If sales are a bit sluggish these days, and your bottom line is looking a bit unhealthy, the last thing on your mind might be giving things away for free,  however sometimes a well run competition can attract new customers and gain you some positive PR and word of mouth referrals.  It is important to keep in mind though, that like most things in business, a competition done badly can leave you out of pocket with nothing to show for it.  Here are some good tips to getting the most out of your competition:

1. Come up with a plan.  Having an idea for a competition isn't enough, in fact, the actual details of the competition should be the last thing that you think about when running a promotion.   Ask yourself what you want to get out of the competition; free publicity? better exposure for your message or brand? more sales leads?  When asking small business owners what the purpose of their promotion is, most say "More sales!"  But sales are the final step in a long chain of events, and no promotion can guarantee any kind of sales increase. 
   
   Identifying your goals will let you design a more targeted competition.  For example, if you want more traffic to your site and more sales leads, design a competition where the winner will be drawn from your newsletter list.   Or, if you want to increase brand awareness and reach a new market, try running a giveaway to a certain group of people, for example readers of a particular magazine, or members of anorganization .   You should also think about where you want your competition results to take effect: your website or your physical store,  this will also affect your decision on where to advertise your promotion.
   
   
2. Next, examine your budget.  Be realistic here, but be willing to invest money for higher returns.  Where do you want to advertise your competition?  Magazines and newspapers may be expensive, websites a little cheaper, adsense cheaper still, and Twitter is free!  Each outlet will have a different kind of audience, so be aware of who will be entering your competition.  I once gave a business consultation to a jeweler who had decided to create a new luxury line of jewelry.  In order to spread the word about the collection she ran a competition inviting people to visit her site and enter their details to have a chance to win an exclusive piece that cost $200.  The problem was, that she only advertised it to her existing customer base - who rarely spent more than $50 per piece.  
   
   
3. Lastly, come up with the actual competition details.  What can you give away that is both enticing to entrants and affordable for your business?  In my experience,  several smaller prizes have a greater result than one larger piece.  The advantages of this is that there is a higher chance of winning, so more people enter, and you widen your net of goodwill, dropping several seeds that might grow into new networks of customers, instead of just one.