Hosting sweepstakes and contests online is a great way to spread brand awareness and draw new customers to your business. People who participate in your promotions do your marketing for you instantly through social media, email, blogs and texting. While you benefit from the exposure, your customers benefit from the chance to win a prize, so it’s a win-win.
Tips for Running a Sweepstakes or Contest
For decades, marketers have been using sweepstakes and contests as a cost efficient way to create awareness for a new product or service, and expose a brand to an entirely new customer base. These promotions encourage people to spread the word — to do your marketing for you — by telling their friends, family, and co-workers about the promotion. Just by running a sweepstakes, you can increase the number of people who interact with your brand, create new brand relationships, and begin the customer conversion process.
To ensure a successful promotion it’s best to employ a professional who is well versed in managing online contests and sweepstakes. However, knowing the basics before you hire a sweepstakes administration company saves a ton of time when developing your marketing plan.
We’ve compiled a list of the most commonly discussed topics to get the ball rolling.
The Difference between Sweepstakes and Contests
It’s pretty common to confuse a contest with a sweepstakes where terminology is concerned. But, the two couldn’t be more different in structure and legal requirement. In fact, you can end up with issues if you do something as simple as labeling a set of sweepstakes rules as a “contest”. So, what’s the difference?
Sweepstakes are also referred to as “games of chance” or “giveaways”. Usually, entry into a sweepstakes is as simple as following a business on a social network, referring friends or completing an entry form. The winners are chosen completely at random, using a drawing or other unbiased selection tool. When you run a sweepstakes, you can’t require entrants to purchase anything or ask them to put forth significant effort without a cost or effort free alternative.
Common iterations include online instant win games, scratch-off cards and random drawings, and the goal is usually to spread awareness for a product or service at a low cost, or to collect data on the product’s demographic.
Unlike sweepstakes, contests are not random – they’re games of skill. Usually entrants are required to put forth effort or skill to win. This may include posting a photo or video, or creating an essay or piece of art. Submissions can often be used as crowd-sourced advertising. When you manage online contests, you must ensure that entries are judged based upon a pre-determined criteria and that any voting components are only part of a larger process of determination to remain compliant with gambling laws. No random elements are allowed.
Free Method of Entry for Sweepstakes
You may have heard of the “free entry” or “AMOE (alternate method of entry)” requirement for games of chance (this is not necessarily the requirement for skill based contests). We can’t think of many marketing plans that would openly offer a free method of entry, when one of the main purposes of a sweepstakes is to encourage sales growth. But, the law is the law and this particular law is enforced on every level.
- Consideration and AMOE. We use this word a lot when talking about AMOE requirements. It’s essential that you remove “Consideration” as your sole method of entry.
- “Monetary consideration” is any monetary contribution you are requesting of the entrant to earn and entry (membership fee, purchase of a product, etc.).
- “Non-Monetary Consideration” is any non-monetary contribution you are requesting of the entrant to earn an entry (writing a product review, taking an hour long survey, etc.). You must remove the element of consideration and add a free method of entry in order for your game of chance to be legal.
- Remove it by adding something? Yes! Technically speaking, consideration doesn’t need to be completely removed from your promotional structure. You remove consideration by adding a free method of entry. So, instead of having just one method of entry (i.e. making a purchase – Monetary Consideration), you have two (make a purchase OR enter for free). A free method of entry can be as simple as an online entry form or write in postcard.
- Equal (and proportionate opportunity). To ensure Consideration is completely “removed”, you have to keep it fair for everyone. For example, you can’t give the person who purchases 10 of your products 10 entries, but only allow people who choose not to purchase the opportunity to write in only once for a free entry. The person who writes in must also be able to write in 10 times to get his/her 10 entries.
- Structure Matters. As with any promotion, the rules are not always black and white. Your free method of entry may need to be tweaked depending upon how your promotion is structured. For example, if you are awarding prizes daily or weekly a write-in method probably won’t work, logistically speaking.
Writing Sweepstakes Rules and Legal Disclaimers
Sweepstakes laws are very specific, which can make running one a bit tricky without a little help from the experts.
Rule #1: Ensure your official sweepstakes rules and regulations are ironclad before kicking off.
Rule #2: Ensure that you use the proper terms, font size and all necessary legal disclaimers. As your promotion administrator, we’ll create the legal disclaimers upon drafting the official sweepstakes rules.
We’ll also review your creative to make sure the legal disclaimers follow the legal guidelines as far as font size, placement, etc. Other things to consider when developing the official rules:
- Sweepstakes Are Free to Enter. One of the most important factors in developing your official sweepstakes rules is to make sure it’s free to enter. The FTC warns consumers that a sweepstakes requiring a person to pay to enter without a free entry method might be a scam. You definitely don’t want to fall into that category. Remember, “free to enter” doesn’t always mean no purchase necessary. There are other non-monetary factors that might require you to add a free entry method. We’ll help you navigate.
- Sponsors Must Tell Entrants it’s Free. We know. It almost defeats the purpose of your marketing plan. But it’s the law. Although you don’t have to shout it from the rooftops, Sponsors and their promotion administrators must disclose that there is a free entry method in a clear and conspicuous manner. This must be disclosed in the official sweepstakes rules, and in all other advertising methods and mailings via legal disclaimers.
- You can’t tell someone they’ve won, if they haven’t. The official sweepstakes rules also need to clearly articulate the method of selecting winners and prize distribution. A Sponsor can’t claim the recipient of a mailing is a winner, unless they have actually won something, nor are they allowed to include simulated checks unless they include a whole lot of legal language evidencing the check is not a prize.
