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What is a Trade Promotion?

By Sharmila Pamamull, Senior Counsel

13 March 2020

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.

A trade promotion is a free-to-enter competition used by brands to promote products and services.

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, 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 Promotion

There are five common types of trade promotion you can use:

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, some states in Australia require permits to operate any trade promotion where the winner is determined by an element of chance.

Let’s look at some trade promotion examples this 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:

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:

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, 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. That means the game of chance regulations apply and, depending on the prize value and the state or territory, you may need a 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.

Queensland

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

Victoria

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

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.

Western Australia

No. Permits and licences are not required to run a trade promotion. 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.

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 permit, 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.

New South Wales

Yes. If your trade promotion is promoting a business or trade you must obtain a permit. You can get one via the NSW Government Fair Trading website.

South Australia

Yes. You must apply for a licence to run a trade promotion with a prize pool over the value of $5000. 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.

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, competition and weigh up which one is best suited to your goals. Stay diligent around the legal requirements. 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.

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