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Deregulation Gives a Boost to Promotional Competitions

August 20, 1997

Frugality is one of the traditional Japanese virtues, but the accent in corporate promotional competitions now seems to be on sumptuousness. Large competitions with prizes like 10 million yen (83,000 dollars at 120 yen to the dollar) in cash, luxury foreign cars, and round-the-world trips are booming. The trend began after a relaxation of restrictions on prizes around one year ago intended to loosen consumers' purse strings after the collapse of the bubble economy of the late 1980s. The public response has been enthusiastic, and most foreign companies trying to crack the Japan market seem to be grateful for this area of freedom in what is often an uphill marketing struggle.

Millions of Entries
Last year's most noteworthy sweepstakes was mounted by an instant-food maker, which offered prizes totaling 100 million yen (830,000 dollars) in a mega-promotion lasting from April to June. With the slogan "We're giving it all back to you," the company awarded 10 million yen to each of five winners in its prize draw. There were a further 50 prizes of 1 million yen each. Because the competition was open to anybody, and did not require purchases of the company's products, organizers were overwhelmed by almost 14 million entrants.

In a three-month competition staged at the same time by another food company, 10 million yen was doled out to a monthly grand-prize winner and 1 million yen went to each of three second-prize winners. At its first draw last May, the top prize award got heavy press and TV coverage. The company estimated that it had made a public-relations splash that would have cost 700 million yen (5.8 million dollars) through normal advertising channels.

Foreign-owned manufacturers also find sweepstakes a useful tool. In a campaign mounted from last September to November, a beverage maker handed out 30,000 coats and 170,000 caps to customers who collected stickers from six of its products and mailed them in to enter a lottery. Over the three months it drew over 44 million entries, having set the earlier national record of 34 million entries for such a promotion the previous year.

Promotion and Information-Gathering
But since the beginning of this year, large cash prizes, of say 10 million yen, have been going out of fashion. "Newsworthiness is everything to these cash jackpots," said one insider summing up the industry view, "and their effect is diluted when they are repeated over and over." Instead, the value of prizes has been lowered to 3-5 million yen (25,000 to 42,000 dollars), and the chances of winning have been raised. The three main categories of big prizes are now cars and foreign travel as well as cash. Cars are often made the top prize, adding to the luster of luxury foreign models.

The primary object of prize competitions is to promote product sales. This function is fulfilled directly by the type of competition that is open only to purchasers of the product. By contrast, competitions which are open to all seek to raise sales through the corporate and product publicity they create. A secondary motive is collation of data on consumers. In a competition staged last summer by an automaker that gave away 20 cars, entrants provided such information as the model and year of the car they were driving at the time. The company garnered a rich harvest of data on the clientele of its rivals.

Relaxation of Rules
A mesh of strict regulations was thrown over sweepstakes promotions in the 1960s after it was deemed that competition had got out of hand. At one point during the high-growth period of that decade, competitions with big-ticket prizes, such as an instant-noodle maker's 1 million yen in cash and an appliance make's 8 million yen home, offered the same kind of odds as the Takarakuji lottery. It was felt that companies had stopped relying on their products to attract customers.

After that, tight regulations were put in place. But in recent years, these have gone onto the government's deregulation hit list as consumers have grown more savvy about product quality and corporate behavior and domestic and foreign firms have begun to press for action on prize promotions that would revitalize the marketing environment. In April last year, deregulation of prize promotions began. Key revisions include a raising of the maximum allowable value of standard prizes from 50,000 yen (420 dollars) to 100,000 yen (830 dollars) in competitions open to product buyers, and from 1 million yen to 10 million yen when anybody can enter. Prior to this, the Fair Trade Commission considered Japan to be midway between puritanical Europe and the liberal United States in its sweepstakes provisions. Now the country has taken a step in the direction of the United States in this area.

After these changes came a wave of glitzy prize promotions mounted by companies across the board. According to one private sector marketing research organization, a record-high 22 competitions drew at least 1 million entries each over the last 12 months, meaning that the appeal of such sweepstakes has apparently spread beyond hard-core lottery fans and has reached the general consumer. There is likely to be plenty of work in the future for the corporate promotion teams and advertising agencies that devise the campaigns.

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