This is the story of an email, a website and a sponsored Facebook post describing two promotions that offered the chance to win a new home. If you’re quick on the uptake (and have read the title) you’ll have worked out that this post is about a complaint to the ASA. In fact, there were two related complaints to the ASA and the subject of those complaints was the property raffle promoter, Raffle House. What’s more, this wasn’t the first time the Raffle House prize promotion had come to the attention of the ASA, because in June this year the ASA ticked it off for changing the entry method to a property raffle and failing to include a prominent closing date in its ads. You can read what I had to say about this here.
With regard to the new complaints, though, I’m going to start with what the ASA said to Raffle House, which was: “We told Raffle House Ltd to ensure in future that they awarded the prizes as described in their marketing communications or reasonable equivalents, and that their future advertising did not mislead by exaggerating the value of a prize that had been previously awarded.”
The complaints and ruling were quite involved, so I won’t go into all the details, but the crux of the matter was that under the CAP Code promoters must award prizes as described. That’s what the CAP Code says and it’s a point I’ve made time and time again, but in this case Raffle House awarded a cash prize of just over £173,000 instead of a London flat worth £650,000.
However, the ASA also found that Raffle House had exaggerated and misled entrants, because it then ran another raffle, which it promoted by quoting the previous winner as saying that winning had changed her life for the better. The ASA considered this to be misleading as it could be read as implying that the winner had won a flat, when in fact she hadn’t, although I dare say she was still reasonably pleased with a lump sum like that.
Incidentally, according to the ruling the cash prize received by the winner of the first raffle was less than 27% of the property’s value and less than 43% of the total amount generated by the competition. That’s the ASA’s maths, not mine, but these figures are quite interesting, aren’t they, because they give you a good general sense of the economics of property raffles.
So the total amount in entry fees in the first raffle was (and this is my maths) a little bit over £402,000, which I agree came nowhere near to covering the cost of the property offered as a prize. Half of the income from the entry fees was used for the cash prize, but Raffle House deducted charity donations, payment processing and bank fees amounting to slightly more than £28,000 before handing over the remainder to the winner.
Where the money went
That left roughly £200,000, which Raffle House presumably retained. In the ruling, the ASA quotes a Raffle House blog on how the cash from this first raffle was used, as follows: “The truth is, running start-ups are costly. In our case, we solicit daily expertise to optimise our marketing campaigns, host our website via market-leading developers to provide customers with a secure and seamless experience, with additional costs and professional services to enable us to run a fully compliant operation.”
Naturally there are costs involved in running a promotion and of course I am an advocate for compliance, but I think it’s fair to say that the primary function of property raffles is to generate direct profit for their promoters, which means selling a lot of tickets.
In the case of the first promotion, three weeks before the closing date Raffle House reduced the ‘ticket threshold’, or the number of tickets it decided it needed to sell in order to award the original prize, to 120,000. Had it sold all those tickets, it would have generated an income of £600,000, although that still wouldn’t have covered the value of the property prize. But it didn’t.
All down to ticket sales
I’m going to go back to the ASA ruling now, which said: “We considered that any promoter who needed to generate sufficient revenue from the competition to fund the advertised prizes was likely to breach the Code if they failed to sell the requisite number of tickets.”
That’s my emphasis, but I would go further than the ASA, as my view is that any property raffle promoter is going to find it very difficult to sell the tickets they need to, because, for a range of reasons, the sums don’t really add up and the public don’t appear to be particularly interested in entering property raffles. I’m sure this is a topic I will be returning to in the future, but I’ll just leave you with that thought for now…
Sophie Robertson is a Prizeology’s Project Manager and an expert in compliance.