May 22, 2019

Why Contest Marketing Is so Effective for Small Businesses

An eMarketer survey of organizations across the US found that 88% use social media for marketing purposes. That’s basically everyone. And marketers predict the social media spend to grow by 89% in the next 5 years. Why? Because data shows that it works.

Benefits of Contest Marketing

One social media marketing tactic popular with small businesses is contest marketing, a way to attract customers by trading products and experiences in exchange for time, promotions, and contact information. Haters will say it’s handing out free products for retweets and likes, but there’s solid data from Hubspot supporting contest marketing:

Those are some incredible benefits small businesses don’t see from traditional marketing. Research from Nielsen shows recommendations from friends and families are the most credible form of advertising. When customers see products shared through contest marketing by their mother, brother, aunt, or old college roommate, they’re much more likely to buy compared to seeing products in a fancy sidebar ad.

Scarcity Equals Desirability

Scarcity also proves to be a valuable element of contest marketing for both small businesses and the consumer. Good for businesses because they don’t need to provide as many incentives. Good for consumers because scarcity is an essential motivator.

“In some respects, contests are all about supply and demand. Limited supply will always increase demand,” said Jonny Videl, founder of Viral Contest Marketing. “If there’s only one grand prize available, it instantly becomes more valuable in the mind of the customer. This scarcity, especially when combined with a limited time frame to enter the contest, makes the prize highly desirable.”

This “limited time frame” is another aspect not only motivational to consumers but also beneficial to small businesses. Shorter contests require less staffing and resources—assets small businesses can’t afford to waste. But businesses don’t have to shell out loads of free product to put on a successful social media contest. An Eventbrite study found that 78% of millennials prefer experiences over objects.   

‘Free’ Encourages Other Benefits

Contest marketing builds relationships by tapping into the rule of reciprocation. Customers who receive something for free (although, nothing is truly free) feel a natural tendency to give something back, whether that’s a recommendation to a friend or a future purchase.

By leveraging urgency and scarcity, businesses can motivate participants while conserving their limited budgets. Small businesses can trade rewards for advocates instead of money for customers by mixing contest marketing into their marketing portfolio.

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About the author

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Jesse Sumrak
Jesse Sumrak is a Social Media Manager for SendGrid, a leading digital communication platform. He's created and managed content for startups, growth-stage companies, and publicly-traded businesses. Jesse has spent almost a decade writing about small business and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped startup. When he's not dabbling in digital marketing, you'll find him ultrarunning in the Rocky Mountains of Colorado. Jesse studied Public Relations at Brigham Young University.

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