Sweepstakes vs Contest vs Lotteries: Key Differences

Sweepstakes, contests, and lotteries are campaigns that offer players incentives for promotional and marketing purposes. While these terms share some similarities, they differ significantly in how they are operated as well as their legal implications. 

Savvy business owners looking to leverage any of these campaign types to promote their businesses need to understand the distinct differences between them and how they operate. As a software development company with iGaming experience, we have the expertise to help clarify the disparities between these terms.

In this post, we’ll explain the differences between sweepstakes, contests, and lotteries along with their pros and cons. 

• A sweepstakes is a free-to-play promotion where prizes are awarded to randomly selected winners. It is considered a pure game of chance compared to other forms of promotions that are skill-based.
• A contest is a game of skill where entrants have to demonstrate some effort or skill. Winners are selected based on the merit of their entry. 
• The winner in a lottery contest is randomly selected based on chance. However, instead of free-play like sweepstakes, participants have to pay an entry fee or make a purchase to join a lottery game. 
• Each form of promotion has varying official rules, legal requirements, and specific benefits that must be considered by operators before they’re launched. 

Understanding Sweepstakes

To set the ball rolling and understand the difference between contests and sweepstakes, let’s begin with definitions. What are sweepstakes and how do they work? 

A sweepstakes is a type of giveaway or promotion where cash prizes and other prizes are awarded to randomly selected winners. A legitimate sweepstakes is a game of chance guided by strict guidelines which ensures that they’re open to everyone and that players don’t have to pay any money to enter the contest. 

The winner in any sweepstakes campaign is entirely based on random chance rather than their skill. Consequently, a sweepstakes promotion is a pure game of chance. Even in cases where players pay or purchase a ticket to qualify for the campaign, their purchase does not influence their winning chances or the prize they can win. 

Pros and Cons of Sweepstakes

Pros 

• Get new customers: You can attract new customers and build your fanbase with a sweepstakes promotion. 
• Reach a bigger audience: The play-for-free model of sweepstakes sites makes it an effective way to reach a large audience. 
• Cost-effective: Operators only require a single reward or a few pre-determined rewards for sweepstakes winners regardless of the number of people that join the contest. 
• Easy to set up: Sweepstakes have few legal requirements and official rules for giving prizes to participants which makes them relatively easy to set up. 

Cons

• Nuanced regulations: Regulations for sweepstakes vary from one state to the other. Federal laws may vary for different countries, too. This can make execution challenging especially for nationwide or international campaigns. 
• Hard to automate: Sweepstakes involve several steps that can be difficult to fully automate. 
• Time-consuming: Sweepstakes take several weeks or even months to execute, which means participants have to wait a long time to receive their rewards. 

Understanding Contests

A contest is a type of promotion that requires participants to do something to show that they’re better than others. The winner of a contest is typically selected based on merit or popularity. This is done either by a panel of judges or through a public vote. 

A contest is generally considered a game of skill since players have to exert some effort. Ideally, the winner of the contest is the player with the best performance as determined by the judges. 

For instance, participants may be asked to write an entry or submit a video of themselves performing an activity or using a company’s product. The winner with the best entry get’s the top prize of the contest. 

Pros and Cons of Contests

Pros 

• Merit-based results: The winner of a contest is ideally determined based on merit. The psychological incentive of being picked as the best in this game of skill encourages participation. 
• Engagement: Contests drive engagement especially when the audience participates in choosing a winner based on an open-voting system. More people get to interact with your band even when they’re not participating directly in the competition. Some contests even require entrants to get winning votes by inviting other people.
• Affordable: Only one or a few winning entries are selected in a contest. This makes contests a relatively affordable form of promotion. 
• Can be used as an incentive to buy: In addition to being a thrilling game of skill, you can use contests to generate revenue by incentivizing participants to make a product purchase. For instance, you can run a contest that asks users to submit a photo of themselves using one of your products. 

