D.'s from the state of Florida, electrical contractors, etc.
HOW LONG MUST YOU HANG ONTO SWEEPSTAKES AND CONTEST ENTRIES?
It varies state by state. Generally, if you hold on to sweeps entries for six months, you should be O.K. California requires certain skill contest entries to be retained for one year.
WHAT IS THE MANDATORY TO INCLUDE IN THE RULES?
No purchase necessary
Promotion end date
Age restriction ( if applicable )
Complete Official Rules may be obtained
Void where prohibited
Please note that the FCC has not promulgated any specific language. The foregoing is based on network guidelines.
If as a sponsor I paid ten thousand dollars for a Kentucky Derby trip through a broker, is that the prize value I must put in my rules, and the amount on which the winner will have to pay taxes?
Not necessarily. The amount of tax should be on the "fair market value", or the Approximate Retail Value of the prize being offered.
DO YOU ALWAYS HAVE TO GIVE A FREE GAME PIECE TO A NON-PURCHASER OF YOUR PRODUCT? WHAT STATE REQUIRES THAT RETURN POSTAGE BE PAID BY THE SPONSOR?
When running a game-card promotion, you must allow consumers the option of writing-in for a free game piece. However, you can require them to send a self-addressed, stamped envelope along with their request, except for residents of Vermont. Vermont allows you to require a pre-addressed reply envelope, but as the sponsor, you pay the return postage. The prohibition on return postage has been repealed in Washington.
DO YOU HAVE TO STATE THE ODDS FOR ALL SWEEPSTAKES AND GAMES?
Odds of winning must be clearly stated when running a game-device promotion. And also in some instances, in a direct mail program since the sponsor knows exactly how many "winners" there are within the total universe of game pieces being produced and delivered or mailed. In a more broad based media implemented sweepstakes, however, you can make a more general statement in your Official Rules such as; "X qty. of Official Entry Forms will be available, however, odds of winning are dependent upon total entries received since there is no way to determine ahead of time just how many entrants will participate in and/ or respond to your promotional offer.
WHO IS AN "IMMEDIATE FAMILY MEMBER"?
This refers to any first generation "blood relative" which is a son/daughter, mother/father, siblings, etc., regardless of whether they reside in the same household. Some sponsors define "immediate family" in their rules, to prevent it from being open to interpretation.
A SWEEPSTAKES REVIEW...
Sweepstakes must be registered only in New York, Florida, Rhode Island.
Registration and filling fees in New York are , in Florida are and in Rhode Island are .
Sweepstakes offering prizes over in total value need to be registered in New York and Florida, and Rhode Island is if retailers are involved.
In the U.S., only New York and Florida require that a surety bond or an escrow account be established as part of the registration requirements.
New York requires a 30 day lead time for the filing and registering of sweepstakes. However they don't currently enforce it strictly. Florida requires 7 days and does enforce it strictly. Rhode Island does not specify a lead time requirement.
You can buy contingent prize insurance against there being a winner for a "big-stakes" game or contest for a tiny fraction of the advertised value; very specific criteria apply.
In Florida, if a sponsor has run a sweepstakes or game promotion without incident for five consecutive years, a "waiver of surety" may be obtained, which avoids the trouble and expense of obtaining a bond. However, this option is not available in New York.
Excluding state-run lotteries, according to the Federal Trade Commission about 65% of households have participated in a sweepstakes, contest, or game promotion of some type within the last 18-36 months. That number increases to nearly 95% if you include state lotteries.
Your Official Rules are, legally, the sponsor's "contract with the public", and as such, there should be as little ambiguity as possible.
1099 tax forms (mis. income) must be issued by the party who actually awards the prizes. However, a third party may do so, if acting as an agent for the sweepstakes sponsor.
For alcoholic beverage sponsored sweepstakes, the minimum age to enter is 21 in the U.S. and 19 Canada.
You can require a proof of purchase with a contest in most states. However, you cannot require poof of purchase with a sweepstakes, unless you have a free alternate means of free entry.
