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.
What is a trade promotion?
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 popular trade promotion examples you can use are:
- Game of skill
- Game of chance
- Trade incentive
- Offer
- 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 is 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. A trade promotion competition that involves a degree of chance in determining the winners is called a Trade Promotion Lottery in Australia. Also called a “game of luck”, no skill needs to be demonstrated and no judgement is passed for the winner to be determined.
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 soft drink 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. Trade promotion permits are discussed further down in this article.
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.
Footy tipping is usually considered a game of skill, however this can vary across states and territories. Even in states where it is considered a game of skill, if the method of entry or selecting a winner involves an element of chance at any stage in the competition it could be considered a game of chance. For example, if there is more than one person with the same number of points, and a draw is used to determine the winner. In this case the trade promotion game of chance regulations apply and, depending on the prize value and the state or territory, you may need a trade promotion permit.
What are the biggest advantages of trade promotions and why?
Trade promotions are an efficient and effective way to increase brand awareness, drive sales, generate brand awareness and promote brand loyalty. Trade promotions can help drive consumer demand by giving customers a push to buy. Trade promotions are also a trusted way to gain a broader reach and build loyalty from your customer base.
How to run a trade promotion
There are many different ways to run a trade promotion, depending on the type of trade promotion. The type of trade promotion picked to run should depend on what you want to achieve, the time frame, and the budget. Some of the most popular mechanics for running a trade promotion to drive sales and generate brand awareness are online entry forms, or instant wins. To learn more about the best mechanics to run a trade promotion read here.
Advertising the competition/promotion
One of the most common pitfalls of running a competition or trade promotion is a lack of advertising. Once a promotion has started it is too late to change things such as the end date, even if there have been insufficient entries, as this would mislead consumers. Conducting a promotion is not enough unless you are adequately supporting it with an advertising campaign. To learn more about the common pitfalls of trade promotions, read this article.
You should also be aware that each state and territory has different rules and advertising requirements. For example in NSW the rules of the trade promotion must be clearly advertised to allow for potential participants to make informed decisions about entering.
Drawing a winner
Games of chance competitions require a winner to be drawn at random, which can be done manually or electronically. You can read about the considerations when determining whether you choose to conduct a draw electronically or manually in Australia in this article.
Prizes
Prizes are an important element of any promotion. A prize includes anything of value or benefit. There are some rules around prizes, not everything can be a prize! Prizes cannot be weapons, cosmetic surgery, tobacco products, and in the Northern Territory liquor must not be a principal prize. You must give information about the prize, in some states this could just be about the nature or the prize, while in others it may need to include the value. To learn more about prizes read here.
What laws do I need to follow while running a trade promotion?
Different states and territories have different laws and regulations for running a trade promotion. It is important to ensure for a business to be compliant with these rules and regulations, as they could face harsh penalties and fines for any errors. Read on below to see the different regulators, legislation and permits required for trade promotions for each state and territory.
Regulators and Legislation
State or Territory | Regulator | Legislation |
Victoria | ||
New South Wales | ||
Tasmania | ||
South Australia | ||
Western Australia | ||
Australian Capital Territory | ||
Queensland | ||
Northern Territory |
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.
State or Territory | | Do I need a trade promotion permit? |
Victoria | No. | |
New South Wales | | Yes. |
Tasmania |
| No. |
South Australia |
| Yes. |
Western Australia |
| No. |
Australian Capital Territory | | Yes. |
Queensland |
| No. |
Northern Territory |  | Yes. |
Read on for details.
Do I need a trade promotion permit in Queensland?
No. Permits or licences are not required for trade promotions in Queensland. For more information read our article about trade promotions in Queensland or 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 about trade promotions in Victoria read our Everything you need to know article or visit 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
the cost of the goods or services must not exceed the prevailing market price; and
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 about trade promotions in the ACT read our Everything you need to know article or 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. For more information about trade promotions in New South Wales read our Everything you need to know article.
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 or to learn about recent trade promotions legislation changes in South Australia read our article here.
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.
Penalties
If a trade promotion does not comply with the relevant rules and regulations of the state or territory, there is risk of significant fines and other penalties. Competition terms and conditions are an important feature of any promotion. While running a promotion is a great way to engage with your audience, if terms and conditions are not correctly written and shared it could also cause complications and lead to penalties. Legislation requires all trade promotions to have accurate terms and conditions attached and readily available. There are options out there to help with creating terms and conditions, such as Promotion Wizard which allows you to generate compliant terms and conditions (reviewed by a promotional law expert) within 24 hours.
If a business is found to be engaging in misleading or deceptive conduct, they could receive penalties under the Australian Consumer Law. Misleading and deceptive conduct could include any advertisements, actions or imagery which may cause a false representation about the competition. If a business gives away free items or prizes as a promotional activity, they must not mislead the audience about the items on offer or the chances of receiving these items. The laws against misleading or deceptive conduct apply regardless of any intention to mislead or deceive others, or if no one has suffered a loss or damage. As such, care should be taken to avoid any errors and ensure compliance for trade promotions. To learn more about crackdowns for making misleading claims to consumers read here.
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 guaranteed compliance for your next competition and end to end legal support for competitions & promotions try Plexus Promotion Wizard.
For more information on trade promotion strategies, or help from a terms and conditions template, get in contact with Plexus today.
