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Contests are a great sales and marketing tool. Not only because they’re good for the brand, but because they’re good for the customer.

Customers love having the chance to win those big prizes—it’s the same thrill they get when playing the lottery or gambling, but with less social stigma and guilt involved. This is because (depending on the mechanics) they’re not just buying a paper ticket—they’re buying a product that they’re actually going to use, and a chance for greater rewards beyond that. Even if the customer doesn’t win, they’ve still gotten a neat product out of the exchange.

Brands get the better end of the deal by far. Well-run contests manage to do multiple things at once, all of which are extremely beneficial to the brand:

Promote a New Product

Successful contests can give new product lines a much-needed marketing boost. You can tailor the contest mechanics such that customers are required to either purchase or review a new product for a certain amount of points or entries. You can also have the new product as a part of your prizes, too.

If you want to involve your customers in the product creation process, you can have them compete to name the new product, much like Doritos and Starbucks have done. This is a great way of engaging the community and driving interest before the product is even formally launched.

Reward Loyal Customers

Contests are a great way to recognize and celebrate loyal customers. You could, for example, reward the customer who has the best story about how the product changed their lives. Or you could judge photos of the product in action. Customers won’t hesitate to tell people about a product they love and they are smart about it. Throw a prize on top of it, and you’ll be drowning in customer appreciation.

Attract Fresh Interest

A non-customer cannot become a repeat customer unless they try the product in the first place. Purchase- or review-based contest mechanics help break down a person’s initial resistance to trying out new things. This is because their attention is focused on the prize; the new product is a necessary step to winning, so they don’t think as much about purchasing it.

Increased Brand Presence

The more people enter a contest and start talking about it, the faster and farther your brand name will travel. You’ll be able to grow your brand’s presence by word of mouth alone as people recruit more of their friends to participate, especially if your contest counts “shares” and referrals as points. This is even better than traditional advertising, because you are doing relatively little of the actual work. You set the machine in motion, but it’s the participants themselves that are promoting your brand for you.

Gather Customer Data

This is perhaps one of the most valuable benefits to doing a contest. If you can gather sign-up information during the contest, you will be able to build a fresh database full of accurate, up-to-date data on your customers and their behaviors. And these customers have already demonstrated an interest in your brand by joining the contest, so they’re going to be warm leads.

Have you held a contest recently? What benefits did you get? What feedback have you gotten from your customers regarding the event?

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Mash Bonigala

Mash B. is the Founder & Creative Director of Logo Design Works. Since 1998, Mash has helped thousands of businesses express their brand messages through creative and award winning logo designs.