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Boot Camp #1 - Gift cards as prizes

January 23, 2013

How much does the type of prize affect the popularity of a sweepstakes? I believe it can make a huge difference, even if the alternative prizes have the same value.

For example, if you have $500 allotted for a prize, you could buy a $500 product and hope your target customers want to own that item, or you could award the winner with $500. It is my experience that given a choice, winners usually prefer money. However, even if the prize is a set amount of money, the form in which it is presented to the winner can make a considerable difference in how they feel about the sweepstakes.

Many serious sweepers tell me that if they win a cash prize, the money usually gets deposited into a checking account. After some time, even if it is ultimately used for a specific purchase, it’s difficult to remember that the acquired amount came from winning a particular contest. On the other hand, if the prize is a gift certificate that can only be used in a certain store, winners often wish they had more control over how the prize money can be spent. This mentality explains the popularity of websites such as Plastic Jungle and Cardpool, which buy and sell gift cards.

Gift credit cards such as Visa, Mastercard, or American Express fall nicely in the middle. By giving a gift card, you give the winner the freedom to spend the money as they choose, without allowing the value of the prize to get lost in a checking account.

The major potential problem with gift cards is that they are subject to two sets of rules.

  • First, they are governed the official rules of the sweepstakes. Under these restrictions, for example, the prize card may not be transferred, used for prior purchases, or redeemed for cash.
  • The cards are also subject to the terms and conditions specified by the company that issued the card, which could forbid the prize winner from selling the card or using it for businesses purposes. The prize-issuing company may also impose fees or an expiration date.

If you use a gift card as the prize in your sweepstakes, it is imperative that you make winners aware of and understand that two sets of rules may apply to cards they have won. You also need to make sure that this information is clearly and conspicuously disclosed to everyone who enters the promotion.

This post is part of our 2013 Sweepstakes Boot Camp series
Click here to see all Boot Camp posts.

This post was written by retired Thompson Coburn partner Dale Joerling. If you have any questions about the topics discussed in this post, please contact Thompson Coburn partner Hap Burke.