Cons 

• Fewer participants: The fact that they’re merit-based means fewer people can participate. 
• Potential for negative publicity: Since contestants are judged based on merit, a controversial contest can have damaging effects on a brand’s reputation.

Understanding Lotteries

A lottery is a type of promotion where winners are selected randomly through a draw. Random drawing means outcomes are chance-based and do not depend on the skills of participants like regular contests. However, unlike sweepstakes which have non-monetary consideration for entry, lotteries require players to buy a ticket or pay cash to enter the draw. 

Based on this definition, a lottery is essentially a game of luck but with an entry fee. In the United States and many other countries, only government organizations are allowed to legally run lotteries. NGOs may also run lottery contests, to raise money for charity purposes. 

Pros and Cons of Lotteries

Pros of Lotteries 

• Brand awareness: Lotteries can generate a lot of buzz and excitement about a brand and its product. The fact that it is chance-based also means more people can join. 
• Raising money: Organizations and governments often use lotteries to generate revenue by selling numbered tickets to particpatants. 
• Engagement: Lotteries often have attractive prizes, which encourage participation and active engagement.

Cons of Lotteries 

• Restrictive legislation: Lotteries are only legal when they’re run by the government or for charity purposes. State laws also tend to vary from one location to the other.
• Costly: Lotteries are often characterized by a huge fixed amount of cash or other prizes which can be costly for organizers. To solve this problem, some lottery operators simply make the prize money a fixed percentage of the total money raised. 

Comparison of Sweepstakes vs Contest vs Lottery

Sweepstakes, contests, and lotteries are all excellent promotional tools that offer entrants a chance to win a prize. Although they’re governed by slightly different laws, these three promotional methods are legal in their own way. 

All three promotions require participants to complete a task as the basic criterion of entry. The method of entry can be as simple as submitting your email (in the case of sweepstakes), buying a ticket (for lotteries), or making a purchase (for contests). This entry requirement provides an opportunity to collect data such as emails and contact numbers from customers. Sweepstakes, contests, and lotteries also achieve similar goals of driving engagement, building brand awareness, and creating a buzz about products and services. 

The major difference between these three promotions is the method of entry and the winner selection process. By law, sweepstakes contests typically require no purchases, which means entrants don’t need to buy a ticket or make any purchase to enter. Contests have similar entry criteria, but this isn’t mandated by law. Many contests require players to make a purchase as part of the contest requirement. To enter a lottery, participants have to buy a ticket. This is the major difference between sweepstakes vs raffle draw or lottery.

Lotteries and Sweepstakes pick winners in the same way (through a random draw). It’s a game of luck in either case since players don’t have to do anything to win prizes. On the other hand, contests are merit-based competitions and the winning entry is ideally the person that has been judged to be the best based on a unique set of criteria instead of a promotional drawing like the other two options. 

The table below summarizes the key differences between these three promotional methods. 

When to Choose Sweepstakes?

Sweepstakes are an effective promotion tactic for generating brand awareness. Since it is free to enter and does not require skill-based entry, a larger number of people can participate in sweepstakes contests, helping you reach a broader audience. 

This kind of promotion is also great for introducing your brand into a new market. Since consumers don’t have to invest a lot of effort to participate, new people who are yet to build rapport with your brand can still engage. By offering a desirable prize, you can entice more people to try and learn more about your brand. 

A sweepstake promotion is also easier to manage. Winners are selected through a random draw which means you don’t have to worry about a long and tedious process to pick the best entry and select winners. 

When to Choose Contests?

Of all three promotional options, a contest offers the highest and deepest level of engagement or user interaction. While it often has fewer participants joining the contest, the entrants have to invest some effort to submit content in order to win this game of skill.

If the quality of user engagement is important to you or you’re running promotions for loyal customers, then this is the best promotional method to use. It’s also an efficient way to boost brand loyalty and connect better with your target audience. Contests can also help increase reach since they often involve sharing user-generated content to get other people to judge and pick winners. 

