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In the world of modern business, startup brands don\u2019t really consider promotional campaigns that entail low or no immediate return to be profitable. That\u2019s why many small businesses are suspicious about giveaways and other pro bono advertising campaigns. To them, giveaways are nothing but a marketing tool which allows target customers to do little (if anything at all) in exchange for freebies. Namely, classic giveaways are subject to the infamous \u2018No purchase necessary\u2019<\/i> clause, which prevents the business from securing an instant financial gain. <\/span><\/p>\n So, what exactly does the notorious phrase mean, why is it so important from the legal standpoint, and are there any benefits which your brand can scoop by adding giveaways to its marketing arsenal?<\/span><\/p>\n By definition, a giveaway is a marketing campaign in which a business offers products or samples to the public free of charge<\/b>. Today, giveaways have moved from real life into the virtual world, allowing online crowds to get free goods in exchange for their personal data, subscription, or social media follows. <\/span><\/p>\n There are four types of giveaway campaigns, and they are the following:<\/span><\/p>\n \u2022 Sweepstakes<\/i><\/b> are giveaways in which the winner is chosen by a random draw, which makes it a game of chance. In sweepstakes, the prizes range from low-end handmade products to all-inclusive vacation deals.<\/span><\/p>\n \u2022 Raffles<\/i><\/b> are a category of giveaways mainly used by non-profit organizations to raise funds for charitable causes. In a raffle, winners are chosen by a draw and the gathered money is donated as a means of charity marketing. <\/span><\/p>\n \u2022 Contests<\/i><\/b> are a giveaway marketing tool in which the winner is selected based on some merit instead of luck. In most contests, winners are chosen based on their performance on a given task, such as photography, filmmaking, writing, etc.<\/span><\/p>\n \u2022 Lotteries<\/i><\/b> are another game of luck in which the winner is selected by a random draw. In a lottery, however, the right of entry entails a fixed fee that participants are required to pay, which makes it illegal for a business to use lotteries for marketing purposes and advertise it as a giveaway. <\/span><\/p>\n Many young brands appear to be completely in the dark about the regulations behind giveaways and the implications of the phrase <\/span>\u2018No purchase necessary<\/i>\u2019 or \u2018No purchase required<\/i>\u2019<\/span>. According to the U.S. law (and the laws of many other countries as well), it\u2019s illegal for a brand to require the consumers to make a purchase in exchange for a chance to enter a competition or take a giveaway home. <\/span><\/p>\n Why would anyone offer products to the public unless they could capitalize from it, right? <\/span><\/p>\n Well, it\u2019s not as black and white as that: by allowing your target audience to have a free go at your merchandise, you get to build brand awareness, collect customer feedback, and establish a positive association with your brand with both existing and potential buyers. All these benefits<\/span><\/a> can be a key trump card in your company\u2019s bag of marketing tricks. You can also gain insight into the best direction to take in future advertising endeavors based on the success of the giveaway campaign. <\/span><\/p>\n You can\u2019t use the giveaway to drive sales that will produce an instant return on investment, but it can be a simple tool to motivate consumers to provide your business with their personal data (such as their email and phone number) or join your brand\u2019s mailing list. This can result in a sales hike at some point later, but only if you play your follow-up advertising right. <\/span><\/p>\n Other actions which giveaway participants can be prompted to take include following your brand on social media, sharing its posts, watching promo videos, subscribing to your newsletters, or providing your company with first-rate referrals<\/span><\/a>. Once you\u2019ve established these touch points with the public, you can use other tactics to entice them to become your loyal customers. In this light, a giveaway acts like a hook: you throw it into the pool of your target audience and wait for buyers to come knocking on your company\u2019s doors eager to purchase your products. However, you will first have to win their trust or foster interest in your offering with the giveaway.