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How to run a successful competition for your business

Running a competition can be a great way to get people excited and involved in your business. But how do you do it? And are there any legal things you need to know?

Businesses run all sorts of competitions. They ask people to share and upload content, to sign up, to create hashtags and interact in exchange for prizes. The buzz these competitions create can help new customers discover your business, often at a minimal cost to you. So how do they work?

Firstly, here’s the why.

I’ve already mentioned that competitions can help customers find you, but they can also help solidify the loyalties of your existing customers. They can build you mailing lists, reward your biggest fans, and increase your social media following.

They’re also fun! Competitions can be a fantastic way to mobilize and engage your customers; potential and current.

Now, here’s the law.

Many people who run competitions simply do so informally and send out their prizes through the mail when they’re done; no questions asked. But in some countries you actually need a permit to legally run a competition!

There are generally two main structures which competitions can fall under (these vary from place to place so I recommend double checking your local laws).

The two structures are

  • Game of Chance
  • Game of Skill

Those who win a game of chance win randomly; they’re given numbers and selected without cause, the same way a name is pulled out of a hat. Those who win a game of skill did something to set themselves apart from the competitors; they were superior in some way and selected because of their skill or talent.

In a game of chance you’ll likely need a state permit or license. In a game of skill, you might not: but you’ll need some formal process when it comes to picking the winner. This process can be as simple as you personally comparing entries or as complex as creating a board of judges. Any method is fine so long as there’s a valid and legitimate reason why the winner is selected.

Because competitions may need licences based on your location, I recommend running your competition with geographical restrictions. When you launch a competition ensure that only people from the places you have licenses for can apply!

Other things you’ll need

You’re now aware that you’ll need to research your local laws and guidelines, and that they’re the reason your competition will need to have geographical limits. But there are other elements you’ll need to include in your competition. These are:

1. Terms and Conditions

The rules of your competition need to be laid out clearly and accurately and abide by local law. A good guideline is that you should clearly include information about:

  • What the actual prize is.
  • Which type of competition it is (Chance or Skill).
  • The duration of the competition, and it’s closing date.
  • When entrants will find out if they have won.
  • How the winner will be chosen, and how they can receive their prize.
  • What will happen if the winner doesn’t claim their prize within a certain window of time.

2. Privacy Policy

If you are collecting any date from entrants, such as their email addresses, you must ensure they receive information about how their data will be used.

3. Announcing winners

In order to abide by the law you’ll also need to let your winner know they’ve won in a certain way! This is to make sure that businesses can’t run competitions and avoid giving out prizes. You’ll need to

A. Notify the winner/winners directly in writing.

B. Share who has won everywhere you advertised the competition; for instance, on twitter or other social media sites.

C. Leave the name of the winner up on your social media sites and website for thirty days.

 4. Transparency: you must be fair to consumers.

You must make sure your competition isn’t misleading or confusing. You also shouldn’t make competitors believe they have a greater chance of winning than they actually do.

It’s also key to note that you have to give away the prize you’re offering exactly as it’s offered, and that the prize can’t simply be entrance into another competition.

Be ethical!


Don’t let the legalities scare you away: competitions are a fun, engaging way to get people involved. They’re also an effective way to gain word of mouth marketing and trust.

Lena Klein

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