The choice of the prize is one of the most important elements in the organisation of a prize draw or competition and can be a decisive factor for the success of the promotion.
CHOOSING THE PRIZE POOL
Factors to Consider
The elements to be taken into account to make the right choice are numerous and include objective criteria such as the budget and compliance with the regulations of the country in which the prize draw or competition takes place, as well as marketing criteria where considerations of communication and the image of the company are important.
To make the right choice, it is fundamental to start from the objective, the content and the target audience for the prize promotion, asking yourself:
- what you want to get from the promotion
- what target audience you want to address
- what prize best embodies the concept of the prize draw or competition.
Correct evaluation of all these aspects will lead to the choice of the best prize pool. A mistake at this stage can compromise the success of the promotion, for this reason it is very important not to be influenced by passing fashions or by your personal tastes.
The regulatory aspect and taxes
One aspect that should never be overlooked when defining the prize pool of a prize draw or competition is the regulations of the country where the promotion will take place.
In many countries of the world, the legislation provides clear indications on prohibitions and limits to be complied with, which may concern the type of prizes that are not allowed, or the value of each prize or of the prize pool as a whole, or methods or delivery times.
The system of taxation of prizes also differs from country to country and should be considered carefully.
Negotiating the purchases and authorisation to use images
Once the best prize has been identified, it is necessary to negotiate and purchase it/them, as well as to request authorisations to use logos and images in the communications relating to the competition. This aspect is often underestimated but care must be taken because some brands do not allow the use of their trademarks and images for promotional purposes. When, therefore, the brand and the images of the prize are critical for the effectiveness of communication, their availability must be verified immediately during the design phase so as to be able to identify valid alternatives if necessary.
Storage, logistics and despatching to winners
Attention should also be paid to the cost of delivery of prizes. Physical prizes entail logistics and storage costs and it is best to take these into account so as not to make mistakes such as providing many low-value prizes without correctly assessing their impact on the costs necessary for their delivery.
In addition to considerations such as size and weight, possible bureaucratic complexities or customs duties must also be taken into account according to the country for which they are intended.
In Italy, for example, the delivery of prizes must be carried out with certifiable procedures and systems in order to produce the documentation required by the Ministry. Disclaimers and supporting documents will be part of the procedure for closing the competition
In Italy, the promoter of a prize draw or competition is required to pay the withholding tax on prizes by the 16th of the month following the date of award of the prize. In Italy there is a 25% withholding tax on the market value of the prizes awarded.
In other countries, too, tax obligations must be fulfilled to the extent and in the manner required by local laws. For example, in Portugal 45% of the value of the prizes must be paid. In Spain 10% of the total value of the prize pool; in the USA, although the taxes are borne by the winners, the promoters must comply with bureaucratic obligations for prizes with a value greater than $600, in Egypt 15% solidarity tax is paid.
Undelivered prizes: procedure to follow
In several countries of the world there is a specific procedure for prizes not awarded or not requested by the winners.
In Italy, these must be donated to a non-profit organisation that the promoter must indicate in the rules of the prize draw or competition. In Croatia, however, unaccepted prizes of a value greater than 5,000 kuna must be sold at public auction and the proceeds donated to the State. In Brazil the corresponding value must be paid to the Ministry of Finance.
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