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Competitions & Prize Draws

This white paper will explain how competitions and prize draws operate and in simple terms what you need to know before you set up a promotion online, after talking to your lawyers to update yourself on the latest rule changes of course!


Getting started, laws and rules and how to run them!

It is all so often tempting for individuals to take advantage of competitions, especially when the prize seems attainable. Businesses have therefore used these schemes for many years to attract customers and collect personal information. If anything, prize draws (a related but very different type of promotion) are used even more frequently by businesses for promotional reasons but sadly the terms and processes can often be misleading or even illegal.

Not surprisingly, there are therefore many tight rules surrounding prize draws or lotteries. Generally speaking, you will need a license to be able to do this and this can be difficult to attain. So what most companies try to do is make it into a competition which removes the need for a license because it requires an element of skill from the contestant, hence it is not classed as a Prize Draw.

A lottery is when the contestant pays a fee to play but is not required to do anything, a prize draw is similar and is monitored buy the same governing body as lotteries...but not every organisation is legally allowed to run a lotery. 


So why are competitions so different and is it best to choose this route?


The laws says that if you pay to enter a prize draw competition then it is illegal without a license but if a person was paying to enter a competition that requires a contestant to get involved with an activity, i.e. use skill, this is legal and therefore doesn't require permission. It is this aspect you should take advantage of for your business.

The consequences of running a lottery, online or not, can be severe and you will at least be fined or sent to jail. Making sure that you have acquired all the necessary legalities with the relevant authority will reduce such risks.

How many times have you been online and seen an advertisement to win cash or amazing prices and all you have to do is "Spot the Ball" or "Match Three Symbols" to win. These are simple but effective ways to reach potential customers and the gifts don't always have to be expensive. Simple, useful or popular items can work too and if it seems that only a little input is required from the contestant, this will work as an incentive for people to play.

Although it seems that companies like Coca Cola or McDonalds have a larger customer base and success with prize draws and competitions, there are no reasons why smaller businesses can't benefit from such schemes. The Coca Cola Company is currently running, in the UK, a £10,000 holiday. You have to enter codes from packs of coke, and the more codes you enter, the higher chances you have of winning. So the more coke you buy the better chances you have.

If you are an online business then running online competitions is a good way to attract traffic to your website. Not only will traffic increase but as people submit their information you will be collecting potential customer records that you can use for marketing in the future.

The chances are that unless you have a good marketing strategy and good exposure on the web, that most of the people entering the competition will be previous customers. This is why it is really important that you advertise consistently and make sure you are getting good feedback from your efforts. Try to make it clear that you are running this competition and make it interesting. Having something different from the usual bombardment of online games and competitions will help you draw in people browsing the Internet.

The best thing about running an online competition is that there really isn't all that much work to get it started. If you are an online based business then you will probably have someone with the skills to get started. Once you have the basics covered all you need to do is make sure you have the prize ready and waiting for the winner to collect.

Make sure you have some Terms and Conditions set out somewhere on your website that make it clear that you are not responsible for the loss of goods during transport etc and how the winner will be chosen. Have age and location restrictions if required by law and have a contact telephone number and address in case of a dispute arising. Other things to consider in the terms and conditions are the closing date, number of entries allowed per person and when and how the winners be notified.

Be 100% sure that the information that is being submitted to you is correct. Make it clear in the rules that only valid UK address will be accepted and a form of identification will be required to claim the items won. Avoid having automated entries and if emails will be accepted as a form of entry, be sure to check that you are not the victim of multiple entries from the same person. 

Your prize choice will determine how many people you get entering your competition, as larger or expensive items are more attractive to entrants, but you don't need to go overboard on cost. A DVD might not attract as many people as a DVD Player for example, or a car stereo may not attract as many as a car. Although this is the trend, it doesn't mean you won't be able to attract a significant amount of entrants. You should decide how much information you want to collect and then decide on the prize, because if you only need around 500 records, giving away an expensive holiday is a little extreme. If on the other hand you decide you want to collect 5000+ records then you may want to consider what kind of prizes would attract that amount of people.

Another important factor in making a decision is segmentation of buying groups. What type of person are you aiming your product(s) at; young or old, men or woman, children or teens, make sure you know who it is you want to target. This will not only help you decide on what it is you will giveaway, but also designing the competition website and/or the games they will need to play.

Even though you are not engaging in transactional business, you should remember that each entrant is a possible customer in the future, even if they lose you should treat them with respect and keep them updated about the promotion. You should work hard to make sure they are satisfied with your service and don't encounter problems that may cause a dispute. Word of mouth is a great way to get more business and you don't want your customers pr prospects "bad-mouthing" your business to all their friends and so on.

Have runner up gifts as a kind a consolation prize so people feel as if their effort in filling out the entry form wasn't a complete waste of time. Gift vouchers or promotional codes for your online store would be a good idea, and would not require you to spend any more money. 10% off vouchers or a free gift item such as a CD is usually enough to keep the top 5 runners up happy. Remember that you don't have to give every person a consolation gift but a promotion linked into Money Off a next visit can deliver a great Return on Investment and pay for the promotion.

When you choose who it is that has won the competition contact the person and inform them and then make an announcement on your website. Make sure you get permission before you use any information of the winner publicly. Inform this person of an expected delivery time and maybe get them to say a few words that you can publish online and release to the press, especially if the prize is significant or unusual in any way. You may get some free publicity, especially if the media consider the event a good photo-opportunity.