If you’re thinking about running a prize draw, you might wonder if it’s possible to do so for commercial gain. It’s essential that you fully understand the rules and legislation regarding prize draws. Otherwise, you risk running an illegal lottery, which could have huge negative consequences for your brand.
The prize experts at Another Way have put together this blog with everything you need to know about running prize draws for profit, including:
- What is a prize draw?
- Prize draw vs prize competition
- Prize draw vs lottery
- Is a prize draw gambling?
- Can I run a prize competition for profit?
- Can I run a prize draw for a profit?
What is a prize draw?
A prize draw is when a winner is chosen randomly from everyone who enters. Brands often use draws to boost sales and brand awareness. They offer customers the chance to win an incredible prize when they purchase a product or enter via the brand’s website.
You don’t need a licence to run a prize draw, provided you offer a route that’s free to enter.
Free entry route
If you’re running a prize draw in the UK, you must follow the 2005 Gambling Act. You can either run a completely free draw or offer both a paid and free entry route.
According to the Gambling Act, paying a ‘normal’ rate for sending a letter (first or second class), sending a text, or calling a standard rate number does not count as payment. However, premium-rate telephone numbers and special delivery services don’t qualify as a free entry route. It’s also considered free entry if you have to purchase a product to enter, provided the product does not cost more than a product without a prize draw entry.
You must ensure the free entry route is:
- Not less convenient than the paid-for route.
- Advertised in the same way as the paid-for route.
- Not treated differently for the purpose of winning a prize.
For example, if you’re running a prize draw, you might offer consumers 3 ways to enter: purchasing a product, paying a fee and entering on your website, or calling a premium rate number. Because purchasing a product is considered to be a free entry route, this would qualify as a free prize draw according to The Gambling Act.
Prize draw vs prize competition
A prize competition differs slightly from a prize draw because it requires a skill element. The competition’s outcome must be determined by the participant’s skill, knowledge or judgement. The level of skill required will depend on who the completion is aimed at. If multiple participants answer the question correctly, the winner is then randomly chosen.
If the prize competition satisfies the ‘skill test’, there does not need to be a free route to enter the competition.
The skill test
To be considered a prize competition (rather than a prize draw), the question or questions must deter a significant number of participants from being eligible to receive a prize. For example, correctly answering a complex maths question or solving a difficult crossword question would qualify. However, a question that most or all participants would know the answer to (such as ‘What language do they speak in France?’) would not be enough for it to be considered a prize competition.
If you’d like more information on running a prize competition, have a look at our blog, ‘Running prize competitions in the UK’.
Prize draw vs lottery
A raffle or lottery is different from a prize draw. Lotteries raise money for charity or good causes and can’t be run for commercial gain. All participants pay to enter, and the winner is chosen at random.
Unlike a prize draw or competition, there is no need to provide a free entry route or meet the skill test. However, you’ll need a licence to run a lottery in the UK.
Is a prize draw gambling?
Businesses don’t need a gambling licence to run a prize competition or free draw, provided they meet the requirements of the Gambling Act 2005.
However, if you fail to meet the Gambling Commission’s requirements (for example, you don’t meet the ‘skill test’ or offer a free entry route), you risk running an illegal lottery, which is a criminal offence.
Can I run a prize competition for profit?
The outcome of a prize competition must depend on the skill or knowledge of the participants, and there is no need for a free entry route. Because of this, prize competitions are frequently organised commercially for private benefit and profit.
Can I run a prize draw for profit?
It is possible to profit from a prize draw whilst still meeting the requirements of The Gambling Act. Many companies offer a free postal route to ensure compliance while also offering paid-for entries through their website, texts and phone calls. Many participants will opt for the convenience of a paid web entry rather than having to pay to send a letter with their entry.
However, if you want to run a prize draw, it’s best to work with a specialist prize promotions agency to ensure you’re fully compliant.
Bespoke prize competitions and prize draws
If you’re considering running a prize draw, it’s essential that you follow the regulations so you don’t risk your brand’s reputation. At Another Way, we’re experts at creating fantastic prize draws that incentivise your target audience to make a purchase and create a real buzz around your brand.
Our founder, Andrew, has been in the Promotional Marketing industry for over a decade. He’s worked with big names, like Airbnb and Ocado, sharing his knowledge and expertise to create prize competitions that drive real and long-lasting results.
We’re experts at the legal requirements for running prize competitions and draws, so you can rely on our team to handle every aspect of your promotional campaign. Our team can design bespoke prize draws with unique prizes that are designed to appeal to your target audience and customer base!
Check out our campaign inspiration to see what we can achieve at any budget.
We offer:
- Unique prizes and experiences
- Prize promotional mechanics
- Pan-European and global prize fulfilment
- Winner management, selection and entry judging
- UK and multi-territory terms and conditions
- Loyalty reward schemes and consumer incentives
- Complete campaign management
If you would like to take advantage of our expertise and knowledge when running your next prize draw, call us at 0778 948 5123 or email us at [email protected].
Or complete our online form, and a member of our team will be in touch with you as soon as possible.
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