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What is a Trade Promotion?

By Sharmila Pamamull, Senior Counsel

13 March 2020

What is a trade promotion

Ask any seasoned marketer and they’ll tell you that running a trade promotion is a powerful way to increase brand awareness, win more customers and drive engagement.

So what is a trade promotion? A trade promotion is a free-to-enter competition that is conducted by brands and businesses to promote products and services and to gain a wider exposure of their brand.

But it’s not as simple as promoting your competition and waiting for the sales to roll in. There are lots of types of trade promotion (with their own pros and cons), different trade promotion mechanics to take into account, and (not to mention) various legal requirements around how they are run.

Before you get caught up in the details, the first question to ask is: What sort of competition do I want to run?

Read on for your essential guide to the most popular types of trade promotion and how they work.

Types of Trade Promotions

Five trade promotion examples you can use:

1. Game of skill

2. Game of chance

3. Trade incentive

4. Offer

5. Footy tipping

The one you choose for your business depends on your goals. Do you want to drive awareness of a new product? Or gather data about your target audience? Or use the promotion to increase engagement of existing customers?

Don’t take this decision lightly – the trade promotion you choose determines the rules you need to follow. For example, you will need a trade promotion permit in some states in Australia to operate a promotion where the winner is determined by an element of chance.

Let’s look at some trade promotion examples in more detail.

Game of Skill vs Game of Chance

The most important question to ask yourself when running a trade promotion is how the winners are to be determined. This will determine which regulation and permit requirements apply to the competition.

In short, will it be a game of skill or a game of chance?

What is a Game of Skill?

A game of skill requires participants to submit an entry that meets criteria based on their physical or mental skill. The winner will be determined entirely by merit either by judges or by vote.

Examples of games of skill trade promotions:

  • Tell us in 25 words or less…
  • Instagram photo competitions
  • Share a story or video

The reason this is such a popular format is simple: In Australia, game of skill trade promotions do not require a permit regardless of the scale of prize offered.

This makes these competitions far quicker and easier to run.

However, in most states, there are still some rules you need to follow for game of skill trade promotions:

  • Your competition must have clear guidelines on the judging criteria.
  • All entries must be judged individually based on their merit.
  • The winner should be selected based on the skill and merit of their entry.

What is a Game of Chance?

A game of chance is a competition where the winner is selected at random. Also called a “game of luck”, no skill needs to be demonstrated and no judgement is passed for the winner to be determined.

In Australia, a game of chance trade promotion is called a Trade Promotions Lottery.

If you want to run a game of chance trade promotion, you need to do your homework. Each state has limits and restrictions in place. Some states require you to apply for a permit first.

For example, South Australia only requires you to have a permit for a “major trade lottery” where the total prize pool value is greater than $5,000. Whereas in New South Wales, a permit is required if the lottery promotes a trade or business, regardless of prize value.

What is a Trade Incentive?

Trade incentives are promotions where a winner receives a prize based on a non-chance method. For example, a power tool supplier might offer a major prize to the hardware retailer that reaches a set sales target for a specific product line.

These forms of promotions are typically used in a B2B setting to boost loyalty and drive sales.

What is an Offer?

An offer is a trade promotion that provides a ‘gift’ to a customer for completing a certain requirement, such as purchasing a product.

For example, purchase a Pepsi 200ml bottle and receive a free football in store.

There are a few rules around offers. For example, if the offer is limited to the first “X” purchases (there are only 1000 footballs available), you might need to get a trade promotion permit.

It depends in which state the promotion is running, whether you are advertising the limited number of gifts and whether you ask people to send in a claim for the prize.

What is Footy Tipping?

As the AFL and NRL seasons kick off, so do footy tipping comps in workplaces around Australia. A footy tipping competition is when entrants must select the winning team in a football match. They are awarded a point if successful. This usually continues for the length of the season, with the final winner being the player with the most points.

The method of entry or selecting a winner involves an element of chance at any stage in the competition. For this trade promotion example the game of chance regulations apply and, depending on the prize value and the state or territory, you may need a trade promotion permit.

Do I need a trade promotion permit?

Whether or not you need a permit to run a trade promotion will vary depending on the prize pool you are offering and the state in which you are running the promotion.

Do I need a trade promotion permit in Queensland?

No. Permits or licences are not required for trade promotions in Queensland. For more information view the Guidelines on the Business Queensland website.

Do I need a trade promotion permit in Victoria?

No. Businesses, charities and community organisations are not required to apply for a trade promotion permit or licence in Victoria. For more details see the Victorian Commission for Gambling and Liquor Regulation website.

Do I need a trade promotion permit in Tasmania?

No. You do not need a permit to conduct a trade promotion in Tasmania. However if entrants are required to purchase a product to enter the promotion some conditions apply, such as

  1. the cost of the goods or services must not exceed the prevailing market price; and
  2. determination of the market price lies with the Commission.

You can view these conditions in more detail on the Tasmanian Government Department of Treasury and Finance website.

Do I need a trade promotion permit in Western Australia?

No. Permits and licences are not required to run a trade promotion in Western Australia. You can view the conditions of running a trade promotion on the Government of Western Australia Department of Local Government, Sport and Cultural Industries website.

Do I need a trade promotion permit in Australian Capital Territory?

Yes, but there are some exceptions. If the total prize pool is under the value of $3000 you do not need a trade promotions permit in ACT, however, the trade promotion must meet certain conditions when you are conducting an Exempt Lottery.

You must have a permit if the promotion is advertised on a website that is hosted in ACT, or the website is not hosted in the ACT but the promotion is being advertised in the ACT in addition to the advertising on the website. For more information on these conditions, see the ACT Government Gambling and Racing Commission website.

Do I need a trade promotion permit in New South Wales?

Yes, however permits are no longer required to conduct a promotion with a prize pool of $10K or under in NSW. See more details of the new regulations effective 1 July 2020 at NSW Government Fair Trading website.

Do I need a trade promotion permit in South Australia?

Yes. You must apply for a licence to run a trade promotion with a prize pool over the value of $5000 in South Australia. If you plan to run your trade promotion using instant scratch or break open tickets, you are required to apply for a licence regardless of the value of the prize pool. For more information, see the South Australian Government website.

Do I need a trade promotion permit in Northern Territory?

Yes. Trade promotions can only be conducted in the Northern Territory by businesses or approved organisations. Permits are required to run a trade promotion with a prize pool over the value of $5000, however, if you are an interstate business with a permit to run that trade promotion in another state you do not need to apply for a NT local permit. For more information, see the Northern Territory Government website.

Over to you

If you’re planning on running a trade promotion, do your homework. Understand the different types of trade promotion, and trade promotion strategies and weigh up which one is best suited to your goals. Stay diligent around the legal requirements, and understand the different trade promotion permits required. Even if you don’t need a promotion permit, there are still compliance requirements in force around how you run the competition, with nasty penalties for breaches.

For more information on trade promotion strategies, or help from a terms and conditions template, get in contact with Plexus today.

Try Promotion Wizard for free

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