Clients often interchange the words “sweepstakes” or “giveaways” and “contest” when describing their promotion, but the actual terminology you use to advertise your promotion to the public (and, state regulators) can get you in hot water (or keep you out of it).

There’s only one term that you can use interchangeably when describing your sweepstakes, giveaway or contest and that’s the word “promotion”. The word “promotion” is used to describe the marketing strategies you’re using to “promote” your brand or product. So, whether it be a contest, game of chance, loyalty program instant win or other promotional offer, it will always fall under the term “promotion” before its further defined by promotion type.

The Difference between a Sweepstakes and Contest

The major difference between sweepstakes and contests is in how people enter and how people are selected to win.

Since promotional law is specific to the type of promotion you are running, how you articulate your promotion to your audience is one of the most important aspects of execution.

The definition of a Sweepstakes

A sweepstakes is also referred to as a “giveaway” or “game of chance”. For a promotion to be defined as a “sweepstakes”, “giveaway” or “game of chance” it must have a method of entry free from consideration (defined below), a random method of determining winners (chance) and a prize or prizes to award.

Consideration. In a sweepstakes, you cannot ask a person or require an entrant to purchase a product or pay a fee to receive an entry. This would be viewed as “monetary consideration” and is not legal in a game of chance. You must also ensure there is no “non-monetary consideration”, such as asking a person to put forth too much effort or skill in order to receive an entry into the sweepstakes.

Free Method of Entry / Equal Opportunity. To comply, your sweepstakes must remove all elements of Consideration by ensuring entrants can obtain entries completely free of payment or too much effort. That doesn’t mean you can’t ask people to purchase a product or take a lengthy survey. You just need to make sure they have the choice. And, you need to make sure they are not penalized or rewarded for their choice – meaning you can’t give a person who purchases your product 5 entries and only 2 entries to a person who chooses to enter without purchasing your product. Everyone must be able to get the same number of entries despite the entry method they choose.

Chance. In a sweepstakes, all winners must be determined by a chance element, such as a random drawing from all entries received or an instant win element, pre-programmed randomly.

Prize. The prize is your “carrot” or incentive to get a person to enter your sweepstakes. Prizes must be determined and clearly described within your official rules. If your total prize pool exceeds $5,000 in value, and you are opening and advertising your sweepstakes to residents of Florida, New York or Rhode Island, bonding and registration may be required.

The Definition of a Contest

A contest is also referred to as a “competition” or “game of skill”. For a promotion to be defined as a “contest”, “competition” or “game of skill”, entrants must put forth some level of skill or effort into their entry, which is later judged by a panel of judges to determine the final winners.

Consideration. Unlike a sweepstakes or game of chance, contests require non-monetary consideration to enter. Contestants must put forth a certain level of effort, such as writing an essay, creating something artistic, or physically challenging other contestants.

Free Method of entry NOT required. The presence of consideration in a skill based contest is not as problematic as the presence of consideration in a sweepstakes. Depending upon the states for which you are running your contest, you may be able to require product purchase or even an entry fee without offering a free alternate method of entry (AMOE). This makes contests appealing to brands who wish to increase product sales in alignment with their promotion.

Skill. In a contest, all winners must be determined based upon the skill they put forth. At the end of the contest, all entries must be judged equally based upon a pre-set judging criteria (i.e. grammar, originality, and creativity in an essay contest). To ensure there is no gambling or lottery law violation, there can be no “chance” elements in a skill based contest. And, all entries must be judged equally, whether you have 5 submissions or 5 million.

Prize. Like a sweepstakes, the prize or prizes you offer is your incentive to encourage entries. Since contests require skill or effort, the prize you award will make a huge impact on the level of participation you receive.

Should I run a Sweepstakes or Contest?

They type of promotion you choose to run is up to you and depends heavily on your overall marketing objective. In general, sweepstakes are fairly simple to plan and implement. You can create a simple microsite and collect entrant information online to grow your database and use for future marketing efforts. If you advertise correctly, you could result in a viral impact, spreading your branding and messaging to millions of consumers.

Contests are typically more intimate, capturing a smaller audience. However, they can be excellent ways to obtain user generated content which can later be used to market and advertise your brand. Contests typically require more administration in qualifying submissions and judging entries, but you can hone in closer on your audience and use the creativity of contestants to grow your brand down the road.

We’re happy to help you decide which promotion is best to meet your marketing objectives. Contact us to get the ball rolling!

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