Benno Spencer, CEO of Raffle House, talks about the challenges property prize-competitions have faced, the changes being made and why house raffles provide a viable alternative to selling and buying property
House raffles are becoming increasingly popular in the UK. From multi-million-pound countryside mansions to swanky city-centre apartments, the last 18-months have seen a huge number of competitions spring up for people to enter.
For sellers, they can offer a more cost-effective way of listing a property and for those looking to get onto the property ladder they provide the chance to win a house or flat at incredible odds from a low-cost ticket.
On paper it is a straight-forward process and one that has established industries all over the world, from Australia to the U.S.
So long as enough tickets are sold and the legalities of the process adhered to, the property will be awarded to the lucky winner.
But those running competitions in the developing UK industry have encountered challenges.
The impact of these challenges has seen house raffles receive their fair share of negative press and many have fallen by the wayside – over 50 competitions have failed in the past 18-months.
But despite this, those that remain active still see strong demand from new and, in our case, returning customers.
As competition organisers better understand the industry’s challenges and overcome them, house raffles are quickly becoming a genuine alternative to traditional ways of selling and buying property.
So, what are these challenges and why have they led to such negative press?
The biggest challenge is, of course, selling the minimum number of tickets required to award the property as the main prize.
From over 50 competitions, only two have awarded a property in the past 10-years or so. We’ve also seen the Gambling Commission shut down a number of “illegal lotteries” for not being “genuine prize-competitions”, where, typically, individuals have misunderstood the legalities involved within this part of the gambling industry.
In most genuine prize-competitions where the legalities are adhered to, a life-changing cash-prize is awarded if the ticket threshold is not met but the owner still retains the property plus some of the ticket sales to cover costs.
Without full transparency regarding total ticket sales, costs and the cash prize awarded it could be that property owners are making money from the raffle and still keeping the house or flat.
While Raffle House is a business set-up to raffle properties rather than an individual effort to sell a personal property, without competition organisers providing these figures some entrants – as well as the national press – remain sceptical.
That’s why we regularly take to our blog to explain our progress, learnings and next steps.
So why are most organisers not selling enough tickets to award the property? In almost all cases, they underestimate the marketing activity that needs to be undertaken to raise sufficient awareness.
Previously, marketing campaigns have been poorly structured and simply lack the budget required to ensure ads are seen by enough people to sell the required number of tickets.
Raffle House took a different route to market, raising investment and selling equity in its business to enable the company to advertise effectively.
However, because the majority of past house raffles have been undertaken by individuals and not professional house raffle companies who understand the investment and expertise needed, their failures have cast a pallor on the industry in general.
Failures undoubtedly damage the reputation of house raffles in general but with a few small changes we at Raffle House believe the industry can move forwards.
To do this, it is vital that a house is awarded as the top prize and we have gone to great lengths to make sure this happens with our current prize draw.
We believe that these changes should be adopted by the wider house raffle industry as ultimately it will lead to more properties being successfully raffled.
So, what have we done?
The first thing we did was to source a cheaper property to raffle for our second competition.
Valued at £500,000 and in a desirable part of East London, it is still aspirational but also, given our learnings, achievable.
We also increased our ticket price from £5 to £10 bringing it closer to, but still below, the average order value of our users.
We’ve also increased the number of bonus tickets awarded when buying in bulk, incentivising higher purchases, which ultimately reduces the number of users we need to take part to award the property.
This has helped us to reduce the number of tickets we need to sell to award the property from 150,000 for our first competition to just 60,000 for the current competition and we’re now about 10,000 entrants from our goal of awarding our current property.
We have also ramped up our marketing activity, spending at least 30% more on our current draw than we did on our first.
Plus, we now know the best channels for reaching our target audience and can rely, in part, on our 40,000+ user base.
No other property raffle company in the UK can boast of returning customers and we’ve now awarded well over £180,000 of prizes to our users via our first competition and our weekly £1,000 give-away.
As a part of this, we are also looking to educate people as to what house raffles are, how they work and the prize structure of the competition.
For the entrant, that means making clear that they are making a “lottery” style bet, albeit with odds far better than the big-name jackpot draws.
When entering a lottery, there is no guarantee an entrant will win the jackpot and so it is the same with entering a house raffle. And just like a lottery, the jackpot prize relates to ticket sales.
The changes have had the desired result and with a little over a month to go we are quickly closing in on the required number of tickets we need to sell to award the property.
If other house raffle organisations follow our model, they too will have a much greater chance of the property being successfully raffled.
I also believe that once one property has been awarded, sentiment will shift, and that is certainly the case for us as we look to move the business forward and run more competitions in 2020.
We have a full schedule for upcoming properties and each fits our model – aspirational price and location but affordable to maintain for our winners and, as always, Stamp Duty and legal fees paid. Professional house raffles are changing thanks to the model being pioneered by Raffle House and are well on their way to providing an alternative method for selling and buying property – a win-win for all.