Last week, I have suggested that contests and giveaways may be one of the most effective ways to build leads and drive signups for new daily deal websites. While it is becoming an increasingly common tactic, running your own contest or giveaway can still help you collect email addresses, Facebook fans, and Twitter followers, if you can sufficiently differentiate your marketing campaign to make it engaging and inherently viral (we will talk more about virality). Today we should be focusing on sweepstakes/lucky draw contests, because they are relatively cheap to run and easy to manage; plus, they are also the most eye-catching form of contest and most easily understandable at first glance.

The keys to running a successful sweepstakes/lucky draw contest are 1) a prize people would otherwise purchase with money if not presented with an opportunity to win it for free and 2) rules and parameters that are in line with your business objective – to drive signups and enhance brand awareness. Without further ado, let us get down to the best practices:

1. Big prize(s) with smaller chances to win trumps small prize(s) with bigger chances to win
If I offered you two opportunities: a 5% chance to win $10 or a 50% chance to win $1, which would you choose? Most people would likely go for the former (do not just take my word for it – Wikipedia says so too), because the initial investments for both cases are equal (no risk) yet the potential returns are much bigger in the former; the risk-reward ratio is much lower in the former. Big prizes are always more eye-catching anyway – in a contest, the magnitude of the prize is the focal point, the odds of winning are often treated as some form of fine print, thus big prizes encourage both sharing and participation. If you are unconvinced with the big-prizes-small-odds approach, you can certainly try the hybrid approach.

2. Have a built-in viral loop for your contest
To run a successful sweepstakes/lucky draw contest requires mass participation, and mass participation is only possible if participants themselves are incentivized to share your contest with others, be it directly or indirectly. All online contests and related marketing gimmicks require some form of viral marketing to keep awareness high after the initial marketing push by the contest purveyor. One popular method that we have come across in the network of daily deal websites that we host is to tie draw events to a minimum number of participants or Facebook Likes: e.g. “10 iPhone 4Ss to be given out. There will be 1 draw for each 100 participants (or 100 fans on our Facebook Page) achieved before the deadline. Limited to the first 1,000 participants only!” Participants have the incentive to share contest to increase the chances of a next draw event, driving signups and participation.

3. Facebook Likes as a method of participation
A related tactic that you can use with tactic 2. above is to say that winners for your big prize will be drawn from the pool of last 1,000 people who have Liked your Facebook Page (a chronological order of people who Liked your Facebook Page is visible from your administrative dashboard of your Facebook Page). This parameter will ensure that sharing is compulsory and that sharing and participation go hand-in-hand. An added bonus is that some people may be perceptive enough to Like and Unlike your Page frequently in order to always end up as one of the latest fans, ensuring that a post about your Facebook Page stays fresh and high up on those people’s friends’ News Feeds.

4. Conduct draws at regular intervals
Instead of saying that a draw will be conducted at random once a certain number of participants or Facebook Likes is reached, say that a draw will be conducted for the exact 100th, 200th, 500th, or 1,000th participant or Facebook fan. Crafting the rule this way may not encourage participants to join in when they are far from the draw interval, but it will definitely drive people to share your contest and your brand so that they have a chance at using other participants to get closer to the draw interval, at which point they themselves would opportunistically put in an entry. However, when hundreds or thousands of people think this way, interesting things happen.

5. “Last participant at closing time wins the grand prize”
This parameter should only apply to sweepstakes/lucky draw contests where multiple participations are allowed. Of course, you would need to craft the rules in such a way that their last entry can only count if it is separated from their second last entry by, say, 5 entries not belonging to them – otherwise, their last entry will be bypassed in favor of the second last entry that fulfills the rule. This rule will not only increase participation but also somewhat force sharing.

As with all marketing tactics out there, your mileage may vary. You should be able to craft contests for your intended or existing audience to match their expected behaviors in terms of the prizes that they care about, their level of adventure, their Facebook savvy, their Twitter savvy, etc. Of course, never forget that you need to give an initial marketing push to get the word out on your newly-made contests; nobody can participate unless people know about it. Give these tactics a try today!

P.S. If you want to start a daily deal website and conduct a sweepstakes/lucky draw contest right away to build leads, you can sign up for a free, no-credit-card-required, 15-day free trial account at our daily deal platform: http://www.zuupy.com. Have a good weekend!

Direct marketing remains a popular channel for many businesses to reach potential customers. Traditionally, direct marketing on its own is used to increase awareness, arouse interest, and drive action. For those who are familiar with the AIDA framework, direct marketing is used to achieve all of the four stages of AIDA: Action, Interest, Desire, and Action. Despite claims that direct marketing is still as effective as before (e.g. here), what we are seeing is that, particularly for high-ticket purchases, direct marketing is increasingly losing its ability to drive action or arouse an interest to buy. These days, the value of direct marketing largely lies in its ability to build awareness.

The reality today is that the emergence of social media and search engines has allowed consumers easy and free access to a wealth of information about brands and products in the market. Consumers almost always want to make an informed purchase decision, and information from unbiased third parties now form an indispensable component in consumer research. In fact, information from other consumers who have had experiences with the product, brand, or company in question is considered more trustworthy and useful than information from the company itself. The only valuable information that can be obtained from the company itself is objective information, which the company is in a position to provide. Marketing is about facts and not opinions after all.

Direct marketing is nonetheless still useful in increasing awareness, because awareness is neutral. People either have or have not heard of your products, services, brand, or company. Consumers are unlikely to shut out new or unfamiliar offerings from their windows of consideration, since consumers love having a choice as well. However, generating awareness is only a small part of effective marketing. Awareness about a brand is ultimately knowledge of the existence of a certain offering. The merits of said offering have to be evaluated and verified with reference to the reviews, opinions, and experiences of others who have personally tried the offering.

A potentially effective strategy to reach new customers is to use direct marketing in concert with word-of-mouth marketing. Direct marketing captures attention; word-of-mouth marketing converts that attention into desire and action to buy. Ultimately, real sales are driven by what others say about you, not what you say about yourself.

A recent Harvard Business School study has found that, if your customers are heavy social media users, they are more likely to refrain from making purchases as a result of encountering commercial offerings on social media, particularly those from friends. The results are succinctly summarized in this article.

The interesting question is obviously why. According to the study report, heavy social media users are “well connected, high status members” who are less likely to be positively influenced by the purchase behaviour of people in their network. Instead, they are likely to be influencers themselves and essentially see no reason in following their followers. In fact, they would probably actively go against what their so-called followers advocate, as it is unbecoming that a leader would want to look to her followers for direction, even when it concerns something trivial like online shopping. Pride seems to be the underlying reason.

The study did not authoritatively pinpoint the reason for the negative effect of social media on the purchase behaviour of heavy social media users but merely made speculations as to the explanation behind the results. What is relevant, however, is that more impressions and more buzz do not necessarily lead to an increase in positive engagement. There is also the possibility that heavy social media users are just not active purchasers in general, i.e. the negative engagement observed is not caused by their being heavy social media users. The results can truly be interpreted in many ways.

Does this mean that, if your customer base comprises heavy social media users, social commerce may be a futile investment? It is perhaps so, but if your customer base consists primarily of influencers by definition, there may be an opportunity to use them as a conduit to reach a wider audience, driving an increase in awareness and reach. So while their own purchase tendencies may be suppressed, their ability to affect the purchase tendencies of others may not be diluted.

After all, you do not have to purchase an offering yourself to (want to) promote it to your friends. What is your take?

There are several common misconceptions about viral marketing: that it is free, that is infinitely scalable, and that it can be engineered. In truth, viral marketing is really a natural consequence or by-product of some previous sunk cost, such as content creation, product development, and implementation of facilitative technologies. By its nature, viral marketing is unpredictable and uncertain; there is no guarantee of ROI, unlike, say, pay-per-click marketing where cost expenditure is proportionate to the number of leads driven to a website. While the ROI of a word-of-mouth marketing campaign may be measurable, it is less likely that the tactics that drove said ROI can be distilled into coherent, specific, applicable processes that is repeatable like traditional marketing.

There are broadly two types of C2C marketing: viral marketing and word-of-mouth marketing (what I would call, simply, “referrals”). While the latter can be indirectly engineered by having a “great product” or “exceptional customer service,” the former is less repeatable and more cryptic in its mechanics. What makes something so compelling that random consumers on the web would want to volunteer their time, effort, and personal reputation to be a business’ marketing/PR team? The common trait among things that went viral (some examples here) is that they elicit unique sensory responses from us: laughter, intellectual curiosity, sadness, reflection, etc. Other common traits include digestibility, in terms of a single core idea as well as the length of presentation, and relevance to a large audience.

While these common traits can be used as guidelines in formulating a marketing strategy, it is important to set the correct expectation when ROI is concerned. Viral marketing is essentially gambling. “Create 10x amount of shareworthy content and hope that x amount of content goes viral” is not a marketing strategy. It is a prayer at best, and to set ROI targets based on factors largely beyond control is unrealistic.

Yet viral marketing can be made more probable by creating the conditions that facilitate it. These conditions can be substantive, i.e. creating unique content and developing differentiated products, or procedural, i.e. adopting social media integration and providing referral incentives (cf. the drawbacks of incentives). Organizing a marketing strategy based on these tactics means two things: 1) the goal becomes to build a sustainable business that organically and sustainably builds brand loyalty among customers over time, as opposed to the one-hit-wonder effects of viral marketing, and 2) it pays immense dividends even if viral marketing does not happen – viral marketing merely becomes a bonus.

In other words, forget about viral marketing. Focus on the product and other aspects of the business, because that in itself holds the best chance to “engineer” viral marketing, however paradoxical it may seem.

Note: This article is a follow-up post to a previous article, 5 Reasons that Social Recommendations Don’t Work.

We all know that word-of-mouth marketing is king. Yet few of us realize that word-of-mouth marketing can only be facilitated at most and not engineered from the ground up. If even possible, the only way to “engineer” word-of-mouth marketing, specifically the viral type, is to have a really, really compelling offering. That is all there is to it. We all know, after all, how hard it is to sell a poor product. Customers are not a voluntary sales force, and they only care about sharing good content or products to win some social capital for themselves. Customers only care about making their own lives better.

Retailers especially are fond of placing social media sharing features on their websites, hoping to piggyback on the high value of social endorsements and to reach out to friends within the social graph. The problem is that 1) people rarely share, and, 2) even if they do, their friends rarely care. Clearly, sharing is not caring when the offering stinks.

Of course, the more simplistic-minded of retailers take the low referral rate as an invitation to “over-facilitate” the social recommendation and referral process by introducing incentives. “Refer a customer and get discounts/freebies for yourself” is the basic idea. At first glance, it looks like a reasonable, win-win proposition for retailers: get a new customer, and keep an existing customer happier than he would have otherwise been.

I think that it is a terrible idea, from both an ethical as well as a business point of view, for three reasons:

Incentives encourage people to recommend unworthy things, diluting their own personal authority. Freebies can cloud the minds of even the most rational, sincere people (and I do not mean “rational” as in economics), because it puts them in a position of conflict of interest. When tangible rewards are involved, the intention of sharing is no longer to help, to sustain friendships, but to manipulate people for personal gain. People can sense insincerity from miles away. When people see that someone is “sharing” products more often than usual, people avoid the barrage of marketing spam and accord less respect to said person. I have an (aptly-called) ex-friend like that.

Incentives merely shift the bottleneck from the sharing stage to the caring stage. It is not difficult to see how incentives would make people share more, but it is harder to see how sharing more would necessarily cause others to take notice. In other words, incentives are not a panacea to the problem of low click-through rates commonly associated with social media. Incentives do not answer the questions of purchase intent and targeting.

Activities based on exploitation of personal relationships are simply unsustainable. The last but most important issue is that of ethics. Incentivized referrers are, in a way, the new multi-level marketers, and they will predictably have the same level of success, or lack thereof, as their manipulative, self-serving counterparts. No one likes to be monetized, feel swindled, or feel taken advantage of in the most opportunistic ways. Perhaps all incentivized referrals should be disclosed, in the same manner that bloggers are mandated, by law, to disclose their paid endorsements.

My opinion is that those who want to generate word of mouth should not try to hack the process but should merely provide the infrastructure to make recommendations and referrals more convenient. Let customers be and not confuse them with incentives, even if it drives action. Social behavior and interactions are more complex than marketers would like to think; it ultimately pays more to just focus on the offering.

While some brands are overly optimistic about the value of social media, others fear the effects of negative word-of-mouth so much that they try to minimize involvement in social media. As is well-known by now, conversations about brands and products go on with or without the brands themselves, and ignoring said conversations can be very costly. The crucial choice to make for brands is not whether to participate in social media but how to participate and harness social media activity effectively to their advantage.

At this point, it is crucial to draw the line between social media marketing and word-of-mouth marketing. Social media marketing fundamentally works on a B2C model, while word-of-mouth marketing works on a C2C model. The former has a striking resemblance to direct/traditional marketing, in that businesses retain considerable control over the content being marketed, and the only material difference lies in the platform of communication. The latter represents a far more democratized and self-sustaining marketing model that, while can be influenced or facilitated by businesses, is essentially driven and controlled by consumers. It is the latter form of “social” marketing that brands often fear for its potential negative impact (and similarly welcome for its potential positive impact).

Many businesses tend to confuse the two, thinking that common social media marketing tactics can achieve word-of-mouth marketing levels of success. There is often an expectation that bland, non-shareworthy marketing content would somehow become infectiously viral once kick-started by the business or content creator (after all, everyone dreams of being Blendtec). In other words, it is secretly hoped that consumers on social media would work their magic and turn a mediocre offering into a great offering. This paradigm, of course, is a severe misunderstanding of the nature of social media and word-of-mouth marketing.

Word-of-mouth marketing is essentially an amplifier. A good product would travel far and fast given the convenience and connectedness afforded to us by social media; a bad product would similarly be publicized as such. Social media is primarily a technological revolution, not a fundamental shift in consumer behavior. Poor offerings will spawn poor user experiences, which will very often be broadcasted on social media outlets. This phenomenon is basically what is often described as social commerce: consumers helping one another to make better buying decisions.

What are brands to do then, in the face of negative conversations? I believe that reputation management is vital, but beyond controlling the spread of fire, brands should see negative word-of-mouth as a great source of customer feedback and market insight and engage the community openly to build trust and rapport. Despite recent claims that consumers do not want to engage with businesses, I believe that social media provides brands a highly valuable opportunity to be more personable, accessible, and transparent to consumers. That, in itself, is one sensible and effective way to exploit social media to grow your business.