Why Do Companies Run Sweepstakes? What Are Their Goals and Benefits?

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 achieve those goals?

Legitimate companies honestly do give away prizes. Those prizes aren't a waste of money, they are legitimate marketing expenses which help boost their profits. Meanwhile, the entrants have the fun and excitement of entering and winning. But they need to 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 and let companies 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, since people can instantly spread the word about things that capture their interest through emails, blogs, Facebook, Twitter, and newsletters.

Contests and sweepstakes encourage people to talk about a company, and its products and services. You might tell your friends about a giveaway you entered, or you might be excited about a product you won, encouraging your family to buy one for themselves.

Some sweepstakes also use a refer-a-friend option to award bonus entries, encouraging buzz explicitly.

Sweepstakes Encourage People to Visit Websites

A great product is worthless to a company if their customers don't know it exists. Giveaways can 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 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 be able to keep you informed about their products and services.

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

Because newsletters are a valuable way to contact potential customers, many companies use newsletter signups to measure whether a giveaway was successful.

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 as advertising.

Companies can ask participants to write a jingle or film a commercial for the chance to win a valuable prize.

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 about how their potential customers think, how they go about their days, or how they use the company's products. This can help their advertising to be more effective.

Giveaways Strengthen the Relationship Between Company and Customer

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

The chance to win creates a positive feeling toward the company in their visitors' minds, which can then carry 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 make more profit. As soon as sweepstakes stop being profitable, companies will stop offering them. That is why it is so important to be a courteous sweeper and 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.