Incentive Prizes for Business

By | March 13, 2012

The book Abundance talks about the important leverage that incentive prizes can provide. Describing the prize that inspired Charles Lindbergh to cross the Atlantic, Kotke and Diamandis write:

Nine teams cumulatively spent $400,000 to try to win Orteig’s $25,000 purse. That’s sixteenfold leverage.

Now some businesses are getting in on the act. Shopify used a $100,000 prize to generate $12,000,000 in sales. Look for incentive prizes to become one of the major drivers of start-up growth in the years to come. If done correctly, they provide a return that no other approach can touch.

The biggest challenge appears to be the legal hoops that one needs to jump through in order to validly offer a contest across multiple jurisdictions. I wonder if the problem emerges from the fact that Shopify promoted their competition as a “contest?”

Most incentive prizes are set up as very straightforward offers. Ortieg’s competition amounted to the following:

I’ll give $25,000 to the first pilot who flies from New York to Paris or vice versa.

The X prizes are similarly fairly simple offers to pay upon being first to achieve a certain outcome. I wonder if the X Prize foundation deals with legal issues surrounding running a contest in multiple jurisdictions?