<\/span><\/p>\n All advertising campaigns that entail free participation such as sweepstakes, contests, and raffles are governed by the law. <\/span><\/p>\n As a rule, only non-profit organizations can run raffles, while sweepstakes and contests can be staged only on condition that your brand doesn\u2019t require entrants to purchase something in exchange for the right of entry. <\/span><\/p>\n In the U.S., there are a few government entities which monitor giveaways to preventing abuse or breach of the law<\/span>. In addition to that, each state has giveaway regulations which vary from one state to another, but all serve a common goal: to prevent gambling and abuse of marketing campaigns for profits. <\/span><\/p>\n Here\u2019s what each of these entities does in their line of work, which legal steps your brand should take to stay on the safe side of the marketing campaign, and what you can do in case you breach the giveaway law.\u00a0<\/span><\/p>\n The Federal Trade Commission<\/a><\/span> <\/span>(<\/span>FTC) is an independent government agency in charge of consumer protection. Monitoring of corporate advertising<\/b> is one of the tasks that fall under its jurisdiction. <\/span><\/p>\n In the small business advertising FAQs, the FTC notes that \u201csweepstakes-type promotions which require a purchase by the participant are illegal in the United States.\u201d The FTC does not directly monitor sweepstakes<\/b>, but it can intervene in case it notices signs of fraudulent or deceptive sweepstakes proceedings<\/b>. <\/span><\/p>\n In addition to that, the FTC has a hand in the implementation of the CAN-SPAM Act which aims to ensure fair treatment of customers generated by means of giveaway campaigns. <\/span><\/p>\n You can learn more about the FCC\u2019s take on sweepstakes and lotteries at Broadcast Contests, Lotteries, and Solicitation of Funds<\/span><\/a>, just to stay on the safe side of the law.<\/span><\/p>\n The Federal Communications Commission<\/a><\/span> (FCC) is another government agency which plays a key role in consumer protection and promotion of fair competition. Unlike the FTC, the FCC is tasked with monitoring mainstream communication channels<\/b> used to promote giveaway campaigns, such as the radio, TV, internet, cable<\/b>, etc. <\/span><\/p>\n In case you intend to advertise your giveaway by means of these communication channels, you\u2019ll need to disclose the terms and conditions of the campaign (i.e. eligibility requirements, prizes, start and end times, etc) and refrain from using fraudulent slogans that might be interpreted as an attempt at deceiving the public. <\/span><\/p>\n Just like the FTC, the FCC doesn\u2019t oversee sweepstakes<\/b>, but it can act if it decides a giveaway is violating the law<\/b>, which is why it\u2019s best to use the \u2018No purchase necessary\u2019<\/i> clause in your giveaway ads. <\/span><\/p>\n You can read up on the FCC recommendations at Advertising FAQ’s: A Guide for Small Business<\/span><\/a><\/span>.<\/span><\/p>\n By the adoption of the\u00a0Deceptive Mail Prevention and Enforcement Act<\/span><\/a> (DMPEA) back in 1999, the United States Postal Service\u00a0<\/span><\/a>(USPS) was granted the power to stop mailing campaigns and impose penalties on businesses that are sending deceptive sweepstakes emails. <\/span><\/p>\n In keeping with the law, all businesses which want to use giveaways to acquire new customers are required to state in the mail that no purchase is necessary to enter the competition. They also need to disclose that a purchase won\u2019t improve the chances of entrants winning the sweepstakes. This should also be highlighted in the giveaway rules and the entry form. <\/span><\/p>\n To find out more about the USPS role in mail-in sweepstakes and sweepstakes advertised through the mail, check out Publication 546 – A Consumer’s Guide to Sweepstakes and Lotteries<\/span><\/a>.<\/span><\/p>\nThe ABC of giveaway marketing tools: The big four<\/span><\/h2>\n
No Purchase Necessary: The why and the wherefore<\/span><\/h2>\n
The secret gains: What giveaways allow you to do<\/span><\/h2>\n
The Legal End: The meaning of \u2018No Purchase Necessary\u2019<\/span><\/h2>\n
FTC: Consumer Protection Taken to the Maximum<\/span><\/h2>\n
FCC: Watchdog of Main Communication Channel <\/span><\/h2>\n
USPS: No Deception in Sweepstakes Emails, Please<\/span><\/h2>\n
A Matter of Law: State Laws on Giveaways <\/span><\/h2>\n