Solarshield, in Altoona, Pa., which sells sunrooms, windows, and basement remodeling in a 12-county region in central Pennsylvania, started working with Jerome Group two years ago and now generates one quarter of its $3 million in sales from sweepstakes leads. “It’s very predictable,” says Randy Green, Solarshield’s director of marketing. “You know what’s going to come in, what your set rate will be, and [that] you’ll close 30% of the leads your salespeople run.”
SCAMS Sweepstakes have been around for a very long time, and one would be hard pressed to find an industry where they haven’t been tried. “They are pure Americana, and very effective,” says Pat Kachura, vice president of ethics and consumer affairs for the New York-based Direct Marketing Association.
Reader’s Digest is credited with the country’s first mass-market sweepstakes, in 1963, and sweepstakes have been marketing staples for such disparate enterprises as American Express and Easter Seals.
The best known of all sweepstakes, though, remains Publishers Clearing House’s annual event, which it launched in 1967 and which has since given away more than $200 million. Sweepstakes, says Chris Irving, Publishers Clearing House senior director of consumer affairs, “are like a big ‘for-sale’ sign inviting customers who welcome and appreciate direct mail to take a look at what you’re offering.”
Sometimes, though, those invitations aren’t what they appear to be, as sweepstakes are also havens for con artists. In March, Springdale, Ark.-based Tyson Foods alerted the FBI that an unnamed Canadian company had been sending letters to consumers under Tyson Foods’ name, claiming that the recipients had won $2 million in a sweepstakes that doesn’t exist. That same month, a woman in New York pleaded guilty to cheating an elderly Iowa resident out of more than $200,000 in a sweepstakes scam.
Sweepstakes accounted for more than one quarter of the complaints about telemarketing dodges that the National Consumer League’s National Fraud Information Center received in 2006, with the average loss that year being $2,749. “We believe that’s just the tip of the iceberg,” says a spokesperson for the Center. More than half of the people filing complaints about sweepstakes were aged 60 or older.
To thwart impostors, all 50 states have laws governing sweepstakes marketing, Irving says. The Federal Trade Commission and the U.S. Postal Service Sweepstakes enforce sweepstakes regulations, requiring that the contest be free to enter, with no purchase necessary, and with odds of winning that aren’t based on whether someone buys what’s being promoted. Kachura of the Direct Marketing Association recommends that any company getting into sweepstakes hire an expert who is familiar enough to navigate this thicket of laws. To reinforce the appearance of impartiality, American Home Craft even uses a law firm that is not otherwise affiliated with the company to select its winners.
STRONG FOLLOW-UP Beyond legal consultation, replacement contractors should have other things in place for effective sweepstakes marketing. Wegmann says that Jerome Group prefers working with companies whose sales are at least $3 million, so they can target a large enough audience to justify the cost of a contest.
He and others believe sweepstakes work best for companies that offer multiple product lines that would appeal to a broader customer base. In fact, it’s common for contractors to offer prizes that their companies don’t install. Last year, for example, Universal Energy’s sweepstakes included gutter installation, which it doesn’t do. “And we’ve tinkered with conservatories, too,” says Howard Leventon, telemarketing manager for the Greenbelt, Md., company. Farmer says American Home Craft offers prizes other than what the company currently installs, to gauge demand for products it might get into in the future.
Although costs and results vary, Solarshield’s sweepstakes last year was fairly typical: The company mailed to 100,000 households — 5,000 households per week over 20 weeks during the year — offering them a chance to win 22 prizes, with the grand prize being a sunroom or the replacement of a home’s windows. Those mailings cost 53 cents per piece, and 1,857 households responded. The contractor set appointments with 450 of these, and wrote $690,000 in net business. Green says sweepstakes leads will cost about half of the $230 his company spends per lead across all lead sources. Ed Antle, Sudden Impact Marketing’s president, estimates that the cost of sweepstakes runs between 11% and 15% of net business, compared with 16% to 20% for marketing programs in general.