An Essential Guide To Online Promotions

By Alan Gerson

Published in iMedia Connection on 10/9/09 at http://www.imediaconnection.com/content/24542.asp

Reward and incentive-based promotions, which include a wide range of marketing strategies, such as sweepstakes, contests, loyalty/rewards, couponing, sampling, and other incentive offers, are gaining new popularity in these uncertain economic times. This resurgent popularity is partly due to the power of promotions to interest, engage, and activate targeted consumer responses, and to produce immediate tangible results. Online technologies have further boosted the attractiveness of promotions by making them more efficient and cost effective, enhancing the message delivery options, and increasing the immediacy and richness of measurement and tracking.

However, promotions are also subject to a dizzying array of potential legal and regulatory requirements under both federal and state law, which can create the risk of significant fines or penalty provisions for violations. In addition, many marketers are daunted by the complicated and even mystifying "back-end" logistics of running a sweepstakes, contest, or other reward-based promotion.

Following and understanding these three steps to a successful online promotion will hopefully demystify the process and pave the way for integrating online promotions into your overall marketing strategies.

Step 1: Establish clear goals and objectives. All successful promotions should start with a clear understanding of the goals and objectives you are seeking from the promotion. These can range from building a registration database of entrants, communicating the features, advantages, benefits, and uses of your product or service, to just publicizing and drawing attention to a new product or service. Promotions should be thought through carefully to determine whether you want to incorporate a remarketing strategy such as an opt-in to a newsletter, or a traffic-driving mechanism such as a coupon. Understand your target audience and the exact marketing messages you would like to communicate and reinforce through the promotion. Promotional marketing strategies encompass a wide range of options that can be customized to meet your goals and objectives, as well as your budget.

Step 2: Determine the promotion structure that best fits goals and objectives. The range of promotional strategies to consider all have different attributes and requirements. We will discuss three main categories, each of which can readily meet your marketing goals.

1. Contest promotions: A contest is by definition an offer that awards a prize on the basis of a bona fide test of intellectual knowledge, skill, or physical prowess. The selection of winners and the award of any prize must be solely on that basis, and chance can play no part whatsoever in the selection process. Contests generally require specific criteria for the competition and the award of the prize(s). These rules and criteria must be applied fairly and on the same basis to all persons entered. Often contests require "judging" to take place, where all entries are evaluated on the same criteria by persons ostensibly qualified to apply the criteria. The required judging of all entries can be a daunting, time consuming, and expensive process. However, online technology has made it possible for remote or virtual judging panels to be employed where all entries can be evaluated, scores captured, and judging affidavits completed over a period of time, without the judges having to be brought together as a group. These online technologies have made contests more popular, and user-generated contests are now a staple of marketing strategies. Leading promotion companies have developed sophisticated software to enable this capability to be automated to a great extent, as well as store the entries in retrievable databases and capture and tabulate individual judges' marks for each individual entry. 

Some promotions start off as contests, but the total number of submissions is then narrowed down to a smaller number of finalists through random drawings. This approach automatically converts the contest to a sweepstakes, which will be discussed next. Contests are often advantageous because of their ability to foster a deep interaction between the entrant and the product or service, especially in user-generated content contests. Without access to effective online technologies, this strategy can become very labor intensive and costly, which is why many such promotional strategies morph into sweepstakes.

2. Sweepstakes promotions: A sweepstakes is by definition an offer that provides for awarding a prize by or through the operation of chance. Any offer that incorporates the element of chance could be considered a sweepstakes, and could become subject to a number of legal and regulatory requirements that are in place to protect against illegal lottery schemes, or to protect special audiences, such as children. If in addition to prize and chance there is a payment or an expenditure of significant time or effort involved to win or accept the prize, the risk of violating lottery laws becomes a concern. An experienced promotion administrator can guide you through the sweepstakes process. 

Happily, most potential concerns involving sweepstakes promotions can be cleared up by carefully drafting official rules, disclaimers, and disclosures in advertising, and conducting the sweepstakes drawing in the manner that was described to the public. Your promotional agency can also help you avoid gray areas entirely without sacrificing your goals and objectives.

Several states (New York, Rhode Island, and Florida) also have specific registration and bonding requirements for sweepstakes or special rules protecting children, which can go beyond the requirements of the Federal Children's Online Privacy Protection Act, as is the case with a very recent statute in Maine. These requirements are often triggered by the aggregate value of the prizes offered. Prize values in excess of $5,000 will require registration in New York and Florida. In addition, there are rules and regulations in some states that are triggered if a retail store visit is part of the entry process, or if there are obligations imposed on the winner in order to accept the prize.

These are just some potential elements of a promotion that should be considered before you risk converting your sweepstakes into an illegal lottery scheme. Another area of intense regulation revolves around the special registration requirements in sweepstakes open to minors and the required parental consent. Again, an experienced promotion agency will be able to explain these requirements and provide software solutions. 

These are just some of the reasons why you often see sweepstakes advertised with disclaimers like: No purchase necessary. Must be 18 years or older to enter. Residents of (state) not eligible. Other conditions or limitations on sweepstakes entry may also be prominently displayed.