Sweepstakes will out-return contests with respect to the number of entries issued by as much as 20 to 1 sometimes more.
You can now run an internet-only sweepstakes in Florida. However, the only means of entry can be online.
A sweepstakes sponsor can give a prize of equal or greater value than as stated in the Official Rules (or as shown in advertising materials) or a cash alternative - at the sponsor's discretion but never less.
It is important to have lots of winners. If your prize budget is one hundred thousand dollars, you're better off giving away one major prize of fifty thousand dollars and another 100 second and third -level prizes totaling fifty thousand dollars rather than one big prize worth the whole hundred thousand dollars.
A surety bond should be signed by a principal or officer of the company sponsoring a sweepstakes (VP or higher), but may be signed by an agent, if that authority has been given in writing.
You must include copies of complete Official Rules in your POP/merchandising kits and materials. Several states require they be posted prominently during a promotion.
To comply with the Children's Online Protection Act, you cannot allow anyone under the age of 13 to provide their address, phone number, or personal information without parental permission.
At least 10 states require that a list of winners be made available to any individual that requests one. A return postage paid envelope can be requested of consumers.
WHAT ARE SWEEPSTAKES, CONTESTS & GAMES?
There are many types and variations of sweepstakes, contests, and games of chance. Within some basic categories, our creative team works with you to compose the best added value with a unique theme to match your industry, target audience, and objectives.
CONTESTS...
Are games of skill, either physical or mental skill. Physical skillincludes all major sports ( baseball, football, soccer, golf, basketball and hockey ), minor sports ( racing, motor sports, bowling, pool, Frisbee, etc. ), as well as non-sport throwing ( paper airplane, food, etc. ). The physical skills tested can be either by the team or player(s), or by selected spectator(s).
SPORTS CONTEST EXAMPLES...
Are as endless as sports statistics. In baseball, you could designate a time, perhaps a specific pitch tied to a co-sponsored radio stations dial number, in which the home team needs to hit a home run for the selected spectator to win. Or a branded target is painted on the outfield fence, with nine spectators chosen to win if the ball hits the target in their assigned inning. Can a spectator shoot 15 hockey pucks into an open net from the blue line, or 2 out of 3 half-court basketball shots? There are many creative sports contests beyond the classic hole-in-one.
MENTAL SKILL CONTESTS...
Are mostly based on participant prediction(s). For sports, it could be the time of score / goal, the half / final score, or attendance. For non-sport prediction(s), it could be the daily Dow, the Academy or CMA Awards, the price of Item(s), the number inside a container, or the characteristics of a product.
MENTAL SKILL CONTEST EXAMPLES...
Include predicting the number of golf tees inside the minivan, or the 4 of a diamond, or the price of a series of sponsored products.
CONDITIONAL EVENT SWEEPSTAKE...
Are not predictions, yet rather winning is outside of the control of the participant. It can be based on any sports contest, or even the weather.
CONDITIONAL EVENT SWEEPSTAKES EXAMPLES...
Include an air conditioner dealer guaranteeing a full rebate if the summer has no days over 95 degrees F, or a spectator wins if a kickoff is returned for a touchdown.
MATCHING GAMES...
Usually give the participant no choice in selection based on something they already have such as Drivers License, Social Security Number, birthdate, paycheck number, dollar bill serial number, VIN number, odometer reading, old Lottery ticket, telephone number, street address, account number, or initials.
MATCHING GAMES EXAMPLES...
Include matching last 6 digits of license to car VIN number in showroom, or responding to dollar bill serial number read over radio.
SWEEPSTAKES DRAWINGS...
Are a random selection, either where the participant actively chooses or passively receives their chance.
SWEEPSTAKES DRAWING EXAMPLES...
Include selecting the prize money bag out of 100 bags in the Brinks truck ( active ), dialing the opening combination to the prize vault ( active ), or receiving in the mail the key that opens the prize treasure chest ( passive ), as well as the classic lotto ticket.
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