So, you’ve probably seen it a million times – those free-to-enter competitions that pop up on social media, in your inbox, or across various websites. It might be a brand offering a chance to win a new gadget or a holiday, all for the grand price of… nothing. Absolutely free. But, have you ever stopped to wonder, how are they making money if you’re not paying to enter?
Let’s be real – businesses don’t run competitions purely out of the goodness of their hearts. There’s always a business reason behind it. If you’re like me and you’ve entered a fair few of these over the years, you’ve probably wondered what’s in it for them. Well, grab a cuppa, and let’s have a proper chat about how free competitions actually make money.
Table of Contents
1. Growing their marketing database
One of the biggest reasons businesses run free competitions is to collect data. And by data, I mean your email address, phone number, and sometimes even your preferences or habits, like where you like to shop or what products you’re interested in.
Let’s break it down. When you enter a free competition, you’re usually asked for some basic info, like your name and email address. Sometimes, they’ll ask for a bit more, especially if it’s a survey-style competition. What they’re doing here is building a marketing database. This is a treasure trove for businesses because:
- They can use your email address to send you promotions, special offers, or newsletters.
- They can segment their audience, targeting specific groups with relevant marketing campaigns.
- They can sell or share this data with third-party companies (although, they’ll need to have your permission for this, usually via those sneaky tick boxes you might not even notice).
A lot of companies use tools like Mailchimp or Klaviyo to manage these databases and email campaigns. These platforms make it super easy for businesses to send targeted emails and track how successful their campaigns are.
For example, a clothing brand might run a free competition offering a £100 voucher as the prize. Yes, one person wins the voucher, but everyone else who entered gets added to their email marketing list. The next week, you get an email with “20% off for new subscribers” – and boom, they’ve got you browsing their website, possibly making a purchase.
2. Boosting brand awareness and engagement
Another key way free competitions make money is by boosting brand awareness and driving engagement. Think about it – when was the last time you entered a competition without liking, following, or sharing something on social media? These actions help businesses get in front of more people, and the bigger the audience, the more potential customers they’re reaching.
Here’s how it works:
- You see a competition on Instagram to win a holiday. To enter, you need to follow the brand, like the post, and tag a friend. Now, not only have they got you following them (which means you’ll see their future posts and promotions), but you’ve also spread the word to your friends. That’s free advertising for the brand.
- The more engagement a post gets (likes, comments, shares), the more likely it is to be shown to other people on the platform thanks to social media algorithms. This visibility is priceless, especially for smaller businesses trying to grow their presence.
For a business, the cost of the prize (even if it’s a big one) is often a small price to pay for the boost in followers, engagement, and visibility. It’s essentially turning a giveaway into a low-cost marketing campaign.
3. Generating website traffic
Free competitions are also brilliant for driving traffic to a website. This is especially important for businesses that rely on online sales or affiliate marketing. The more people visit their website, the higher their chance of making sales or earning revenue from affiliate links.
Here’s how it works:
- The competition draws you to the brand’s website, where you might be asked to browse products, fill out a form, or complete a survey as part of the entry process.
- While you’re there, you’re exposed to their products, services, or affiliate links – which could tempt you to buy something or click through to another site.
Websites also benefit from increased traffic because it can improve their SEO rankings (Search Engine Optimisation). The more visitors a website gets, the more search engines like Google view it as trustworthy and relevant. This helps the website rank higher in search results, which, in turn, brings even more visitors.
Let’s say you’re entering a free competition to win a year’s supply of coffee from an independent roastery. To enter, you have to visit their website and complete a form. While you’re there, you might notice they’ve got some limited-edition coffee blends, or maybe they’re running a special offer. Suddenly, the prize draw has not only boosted their site traffic but potentially led to a few extra sales as well.
4. Affiliate marketing and sponsored content
Some free competitions are sponsored or linked to affiliate marketing. This is particularly common on blogs or websites that regularly run giveaways. In these cases, the competition might be free for you to enter, but the website or blog is making money in the background through affiliate commissions or sponsorship deals.
Here’s how that works:
- Affiliate marketing: The website hosting the competition might include affiliate links to products or services within the competition page. If you click one of those links and make a purchase, the website earns a commission. Platforms like Amazon Affiliates or Awin are popular for this kind of marketing.
- Sponsored content: Sometimes, the competition itself is sponsored by a brand. The brand provides the prize and might even pay the website for hosting the competition, in exchange for exposure and traffic.
For example, a lifestyle blog might run a competition to win a beauty hamper. The blog could be earning money in two ways:
- Through affiliate links to the beauty products mentioned in the competition (if you click on those links and buy the products, they earn a cut).
- Through a sponsorship deal with the beauty brand providing the prize.
In both cases, the competition might seem like a freebie for you, but it’s actually a clever way for the website to generate revenue.
5. Advertising revenue
Some websites that run free competitions are making money from advertising. If the website gets a lot of traffic, they can make money through display ads or pay-per-click (PPC) ads.
Here’s how:
- Websites use platforms like Google AdSense or Mediavine to display ads on their site. Every time someone visits the website and sees an ad, the site owner earns a small amount of money. If the visitor clicks on the ad, they earn even more.
- By running free competitions and attracting loads of entrants to their site, the website increases its traffic – and that means more people are seeing and potentially clicking on the ads.
It’s a subtle but effective way of making money. You might think you’re just entering a competition, but every time you visit the site, the ads on the page are earning the site owner a bit of cash.
6. Partnering with brands for product promotion
In some cases, free competitions are used to promote specific products, either directly from the business running the comp or from a brand partner. This works especially well for new product launches or when brands want to create buzz around something specific.
Here’s how businesses make money from it:
- Product awareness: Running a competition to win a product helps generate buzz and puts that product in front of a wider audience. Even if only one person wins, hundreds (or thousands) of people are now aware of the product and might consider buying it.
- Discount offers: Many competitions will follow up with a discount offer for all entrants who didn’t win. For example, you enter a comp to win a new piece of fitness equipment. A week later, you get an email saying, “Sorry you didn’t win, but here’s 10% off your next purchase!” This is a clever way to turn entrants into paying customers.
For businesses, the competition prize might be a small investment compared to the potential sales boost they get from everyone else who entered.
7. Building loyalty and customer relationships
Competitions are also a way to build loyalty and strengthen the relationship between the brand and its audience. By offering a free competition, businesses create positive interactions with potential customers, which can pay off in the long run.
- Loyalty: People love to feel like they’re getting something for nothing. By offering the chance to win a free prize, businesses create goodwill with their audience, which can turn into brand loyalty. Even if you don’t win, you’re more likely to think positively about the brand and might make a purchase later on.
- Engagement: Competitions are a great way for businesses to interact with their audience. Whether it’s through social media comments, emails, or even a live prize draw, these touchpoints help keep the brand top of mind for customers.
By fostering these relationships, businesses increase the likelihood of future sales – and in some cases, the prize draw itself becomes a memorable brand experience that people talk about or share with others.
Wrapping it up
So, that’s the scoop on how free competitions actually make money. While it might seem like they’re giving something away for free, businesses are often benefiting in a range of ways – from collecting data and driving traffic to generating sales through affiliate marketing and ads. For companies, the investment