Healthy, Wealthy, and Wiser: Sweeps go virtual as spending climbs 15 percent.

Marketers spent an estimated $1.38 billion on games, contests, and sweeps in 1999, up about 15 percent from the previous year.

Measuring annual spending on sweeps, contests, and games is difficult (this is the first year promo has undertaken the task), since the segment ranges from high-profile national blitzes to grassroots giveaways that are often layered throughout multi-pronged campaigns.

promo’s figure, based on insurance and fulfillment spending, includes the costs of prizes and adminstration (including insurance, fulfillment, and agency fees) but not advertising support or companion tactics such as premium offers. Marketers spent $1.24 billion more last year to print gamepieces and collateral support; that money is included in promo’s measurement of specialty printing (see page S8).

Nearly three-quarters of U.S. companies (73 percent) run sweepstakes, according to testimony before an attorneys general panel on sweepstakes in February 1999. Sweeps typically reach 80 percent of U.S. households. The panel found that 29 percent of consumers take part annually.

Fulfillment houses and specialty printers saw their sweeps, games, and contests business rise by more than 10 percent in 1999. “Marketers who have used sweeps moderately in the past are doing more and investing more heavily,” says Tom Conlon, president of DraftWorldwide unit DL Blair, Garden City, NY. “There’s a ripple effect. They see competitors do a sweeps, so they dip their toe in the water and if they don’t drown, they try it again.”

U.S. marketers spent about $40 million on games insurance, including bonds (which are required in New York and Florida), and contingent-prize coverage. Dot-coms have been the busiest sector, insuring dozens of multi-million-dollar prize pools.

Three trends are driving the increased use of games. New segments such as financial services and apparel are widely adopting the tactic; companies are finding that sweeps can build brand image better than coupon or rebate programs; and the profusion of new Web sites has dot-com start-ups using sweepstakes to build traffic (see page S34).

In 1999, many lawyers worried that government restrictions on direct-mail sweeps would cast a shadow over the entire industry. Relax: Forty-six percent of marketers last summer said that legislation hadn’t affected sweeps strategies at all; only eight percent of marketing services companies surveyed by promo earlier this year said legislation had affected their clients’ plans for 2000.

“Consumers see direct-mail sweeps as a completely different item from other sweepstakes,” says Val Stark, senior vp-marketing at Fleming Promotional Graphics, Fenton, MO. That’s the same view taken by the Federal Trade Commission, which began enforcing direct-mail restrictions in April but has no plans to extend restrictions to other sweeps.

Within sweeps and games, suppliers see an increase in instant-win sweeps, larger pools with more small-value prizes, one-of-a-kind prizes, contingency games, and multi-partner cross-promotions.

– Instant-win sweeps are popular in part because Internet-savvy consumers increasingly want immediate gratification off-line as well. The tactic also enables marketers to give away more prizes.

– Larger prize pools mean more players, more winners, and better buzz. Tricon Global Restaurants gave away more than 40 million prizes last May in a $50 million Defeat the Dark Side game tied to Star Wars: Episode One – The Phantom Menace. The odds of winning were one in eight. Chicago-based Wunderman Cato Johnson (now called Impiric), handled.

– Unique prizes have been a popular hook since MTV gave away a truck with rock band Metallica inside it a few years back. A one-of-a-kind prize reinforces brand image and deters professional sweeps players. Networks including Nickelodeon and Fox regularly mine their properties for quirky prizes (remember the full-size Simpsons house that Fox built?), and private parties are big. Last year, Ford Motor Co.’s Focus targeted Dawson’s Creek fans with a private concert of bands whose songs were used in the show. Miller Brewing Co.’s Blind Date sweeps for Miller Genuine Draft books big-name bands in small venues, and only reveals the band as it steps on stage.

– Contingency games – where winning the prize is based on a player’s performance such as making a half-court shot or solving a puzzle – are gaining in popularity especially among smaller brands. Such games are cheaper than random-draw sweeps but can still carry million-dollar buzz. Marketers can insure a $1 million prize for as little as $12,000, depending on the skill involved (and subsequent odds of winning). “Marketers can afford to offer an alluring prize with little out-of-pocket cost,” says Terry Cunningham, president of Cottonwood Enterprises, a Bozeman, MT-based fulfillment firm. Web brokerage house E-Trade ran a contest challenging consumers to guess the end-of-year Dow Industrial Average. HomeBanc Mortgage, Atlanta, GA, offered a $1 million contingency prize to consumers who could pick the correct combination of seven winning numbers on a gamecard.

– Two budgets are always better than one, especially in Hollywood. Studios will line up as many as 15 promotional partners to support theatrical releases, and will often run multiple sweeps.

Fast food and soft drink marketers are still the top sweepers, and often the most innovative campaigners, too. Coca-Cola executed its “IYDKYDG” sweeps for teens via voice mail last summer. (Pepsi-Cola Co.’s Mountain Dew ran a pager sweeps in ’97 that beeped winners.) Taco Bell used heat-sensitive labels on its 1998 Feel the Force effort; players pressed the gamepiece against their heads to see if they’d won.

Packaged goods marketers even turn products into gamepieces. An Oreo sweeps from Nabisco gave cash to the snacker who found a cookie stamped with a special symbol. M&M/Mars has pegged $1 million prizes to candy with only one “m” (instead of the standard “mm”), a gray candy, and a package of off-colored snacks. Watch for similar product-centric sweeps to emerge.

Also watch for attorneys general to monitor second-chance drawings and perk up over contingency games if consumers complain that odds are too great. Online and off-line partnerships, as well as techie gamepieces and entry methods, should also be on the rise.

– Spending rose 15 percent to $1.38 billion.

– Marketers spent $1.24 billion more on printing needs.

– Nearly half of U.S. marketers say tighter laws on direct-mail sweeps haven’t affected their own use of sweeps.

– Top sweeps users are quick-service restaurants, soft drink brands, and movie studios. Newcomers include auto makers, financial and insurance services, apparel makers, durables marketers, and dot-coms.

Games swept the Internet last year as dot-com startups leaned on sweepstakes and contests to drive site traffic.

More sites mean more clutter – which means bigger prizes. “A few years ago, the prize was a laptop,” says Mark Barry, senior vp-global marketing for insurer ASU Enterprises, Stoneham, MA. “Now it’s as much as $20 million.”

Eye-popping prizes require hefty insurance, and ASU’s dot-com business is “growing off the charts,” Barry says. “Internet companies know how to leverage partners to make a lot of noise and get traffic.”

At the same time, nearly all traditional marketers have added Internet overlays to their real-world sweeps – often with surprising results.

“Promotion agencies are finding the number of Web sweepstakes entries are routinely eclipsing the number of mail-in entries for certain promotional campaigns,” says Terry Cunningham, president of Cottonwood Enterprises, Bozeman, MT. “As a result, the Web site must be seamlessly integrated into the overall sweepstakes campaign [for] marketing efforts, random drawings, and database collection.”

Promo shops have adapted traditional gaming tactics, like scratch-and-win games where players use a mouse to “rub off” the on-screen gamepiece. Decode-and-win games play out like a scavenger hunt: Marketers including Follett Higher Education Group and Havas Interactive distribute gamepieces with hidden messages that are only decoded at certain Web sites. “Innovations such as these will continue to fuel growth in the category,” Cunningham predicts.

The bad news: The Internet has made professional gamers more efficient. Web sites and e-mail newsletters track sweeps for gamers to enter en masse. Cunningham estimates that a sweepstakes profiled in more than one major newsletter will get 25 percent to 45 percent of its total entries from gamers who never saw the promo or bought the product.