Calculating Your Odds in Those Magazine Sweepstakes

Question: I am sure that you are aware of the very active promotion by some organizations offering millions of dollars to some lucky people if they will answer a sweepstakes giveaway and at the same time subscribe to some magazines. It is pointed out that it is not required to subscribe; all that’s necessary is to return your “yes” or “no” answer.

However, on the back of the return envelope is a small opening revealing how you answered. My question is: If you are not buying, does your unopened envelope get tossed in the ashcan, or will it receive the same consideration as that of a buyer? I think consumers would be very interested in your answer.

Answer: With the regularity of spring daisies popping through the soil, this time of the year invariably brings forth the annual magazine-sweepstake questions:

“Are these things for real ? Is it possible that a computer has already picked me as the winner of eight matching baby-blue Ferraris and three working oil wells outside of Houston? What’s this jazz about not having to buy or subscribe to anything?”

So, once again into the breach: Yes, it’s true enough that the Federal Trade Commission won’t permit these interstate sweepstakes if buying something is a prerequisite. Otherwise, it’s the interstate transmission of lottery material.

Contests, however, are a different breed of cat, and if some sort of skill is involved, no matter how rudimentary, a purchase, sure enough, can be required. (You submit your eggplant casserole recipe, for example, or you are required to write a two-line jingle rhyming some noun with the name of the sponsor’s product, “Flederhausen Garter Belts.”)

Closely Guarded Secret

And, year after year, the promoters of these sweepstakes are most adamant in their claims that even if you don’t buy anything, your entry has the same chance of winning that a buyer’s does. Normally, the ratio of buy to no-buy entrants is a closely guarded industry secret on the order of an orthodontist’s profit margin. But, in a rare burst of candor a couple of years ago, Charles Pintchman, deputy director of corporate affairs for Reader’s Digest, confided to us that entrants in that magazine’s big year-end giveaway break down about 50-50 between those subscribing and those not subscribing.

Another breathless statistic: Any sweepstakes is considered a success if half of the millions of forms mailed are actually returned instead of ending up under the cat’s water dish.

Interestingly, all of the biggies in these annual sweepstakes take the same position: They don’t really keep tabs on the proportion of buyers to non-buyers. But if you seriously believe this, it is also safe to assume that your faith in the Tooth Fairy remains unsullied too. There’s far too much at stake to make this sort of indifference about such a critical element in a sweepstakes believable.

However, all of them are equally adamant that winners are picked without regard to whether they’ve bought (or subscribed to) something. And there’s no valid reason for disbelieving them on this score because any hint that the ranks of the subscribers are favored for winners would pretty well doom the sweepstakes’ future credibility.

The sweepstakes promoters concede that the “yes” or “no” boxes that must be checked look like a device for weeding out the non-subscribers from possible prize winners, but it really isn’t.

As Pintchman said in our last conversation: “A ‘yes’ envelope means that the person has bought something from us--a trial subscription, a book or a record--and we don’t think that it’s fair to make that customer wait until the contest is over--about six weeks--before the order is filled.” Once the buy (or subscription) order has been extracted, however, the entrant’s actual entry form goes right back into the old barrel.

The suspicion exists in the minds of a lot of cynical observers, of course, that all of that clipping, pasting and reshuffling of little stick-on coupons has, by the very nature of its complexity, an ulterior motive: to befuddle a fair share of the entrants sufficiently so that they’ll end up subscribing to something out of sheer confusion. But the sweepstakes’ promoters deny this by insisting that the complexity of putting together the final submission is simply “to make it more interesting,” or, from another, “to make it more like a game.”

Actually, one observer of the sweepstakes phenomenon says it’s largely a psychological ploy: The longer it takes you to put the entry together, the longer you have to dwell on the pretty magazine-cover illustrations and to ponder the idea that it might be a good idea, after all, to subscribe to Golf Digest just in case you do become interested in the game at some time in the future.

Emphasis on Subscribing

You may have noticed still another ploy in the physical presentation of the sweepstakes material: While subscribing to one of the magazines, sure enough, isn’t a requirement for entering--and this is stated somewhere in the material--a big deal isn’t made of it. Ninety-eight percent of the emphasis, naturally, is on the mechanics of pasting up coupons in order to subscribe to something-- not on the details of how not to subscribe.