- Sweepstakes laws are not black and white (sorry!) Although some of the laws might make it seem like running a sweepstakes is either do or do not, our years of experience working in the industry tell us otherwise. When drafting your official sweepstakes rules we take your marketing objective AND the legal requirements in mind.
- Are you awarding prizes on a weekly basis?
- Are you asking entrants to become the member of a free service?
- How are you advertising? Are you awarding an event related prize, but not including travel expenses?
Each of these examples, fall into the grey area which means, we might be able to make some tweaks to the structure and official sweepstakes rules to ensure you’re on the up and up, while also accomplishing what you hope to from a marketing perspective.
Writing Contest and Game Rules
Contest and game rules are equally scrutinized in the legal world and are therefore subject to specific requirements too. Disclosing material terms, outlining the process for collecting and judging submissions, and prize distribution methods are just some of the requirements for official contest rules.
What other Legal Documents are Needed?
In addition to the full Official Rules and legal disclaimers (which are required to identify the material terms and conditions governing the sweepstakes, contest or game), you may need (or want) to have other, certain legal documentation in place before you launch.
Figuring it all out on your own can be quite the daunting task, but it doesn’t have to be! Here’s a few of the stand outs, along with the ways in which we can help make it all a little less overwhelming:
Bonds/Registrations: Are you awarding more than $5,000 in total prize value? If so, you may need to bond and register with certain states. This paperwork can be very confusing and must coincide with certain sections of the Official Rules.
It also must be submitted within certain deadlines, some of which are very strict and result in fines if bypassed. We’ll submit it all for you within the required time frames, obtain surety bonds, and ensure release of those bonds when the sweepstakes ends. We’ll also make sure the Official Rules are laid out the way the various states require to avoid delays in the process.
Winner Releases/W-9’s: Typically, sponsors require all major prize winners to sign affidavits of eligibility and liability/publicity releases when a prize exceeds $600 in value. Winners with prizes over $600 are also required to complete IRS forms prior to receiving the prize. Our team originates these documents, sends them to winners and works with the winners directly to answer any questions and facilitate their return.
Guest Releases/Companion Waivers: Sometimes, a prize allows the winner to bring a guest with them (think vacations and VIP experiences, such as meet and greets with celebrities). In such cases, sponsors usually have the guests sign releases or waivers prior to awarding the prize to make sure they sign off too. NSC originates guest releases / waivers and submits them to winners with the affidavits and W-9 forms for facilitation.
Mistakes to Avoid When Running a Contest or Sweepstakes
Many Sponsors to make some very simple mistakes after their promotion has gone live. Once we’ve done the initial website programming, official rules and other pre-launch tasks, Sponsors often move ahead with the sweepstakes and make decisions without checking in first.
While this is okay in some cases, there are a few very specific things that should never happen once that promotion becomes available to the public.
- Failure to write official rules. It’s a common misconception that small or short lived sweepstakes (i.e. a small giveaway run at an event or a simple online sweepstakes with smaller prizes) doesn’t need Official Rules. But, the truth of the matter is that the law doesn’t discriminate based upon size. And, one of the requirements for running a game of chance are posting the material terms (aka, the Official Rules).
- Failure to post Official Rules. No matter what type of promotion you are running, you are required to make the official rules readily available to anyone that wants to look at them. This is typically via a URL which is made available in the legal disclaimers.
- Failure to post legal disclaimers. Legal disclaimers are required to go on any piece of advertising referencing your sweepstakes. That includes print, on air, online and more. And, there are specific requirements for posting depending upon the medium (and promotion type) – like font size, legibility, etc. If you’re not sure about where to post disclaimers for your particular sweepstakes, contest or game, contact us and we’ll take a look for you.
- You’ve stopped your promotion before the official end date. Sometimes Sponsors cancel a promotion because it didn’t yield the traffic they hoped for, or they didn’t sell enough product. This is a huge no-no. Once that sweepstakes or contest goes live, you can’t just stop it based upon its performance. No matter how successful you find it to be going you have a legal obligation to collect entries to the end, select winners and award prizes in accordance with your official rules.
- You didn’t verify the winner’s eligibility. We encourage Sponsors who are offering high value or experiential prizes to vet their winners before they announce anything publicly or award anything officially (Affidavits of eligibility / liability / publicity releases are the industry standard here). There is nothing worse than announcing a winner who turns out not to be the actual winner based upon a tricky eligibility glitch. Why? Because those non-winning “winners” can cause a lot of negative PR and even legal recourse if you didn’t follow your rules. It’s not pretty. We’ve seen this way too many times to count.
- You’ve changed your prize. Certain changes are allowed based upon how the official rules are written. You may see language that states something like “if the prize becomes available at time of award, a prize of equal or greater value will be awarded”. This is pretty common language, but it can get tricky. A clear line of communication with the winner is key. For example, if the prize you now intend to award is a lot more expensive than the original, ask the winner if they okay with it. Believe it or not, a higher value prize could have a negative impact depending upon the winner’s new tax liability and personal tax situation. Make sure they sign off in writing and work with them. The more you work with them, the better the PR for you in the long run.
The very best way to avoid making these mistakes is to ask us before acting. If you have chosen to handle a specific administrative element on your own, we won’t leave you hanging. We’re here to be your ally throughout the entire promotional experience and beyond.