Why Do Companies Run Sweepstakes?

Giveaways Are a Smart Business Decision, Not Charity

Have you ever wondered why companies give away prizes in contests and sweepstakes? What are their goals, and how does giving away prizes help them? By knowing what companies hope to gain from giveaways, you can make smart choices about what to enter and what personal information you want to share.

Sweepstakes Are Smart Marketing Tools

Although some people worry that sweepstakes are just tricks, legitimate companies do give away prizes — sometimes, with very high values.

How can they afford to do that?

Well, think about the cost of buying advertisements on television, radio, or for the brands that can afford it, during the Super Bowl. That's a pretty serious expenditure of money going into the pockets of television or radio networks.

By using giveaways, companies skip the middlemen — the TV or radio networks, the newspapers, the online websites — and instead, reach out directly to their fans.

Those prizes aren't a waste of money, they are legitimate marketing expenses that help boost the sponsoring company's profits. Meanwhile, the entrants benefit from the excitement of entering and the chance of winning. But entrants should be aware of what they are exchanging for that chance to win.

For example, when you enter, you are willingly participating in viewing the company's advertising. You might sign up for newsletters or follow a company on Facebook to let them market to you in the future. You might also exchange personal information, like your website browsing habits, for that chance to win. 

To keep yourself safe, you need to know what companies are trying to accomplish so you can make an informed decision about how much you want to help them achieve those goals.

Sweepstakes and Contests Create "Buzz" about Products

Sweepstakes are an important marketing tool for many companies.
Sweepstakes help many companies achieve their marketing goals. Plus, they're fun!. Image (c) Muharrem Aner / E+ / Getty Images

Word-of-mouth marketing is more powerful than ever now that people can instantly share the things they like through texts, emails, social media, blogs, and more

Contests and sweepstakes give people a reason to talk about a company and its products. For example, you might tell your friends about a giveaway so they can enter or you might share the news about a product you won, encouraging your family to buy one for themselves.

Some sweepstakes build buzz by giving entrants an incentive, like bonus entries, for referring friends or sharing the giveaway on their social media channels. In some cases, this is even a requirement for entry.

Sweepstakes Encourage People to Visit Websites

A great product is worthless to a company if its customers don't know that product exists. Giveaways help companies get eyeballs to their websites to learn about their products.

Online sweepstakes give people strong motivation to visit a company's website, and many of those people will continue to explore the website after they've entered to see what the company has to offer.

Companies can capitalize on this by "teasing" entrants with content they are likely to enjoy. For example, a cooking website might put links to tasty recipes on the confirmation page of a recipe contest. Meanwhile, a company that's giving away a game might advertise their discounts on gaming PCs while people are entering.

Companies Use Giveaways to Build their Email List

An email marketing list is a great way for companies to strike up a dialog with you and to keep you informed about their products and services. A solid email list is pure goal for retailers.

This is why contests and sweepstakes usually include the chance to opt in to the sponsor's mailing list. Some even make subscribing a condition of entering.

Because newsletters are a valuable way to contact potential customers, many companies use newsletter signups as a sign of the giveaway's success.

Contests Generate Advertising Content at a Reasonable Cost

Creative contests, where participants submit photos, recipes, or essays for a chance to win, can oftentimes be used to create even more advertising at a good price.

Companies will ask participants to come up with a recipe using their products, write a jingle, or film a commercial for the chance to win a prize. They'll then use that entry just as they would a piece that was created by professionals.

That means that, instead of paying an ad agency to produce content, sponsors can pass that money directly to their loyal customers in the form of prizes. This benefits sweepers and corporations alike.

Sweepstakes Provide Valuable Market Research

Many giveaways include some optional or required survey questions on their sweepstakes entry forms. Why?

Companies use giveaways to get insight into how their potential customers think, spend their time, or use the company's products.

The company can use the results of their surveys to make future advertising more effective.

Giveaways Strengthen the Relationship Between Company and Customer

Sweepstakes strengthen the business-to-consumer relationship. They are fun, and entertain people while informing them about the company's products, giving customers a benefit for interacting with the company.

The chance to win creates a positive feeling toward the company in their visitors' minds, which then carries over to a brighter attitude toward the sponsor's products.

Conclusion: Sweepstakes Only Work When Sponsors and Sweepers Work Together

Sponsors hold sweepstakes and contests because prize promotions are an effective way of helping them increase their profits. As soon as sweepstakes stop being profitable, companies stop offering them. That's why it's so important to be a courteous sweeper — to encourage companies to continue to hold more prize giveaways.

At the same time, sweepers have rights, too. Participating in contests doesn't obligate you to be deluged with spam or to make a purchase.

By learning how to protect yourself from unwanted marketing mail and recognizing the signs of a sweepstakes scam, you can make sure that companies aren't taking advantage of you while you enter sweeps.