Business development · 27 March 2017

How to run a successful (and legal) promotional prize draw

Prize draw
Although the prize draw must be free to enter, you are able to have a special promotional product which people must buy to enter the draw
For the latest in his marketing series for Business Advice, Grid Law founder David Walker explains how a promotional prize draw can be used as an effective tool withina small company’s marketing strategy

We all love competitions and being in with the chance of winning some free goodies, so they’re a great way of generating interest in your products and services.

Let’s say you’re thinking of running a promotional prize drawto boost sales for your business. What do you need to think about to ensure it’s a huge success, rather than a costly disaster?

In this article, were going to look at three key elements of the promotion. First, we will consider the prize itself, then the type of promotion you’re running and finally, how it’s administered.

The prize will be the first thing to catch peoples? attention, so it needs to be enticing. However, it must be described honestly and accurately so people can decide whether or not to enter.

For example, if the prize is a one-night stay in a three-star hotel, you shouldnt describe it as a luxury holiday. A luxury holiday implies that food and travel are also included and some people may have an expectation of staying in a five-star hotel for a week.

Whilst your prize may be lovely, it’s likely to be a disappointment compared to what the winner was expecting.

Even if this really is a luxury stay and you are clear that it’s two nights, full board in the penthouse suite of top London hotel, you should also explain whether the winners will have to pay for anything themselves, or if there are any other expectations on them.

If the winners have to pay for their own travel to get there, and dinner is a black-tie event, this will have a definite impact on their decision about whether or not to enter.

Once the prize is clear, you need to decide on the format of the promotion, how it’s going to benefit your business and how the winner will be decided.

There are many options here. You may decide that the promotion is an excellent PR opportunity and that this is sufficient for you. However, you could go a step further. You could use the promotion to actually sell products or build your marketing database.

If you do this, you need to be careful. You cannot ask people to pay to enter and then choose the winner at random or your promotion will be classed as a lottery. Without a licence to run the lottery, your promotion would be illegal and you would be committing a criminal offence.

Running a promotional prize draw

So, putting lotteries aside, you basically have two options:

  1. You could have a free prize draw, where entry is free and the winner is chosen at random
  2. You could run a prize competition where the winner must exercise a ‘significant? amount of skill, knowledge or judgment (Ill talk a little more about what ‘significant? means later)
Done well, either of these could give you the boost in sales you’re looking for, but you’re not home and dry yet. For your promotion to be a genuine prize draw, it must be open to everyone and everyone must have the same chance of winning.

But let’s think about your business.

How is this going to benefit you, if someone who isnt a potential customer wins?

Although the prize draw must be free to enter, you’re well within your rights to have say, a special promotional product which people must buy to enter the draw. Then, only someone who has purchased a product will win. However, you mustnt increase the price of your products to cover the cost of the prize or this could be considered paying to enter and then your promotion would be an illegal lottery.

it’s also perfectly acceptable to ask for someone’s personal details as a condition of entry to build your marketing database. If they’re not interested in your products or services they’re unlikely to want to give you their details so again, the winner will either be a customer or a genuine prospect.

If you do ask for personal details, you must comply with the Data Protection Act. This means that if you are going to use their details for marketing purposes they must be notified of this up front. For more information about this, see my previous article on direct electronic marketing.

If the promotional prize draw is open to people in Northern Ireland there must be a no purchase necessary? way to enter. In other parts of the UK this isnt strictly necessary, but people often include this provision just to be absolutely sure they don’t fall foul of the lottery rules.

If you decide to run a competition, entrants must demonstrate ‘sufficient? skill, knowledge or judgement to be in with a chance of winning. it’s hard to give a definitive idea of what ‘sufficient? means, but generally the answer to a question must not be so obvious that everyone gets the answer correct.

Once sufficient skill, knowledge or judgement has been demonstrated, if more than one person gets the answer correct, you can draw the winner at random from all of the correct entries.

Guessing the outcome of, for example, a sports event is not considered a skill. These are a special type of competition known as prediction competitions. If you run a prediction competition, such as a fantasy football competition, you have to comply with additional betting and gambling regulations to stay on the right side of the law.

How to administer a prize draw



David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry, advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights.