Headlines about the impending Gambling Bill scream about “super casinos” along Blackpool’s Golden Mile, yet hidden away in the finer detail are some potentially radical changes to how the sales promotions sector does business. The Government finally responded to the All Party Committee Report on the Draft Gambling Bill on June 14, although it is still unclear how exactly the new laws, to be overseen by the new Gambling Commission, will affect prize promotions.
The Institute of Sales Promotion has been watching developments as closely as a punter studies racing form. ISP director-general Edwin Mutton has given a cautious welcome to Culture Secretary Tessa Jowell’s proposals, which he says should mean the use of some form of prize or gambling element within sales promotion activity will remain a popular choice for brands.
At present this area of UK law is covered by the Lotteries and Amusements Act 1976, which makes it illegal for promotional marketers to make consumers spend money to participate in a game of chance. There has, therefore, been widespread support for plans in the draft bill to adopt what is known as the New Zealand model. It means promoters could insist on the purchase of a product or service to enter a prize promotion, ending the “no purchase necessary” rule. These purchases would be deemed “free” in terms of lottery law.
Price to pay
In its report, the House of Commons All Party Committee insisted that the goods consumers buy to take part must not be inflated in price to cover the costs of a promotion. This is fine in principle, but there are fears it would be difficult to police because of the different pricing structures operated by the supermarkets, for instance.
There are also fears that allowing lotteries in sales promotion, where inflated prices cannot be regulated, could lead to big promoters competing to offer ever larger prizes in the knowledge that their campaigns will be funded from product sales.
Tessa Jowell has assured the industry that both these areas will be sufficiently policed by the Gambling Commission, while she has not ruled out that Trading Standards might also get involved.
If the New Zealand model is adopted it will make it easier for smaller brands to run prize promotions because it will lower the cost of entry. This would be good news for sales promotion agencies, as it should mean more client briefs come their way. The downside of all this, of course, is that it will mean more promotional noise in an already crowded retail environment. There are also concerns that creativity might be compromised.
No purchase no reward
Nevertheless, Ed Gray, business director at Billington Cartmell, has welcomed the news that things are likely to change. “It will mean prize funds can remain at levels that are appealing to consumers, while clients will no longer have to reward people who do not buy their products. Just how the area of inflated prices is policed is a tricky one, but perhaps there will be a new code of practice that brands can sign up to,” he says.
If the UK does change the rules it would mean this country stood alone within most of Europe and this would make implementing pan-European promotions more difficult.
One major consequence is that brand owners will no longer be able to reduce their costs by running the same promotional activity in Eire that they do in the UK. The new model will be illegal in the Republic of Ireland, as it will be across the rest of Europe. This could have a major impact on the financial viability of running promotions across the Irish Sea. Packaging costs could rise significantly, for instance.
With this in mind not all marketers are celebrating the demise of the “no purchase necessary” rule. “Having waded through the legal compliance for a pan-European prize promotion where consumer protection and anti- competitive behaviour are key parameters, I feel it would be a mistake for the UK to further distance itself from most of the rest of Europe by relaxing our gambling laws,” says Arc Integrated Marketing commercial director Philip Cornell.
“Inevitably Europe will harmonise its sales promotion practices and the chance to introduce the current UK model will then be lost forever,” he adds.
Another recommendation made by the All Party Committee that the Government is taking forward – to the delight of most agencies – is a promise to attempt to clarify the element of skill in prize promotions. This is one area that has never really been clearly defined and has meant some stages of a promotion have included different degrees of skill, while others were pure chance.
Although a skill-based element such as “in less than 20 words describe…” may no longer be necessary, there is a feeling many brands will continue to include one to encourage consumers to consider a brand’s message in more detail.
Simon Mahoney, director at independent sales promotion agency SMP, says the contents of the draft bill are confusing and ambiguous. “This makes it difficult for the industry to plan for the medium term and shows a lack of understanding of the discipline by politicians, despite the millions of pounds that our sector generates for the economy,” he says.
“Prize promotions are a very small part of the bill, but whatever is finally decided it is likely to mean agencies must be even more creative and promotions much more honest, and that cannot be a bad thing. We will just have to wait and see what happens.”
Whatever the final outcome and whenever the Gambling Bill is passed and the new laws implemented, which is likely to be at some point in the next two years, one thing unlikely to change is the popularity of using some form of prize or gambling element in promotional activity.
Mahoney believes the secret to running a successful offer has always been to ensure consumers can make a sensible judgement about his or her own chances of winning. “We ran an anniversaryinstant-win promotion for Andrex offering 30,000 prizes and the consumer could go online to see what was left and what had gone. This empowered the brand’s integrity and we saw a very high redemption level,” he says.
Where some brands can get it wrong is when consumers are so unconvinced they have any chance of winning that they don’t bother to enter. Promotions can also fail if they are too complex and there are too many steps to go through to win a prize.
At last month’s In-store Design and Marketing Show at Earls Court, French company Promotion L&H launched its intelligent electronic lottery games into the UK. Marketing manager Christina Yeger says the games act as personalised point-of-purchase displays for retailers and brands that can distribute playing tickets either in store or via direct mail campaigns.
A customer’s ticket is inserted into the machine and read by a barcode scanner. The machine then churns out another ticket telling the person if they have won and giving details of any prize. The number of winners can be regulated and prizes could include a discount off the customer’s next purchase, loyalty points or a reward they can collect elsewhere in the store.
“The games have had a big impact on consumer behaviour in Europe as it targets all demographics and increases trial. The activity can be measured because we provide data on who plays, how often and when and if people redeem their prizes,” says Yeger.
A question of ethics
Of course, whenever any form of gambling is mentioned as a mechanic in sales promotion there are ethical questions the industry must address. There is no doubt the British like to gamble. A Guardian-ICM poll published at the end of last year revealed that 65 per cent of Britons had played the National Lottery in the past year and 17 per cent (7 million people) had bet on the horses.
The charity Gamblers Anonymous would not comment specifically on the impact of gambling- based sales promotions, but it did confirm that gambling addiction remains a problem in the UK. It says that since the launch of the National Lottery and its scratchcards, the number of calls it receives has jumped by 17 per cent.
One popular scheme is to offer consumers a free bet around a major sporting event.The financial risks to brands that link with a bookmaker are small because turf accountants see taking part in a sales promotion as a good route to recruiting new customers and they will usually provide funding for such activity. The only downside for a brand is the potential for some negative PR if consumers perceive the promotion as encouraging gambling.
Yet for brands targeting adults, and particularly men, the link with gambling is an obvious one to exploit. For instance, Holsten Pils teamed up with BSkyB-owned betting service Sky Bet in a &£500,000 promotion around Euro 2004.
Since May, 1,000 pubs have been giving away a game card with every two bottles bought. Each card guarantees the holder a complimentary bet ranging in value from &£3 up to &£20 which can be made immediately by calling a freephone number. Any winnings are paid to the person’s debit card.
Holsten marketing director Ben Peters says the promotion has encouraged trial and sales during Euro 2004, while Paul Vines, managing partner at Meerket Marketing Communications which devised the promotion, says the instant reward gives drinkers a positive impression of the brand.
“It also works because we are not relying on publicans handing out free products, such as T-shirts or caps, which are often kept by the staff and not distributed. I believe using gambling to encourage adults to try products is fine, as long as you are not encouraging them to do it too often or to spend too much money,” says Vines.
There are no dead certs in horseracing, but brands that put their money into prize promotions, and use gambling to offer consumers the chance to dream a little, should be on to a winner.