If you want to run contests that give you significant control over what participants need to do to win prizes, then a contest is a good idea. You can get them to purchase your product, use the product in a specific way, follow a Facebook page, or refer other users.

With contests, you can get participants to do pretty much anything that aligns with your brand’s values and messaging. This gives you access to several user-generated content that supports your brand for a chance to win prizes. 

When to Choose Lotteries?

If the goal is to generate buzz and excitement about your brand or product, the lottery is the best option to consider. It typically comes with a huge prize that may run into thousands or millions of dollars. This is often enough incentive to get a large number of people to participate. A lottery is also a great way to raise funds. This can be done by selling tickets directly or incentivizing purchases. These are all efficient ways to generate revenue for your business. 

Note that a lottery is only a great idea if the law permits it. In some jurisdictions, private businesses are not allowed to organize lotteries or can only do so under stringent conditions. This makes it less of a viable option compared to the rest. 

How To Setup Sweepstakes and Contests: Implementation Guide

Planning 

With proper planning, sweepstakes and contests can deliver amazing results for your business. While there are several steps to planning a promotional contest, the key is to keep it as simple as possible, the fewer the barriers to entry, the better the results you’ll get.

Legal and Ethical Considerations

Participants are always asking questions like “How to tell if a sweepstake is legitimate“. This shows just how concerned people can be about the legitimacy of your contest. This is why it is important to consider all the legal and ethical guidelines when running sweepstakes and contests.

Your promotion should not violate lottery laws, sweepstakes laws, consumer protection policies, and privacy laws. Note that these laws often vary from one location to the other, which means you need to be aware of the specific legislation in your location before setting up a contest. 

Setup

Next, you should set up your contest. This may include several steps such as setting the entry fee, qualification criteria, the official rules, top prize (and additional prizes), and other conditions. It is most helpful if you can align the terms of your contest with your brand goals and objectives, to achieve the best results possible. You’ll also need to create sweepstakes software to host your contest. 

Marketing Strategies

Marketing is an important step in setting up any sweepstakes contest. You need to consider how you will spread the word about your promotion and leverage tools that will maximize participation. Your marketing strategies should be tailored to your target audience to achieve the best results. 

Launch

The launch day is when you execute all your pre-launch strategies and make the contest public. It is important that you put everything in order on launch day to ensure maximum reach and achieve the set goals of your contest. 

Post-event Activities

After the stipulated period for your sweepstakes contest ends, you need to set up a promotional drawing to select the winner of the contest. Selected winners should be publicly announced and contacted to redeem their prizes. Post-event activities also include analyzing the data you have collected and accessing the success of the contest. 

Best Examples of Sweepstakes and Contests

Sweepstakes and contests have proven to be effective promotional tools for boosting brand awareness and recognition. There are many contest and sweepstakes examples demonstrating just how effective this tool can be especially when executed effectively. Here are a few of them.

2023 Annual WorldStrides Photo and Video Contest 

In 2023, WorldStrides launched a photo and video contest in which participants were asked to submit photos and videos to qualify for a $100 Visa eGift Card and a $500 Visa eGift Card grand prize. The photos were to be submitted in different categories with themes like friendship, gratitude, breathtaking scenes, life-changing moments, and so on. 

HGTV Battle on the Beach Sweepstakes 

HGTV in partnership with Eddie Bauer created a sweepstakes contest where a random winner was selected to win a beach vacation worth $10,000 as well as other beach products from the Eddie Bauer brand. The contest was open to residents of the United States over 21 and all that was required to enter was their email address. 

Duracell Sweepstakes Program 

Duracell in partnership with Williams Racing created a Formula 1 themed sweepstakes contest in 2023. Participants could enter the contest by simply uploading a receipt for a Duracell battery purchase to a microsite or sending in a mail-in request.