Here again, online registration forms and their underlying software, which automatically detect compliance with age requirements or residency or entry limitations, make this process much more user friendly and create a simultaneous record of what information was captured and from whom. These capabilities, along with the advantages of posting these official rules, privacy policies, and links to sponsor websites, have dramatically increased the attractiveness and utility of online registration sites to conduct sweepstakes promotions of all sizes.

Sweepstakes offer many benefits as a promotional strategy, depending on your goals and objectives. These include ease-of-entry, ability to register large numbers of people, and a relatively uncomplicated call-to-action. Online technologies, which have reduced the cost of sweepstakes, especially compared with contests, enable the capture and database storing of large numbers of entries and can include a random drawing program to select winners and notify potential winners by qualifying their eligibility. 

3. Other reward/incentive/product sampling/event-based concepts:  Promotional reward-based offers and opportunities are an important and growing part of the marketing strategies of many companies. 

Companies can launch their own comprehensive reward and loyalty clubs quite easily today by accessing ASP solutions provided by promotional agencies or other companies specializing in administering loyalty and rewards engines. Loyalty/rewards programs target retention of your most valuable customers, and they can be an ongoing source of consumer research. They can facilitate product introductions or product samplings as well as drive retail sales through discount coupons and regular customer communications. Coupled with a pre-planned series of sweepstakes and contest promotions to add excitement and interest, many leading brands have shown expanded interest in this strategy. Supplemental email communications, companion mobile/text and email campaigns, and event or place-based promotions round out a campaign to build long-term customer value and increase revenue. A full-service promotional agency can provide ready advice on alternative strategies to meet any budget or set of goals.

Step 3: Pay attention to the details. Promotions are complex and often interdependent marketing strategies. It is very important to work closely with your promotional agency to make sure that all the various elements and details have been considered and thought through to maximize the impact and success of the promotion. Once you determine the nature of the promotion that best suits your marketing goals, success then requires paying strict attention to the myriad details, elements, and considerations applicable to that promotional strategy.

The following is a checklist of the elements to consider at the very beginning of the process, to make sure your promotion starts and ends well and meets with the greatest success:

General points:

a.  When will the promotion start and end?

b.  How many winners will there be? 

c.  How often will there be a need to select winners? Daily? Weekly? Just Once?

d.  What will winners win? Will they receive, cash, merchandise, travel?

e.  What is the total prize value?

f.    What is the prize budget, and where/how can prizes be promoted for less than full consideration?

g.  What goes into the detailed prize description?

h.  What is the media strategy to promote entry or registration for the promotion?

i.    What is the media budget to support the registration process?

For contests and sweepstakes, determine:

j.    If it's a sweepstakes, what are the odds of winning? If it's a contest, what are the criteria to select winners, and how will the judging be conducted?

k.  Who is eligible? How do we confirm eligibility? What are the implications of making residents of specific states eligible as far as specific state laws that could apply to the planned promotion? What about Canadian citizens? What about people from other countries? Does the promotion need to be registered or bonded, and where?

l.    How will prizes be delivered and fulfilled?

m.     If it's a sweepstakes, do I want to/need to employ an alternative free method of entry?

n.  What other potential legal or regulatory issues may apply to the planned promotion?

o.  How are winner lists going to be posted and made available to the public?

p.  What are all the conditions, limitations, or restrictions that apply to the prizes?

q.  Has the language of the prize description implied additional prize elements? (For example, describing a prize package as a "vacation" or using words like "all-inclusive" have implications. For example, an "all-inclusive vacation" usually would require that the prize include travel, hotel, meals, transfers to and from airports and hotels, spending money, and provision for the winner to bring a guest.

r.   Who is going to handle issuing W-9 and 1099 Forms to winners?

s.  Who is confirming the eligibility of potential winners under the rules?

t.   Are there affidavits and releases to be executed by potential winners?

u.  For contests, who are the judges? What are their qualifications to judge?

v.   How will entries be solicited, and what disclaimers or disclosures need to go into advertising materials?

w. Do I have promotional partners, and what are their contributions to the promotion, and what requirements to they have that need to be coordinated?

x.  What about the identification of promotion "entities" and understanding their respective duties and obligations?

y.  What additional marketing messages or customer feedback opportunities should be included?

z.  What will it take to draft official rules that take all these points and more into consideration?

For loyalty and rewards programs:
Consider what the value proposition for the loyalty program should be, what kind of consumer actions you wish to incent, and what kind of rewards are going to be most attractive to your target audience. The points program can be readily set up and tied to specific valuable consumer actions. There are a number of different ancillary business models and strategies that can be built around loyalty/rewards programs, and online technologies allow for the efficient and cost-effective administration of all these elements.

The ability to execute your promotion with as much technology and communications expertise built in can be crucial. This will save you time and expense and will lead to a more successful promotion.

However, equally important is to find a promotional marketing partner that can also pay attention on your behalf to the hundreds of moving parts in any promotion, and that has insight into consumer-focused media and marketing.

Nevertheless, the power of promotions, as enhanced by digital technologies and the interconnected online and wireless communications world, is growing in size and importance. Follow these steps, and you will be able to make promotions work successfully for your brand.

Alan H. Gerson is the president, CEO, and principal shareholder at Enteractive Solutions Group, Inc. a full-service promotional marketing company in Burbank, Calif.