Prize draw FAQs: Everything you need to know about prize promotions

Prize draw FAQs: Everything you need to know about prize promotions

Prize draws are a specialist segment of promotional marketing, shopper marketing and brand activation. Even for those who’ve been in the prize promotions industry for decades they can be something of a mystery (yes, really!), so we’ve put together the answers to the most common questions that we are asked.

What is a prize draw?

A prize draw is a promotion in which the winner is chosen at random. In a traditional prize draw, the winner is randomly selected at the end of the entry time frame from a pool of all valid entrants. However, there are a number of other promotional mechanics for prize draws, as follows.

Pre-selected winner

For a pre-selected winner promotion, unique numbers or entry codes are issued, usually on packs, but sometimes by other means. A consumer uses this code to enter the prize promotion, for example by texting it to a phone number or plugging it into a specially produced microsite. This can be used a proof of purchase. One of these codes will have been pre-selected as the winning code. The winner is therefore the person who enters with this code. In most promotions multiple winning codes are obviously put into circulation.

Winning moments

For an instant win prize promotion, prizes are randomly allocated via a winning moments formula. If a participant enters at the time of a winning moment, they win the prize allocated to that moment. Consumers can find out if they have won and how to claim their prize without any delay.

Is a prize draw a lottery?

In England (the rules are not necessarily the same even in the separate countries of the UK), the main difference between a lottery and a prize draw is payment for entry. A lottery is a form of gambling and entrants must pay to enter. Lotteries include activities such as raffles and sweepstakes, and you may need a licence (see below).

However, free prize draws are different. A free prize draw, can be linked to a product purchase and cannot have inflated rate to enter, or at least offer a free method of entry if there is also a paid entry mechanism.

Do you need a licence to run a prize draw?

You do not need a license to run a free draw or prize competition. You only need a licence if your competition is considered to be ‘gambling’, whether that’s gaming, betting or participating in a lottery.

You can ensure you don’t need a licence to run your prize draw by requiring entrants to utilise a level of skill or knowledge to enter or there is a completely free entry route.

The regulations around free draws and incorporating skill into your entry requirements are complex, so make sure you seek expert compliance and best practice advice.

How do you run a legal prize draw?

If you are the promoter of a prize draw (effectively the person or company running it) you must get the legalities right, which means you need robust terms and conditions. You must follow the legal regulations for prize competitions set out in the CAP Code. This is the rule book for all marketing communications (which includes prize promotions activity) in the UK.

The CAP Code requires your prize promotion to have terms and conditions that specify the prizes available, the closing date, entry restrictions such as age or location, and how the winner will be selected.

These important terms and conditions are the contract between your business and your prize draw entrants. They protect both parties and should anticipate all eventualities.

Is your prize suitable for someone under 18 and, even if it is, is your aim to engage with children? If not, you can restrict the age of entry. If your prize is physical and the winner lives in the USA, is it viable for you to send the prize there? If not, you can restrict the location of entrants. All this should be explained in plain language.

After the closing date of your prize promotion, ensure you’ve carried out a fair and impartial draw. Even if you don’t get many participants, you should always run your draw and send out the prizes you stated in your terms and conditions.

What rules are there about running a prize draw?

When you run a prize draw, you need to comply with the CAP Code, which is administered by the Advertising Standards Authority. The way you conduct your prize draw, including your terms and conditions, should be fully compliant with this code. If in doubt, consult a specialist.

Your draw should always be fair and impartial. Also, it’s important not to be misleading, for example don’t change or extend the closing dates, and always provide the prize that was specified and not a different one that has a lower value.

It’s also crucial to note that regulations outside the UK are different, so if you’re operating across different territories, do seek advice on running global prize promotions.

Why do competitions offer free entry?

Competitions will offer a free entry if there is there is entry mechanic where the entry rate is inflated – for example a premium rate text message – and they want to distinguish their draw from a lottery. Lotteries require entrants to pay to enter and a company needs a licence to run one – lotteries cannot be administered for personal or commercial gain. Therefore, if there is a genuine free entry route as an alternative to paying for an entry, the competition is a legal and does not require a licence.

Who is the prize draw promoter?

The company or person who is running a prize draw is the promoter. Promoters are responsible for every aspect and stage of their prize promotion. They must be fair and impartial with all of their entrants and potential entrants.

Ultimately, promoters are responsible for ensuring their promotions are legal and should seek prize draw compliance advice if they are unsure about any of the regulations.

What makes the best prizes?

Your prizes need to be prizes your entrants will want to win. However, it’s not just how attractive your prizes are to your target audience that will determine how successful your promotion is, but how many you give away and their value.

Promotions with one very large, single prize can do well, but experiences, technology, vouchers and beauty products are also popular, and mean you can give away more prizes within your budget. A higher chance of winning can also be attractive to consumers!

Sometimes this can require research into your audience and creative thinking, so it’s smart to identify a specialist in prize sourcing, which will make the effort to understand your customers and what you want to achieve.

Cash prizes also extremely popular. However, if you decide to go down this route, for security you might want to use a specialist service that allows winners to withdraw their money from a nearby cash point using a one-off secure PIN code.

How do you pick a prize draw winner fairly?

When picking a winner for your prize draw, you should follow the CAP Code. This states that “Promoters of prize draws must ensure that prizes are awarded in accordance with the laws of chance and, unless winners are selected by a computer process that produces verifiably random results, by an independent person, or under the supervision of an independent person.”

There are various online sites that you can use for randomly selecting a winner, but it’s vital that any judging process or draw has an element of independence and your winner’s lists comply with data protection laws. Therefore, you may want to consult a specialist to advise or perhaps provide an independent judge.

How should you treat a prize draw winner?

Really well, of course! First and foremost, you need to ensure they receive their prize. The CAP Code instructs promoters to award prizes as advertised, but it’s just common decency. Also, rather than bad-mouthing your brand, your winners are then far more likely to sing its praises, which was surely one of the reasons you decided to run a prize draw in the first place.

You will have included a lot of the details about how you should treat your winners – when you will notify them if they’re won, how long it will take before they receive their prize and so on – in your terms and conditions, so be guided by those.

If you’re dealing with a high volume of winners, you might want to let a winner management specialist, which knows the possible pitfalls and has a high level of attention to detail, take that load from your shoulders.

How can Prizeology help with your Prize Draw FAQS?

Prizeology really can help you with all of the above. Prizeology specialises in all aspects of prize draws and competitions, but everything we do is founded on promotional compliance, because that ultimately protects both our clients and the prize draw entrants themselves.

When we say all aspects, though, we mean we can deliver any mechanic for a prize promotion, and we also offer winner selection, prize sourcing and prize fulfilment services. We’re very hot on fraud control, too.

So if you have any further questions that aren’t covered here, or if you want to launch a legal, successful prize promotion, just give Prizeology a call on 020 7856 0402 or drop us a line on hello@prizeology.com.

© Prizeology and The Prizeologist Blog, 2022. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited.

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