Physically, the selection of the lucky envelopes will vary from one sweepstakes to another in minor details, but sweepstakes are similar in their reliance on computers and statistics. At Publishers Clearing House, for instance, a random selection is made from each day’s mail, based on the number received and the number of prizes to be doled out. The potential winners, whose numbers match those chosen by the computer, are literally thrown into a padlocked barrel. And at the close of the contest, the actual winners are again drawn out at random--without regard for the “yes” and “no” answers checked on the entry.

Reader’s Digest’s “yes” envelopes are dumped daily into a large tray by the magazine’s staff while all of the “no” envelopes go to similar trays in the Mount Vernon, N.Y., offices of Reuben H. Donnelly Co., which judges the entries.

But the selection procedure is exactly the same at both locations--statisticians determine how many potential winners are plucked from each--”maybe three per tray,” Pintchman guessed--and are kept separate. The potential “yes” winners are dumped into a battered suitcase and kept in a sealed room at Reader’s Digest’s headquarters. At sweepstakes cut-off time the “yes” and “no” finalists are dumped in a drum, and the winners are drawn--beginning with the biggest prize and continuing down to the smallest.

A higher number of winners are drawn than there are prizes, Pintchman added, to allow for a predictable number of invalid entrants--employees of either Reader’s Digest or the judging company who enter the drawing in spite of their ineligibility, entrants who did nothing right in submitting their entries and absent-minded entrants who have enclosed a handful of cents-off Puppy Chow coupons instead of the forms provided.

While all of the “yes” envelopes are opened immediately to facilitate the orders enclosed, the “no” envelopes aren’t callously thrown away either, Pintchman added. A significant percentage of these also contain checks or money orders, but the customer has checked the wrong box. Opening them doesn’t quite have the “rush” priority accorded the “yes” envelopes, however.

And, in the absent-minded department, there was the gentlemen a few years ago who mailed his local bank his Reader’s Digest’s entry form, but then sent his $2,000 cash deposit to the magazine in an envelope provided and dutifully marked “no” on the back of it. And, more recently, another opened “no” envelope flushed forth a wedding ring. Both, fortunately, were traceable.

The odds on winning big? About what you calculate them to be--in the millions-to-one range. But the promoters point out that the normal sweepstakes offers not just a handful of prizes, but dozens, hundreds or even thousands of valuable items.

And who among us can’t use still another T-shirt?

Q: I read “The Flip Side of the Financial Revolution,” your recent article about banks, and it caused me some concern.

I am retired and have most of my savings invested in time-deposit accounts, one with a savings & loan association and another with a regular bank. But this arrangement is causing me some worry. These two accounts amount to less than $100,000 each, and at the time I made these deposits I was assured that they were insured by the Federal Savings and Loan Insurance Corp. (FSLIC) and the Federal Deposit Insurance Corp. (FDIC). Except for a few hundred dollars I keep open for living expenses, this represents all the money I have. Therefore, your article somewhat disturbed me. I would hate to lose all my money.

Would the regular savings account paying 5% at the S&L; be safer? I would be willing to forgo some of the higher interest in order to have the money safe. Unfortunately, many things I read in the paper or in the notices sent to me by the bank are not very clear, and when I inquire about them at the bank, I am usually told not to worry. But I do.--S.L.

A: How can I say it to make it more emphatic? Do not shift your money over into a regular passbook account! That, in fact, is one of the things that frustrate consumer activists like Stephen Brobeck, executive director of the Consumer Federation of America, who was quoted in the article you read.

In spite of much higher bank/S&L; yields available via time deposits (such as you now have), CDs and so forth, consumers remain so confused about the options available to them--and the security of their money--that there is still more than $200 billion lying around in checking accounts on which the banks are paying peanuts in interest and are laying out in new loans yielding them more than twice their cost.

All deposits--checking, savings, time or whatever--are insured by the FSLIC or FDIC up to $100,000 apiece if the institutions are members (and they wouldn’t tell you they are if they aren’t).

So believe me, your money is perfectly safe. No one has ever lost any FDIC/FSLIC funds through a failure unless their deposits exceeded that $100,000 limit.

The fears expressed in that article were directed at the explosive growth of banking charges and the sharp reduction in banking services for low-income families.

Safety of deposits was never an issue.