Sweepstakes, promotion campaigns and ideation contests

Contests are competitions in which participants perform some actions to compete in exchange for some rank-based benefits. Similar to sports or scientific competitions that take place in the physical world, organizations host online, crowdsourcing contests as a form of eliciting inputs from a large and diverse customer or user base. I emphasize the role of an organization or firm in managing a crowdsourcing contest, as one key difference from the traditional, off-line contests. This is because a firm may have various objectives depending on its industry, size, product, market size, age, etc that define the success of a contest outcome, which are by nature very different from the objectives of a Marathon or an International Mathematical Olympiad, to name but a few off-line contests.

In this blog, I describe two basic sets of online contests organized by a firm for marketing purposes or as a way to elicit innovation from a crowd of experts: sweepstakes and ideation campaigns. In follow-up posts I shall elaborate on other forms of online contests used in practice including innovation contests, patent races, and social-status contests based on badges. Broadly speaking, a buzz word for the “contests” of my interest used by practicioners is gamification, or the “use of game-design elements and game principles in non-game contexts” (Huotari and Hamari, 2012). But that notion deserves several posts on its own too : ).

The first set of crowdsourcing contests I focus in this post is sweepstakes, or more broadly, promotion or consumer contests. Such contests are systems in which a set of the participants wins a prize (out of perhaps multiple available ones) as a (random) outcome of a lottery, or affected by the skills of the entrants. The distinction between pure lotteries and skill-based promotion contests can be an important one. For example, he law of several states in the US requires that winners of sweepstakes be determined by a purely random drawing mechanism and that no specific skill is required to win. By contrast, a marketing campaign may offer a product discount to any consumers who rate and review its product; and this often requires a level of expertise to be done right.

Here is a list of websites that collect and frequently renew sweepstakes and similar consumer contests:

Skimming through these massive collections of consumer contests you will notice that firms use multiple rewards (of often equal monetary value), although several contests pre-announce a unique winner (Winner-Takes-All (WTA) contests). Also, depending on budget and industry, firms offer a different distribution of rewards, and attract a significant variation of number of participants. Further, firms choose various deadlines for their consumer contests.

The percentage of contests listed on the platforms above that offer more than two rewards (vs. WTA contests) is an empirical question of my interest. Do let me know if you find out, but if I could bet, I would say that less than 50% of such contests are WTA.  In my recent research, I collected all contests hosted on Google’s data science contest platform Kaggle.com during 2010-2016 and all innovation contests on the popular marketplace InnoCentive.com during 2012-2015 and I found that only 33% and 32% of the contests were WTA respectively! I would be curious to know whether similar average statistics hold in sweepstakes and give-away contests, but even more importantly, I am curious to fundamentally understand whether it is optimal for firms to offer such incentives (as opposed to single-winner incentives).

The second set of crowdsourcing contests I focus on this post is ideation contests. A firm that hosts an ideation contest announces rewards for the best idea submitted to a business-related it faces, in exchange for rewards. Such rewards can be of monetary value (cash prizes or equivalent), or of non-monetary direct value (such as an invitation to a members-only social event, having the privilege to know of a new product ahead of the market, or a discount to a product upon purchase).

Both sweepstakes and ideation contests share the key feature that are “contests for participation“. That is, effort exerted upon entry matters very little for those firms, if at all. Sweepstakes are a numbers game by definition, but I argue that effort doesn’t matter for ideation too. That’s not because firms don’t value a better idea, but because firms often can’t judge how successful an idea is. Because nobody can! There is a lot of luck, or randomness in the world that affects the success of an idea.

However, participation in contests is not just about numbers; participation quality does matter as well. And that introduces a notion of “participation sets”, or that a set of participants with specific quality and size properties may be more preferred by a firm over another set. For example, acquiring 10 loyal consumers could be more valuable than attracting 200 “freebie sharks”. Another interesting case is the set of currently available drivers (as opposed to the potentially available drivers) of a ride-sharing app: are more drivers always better? If they were homogeneous, sure, more is more, but there are good, bad or awful drivers. And at a given instance, the ride-hailing app may be better off discouraging entry to reap the benefits of higher quality of the participating set of drivers.

I don’t have a good way to (tractably) compare sets of participants with heterogeneous attributes. I am open to feedback from the readers below or by email.


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