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Using promotional codes is an excellent way to drum up business. Promotional code marketing can help get customers to use your business for the first time. Indeed, it can even attract customers who may have been using a competitor. As such, online businesses often use promotional code marketing. The process often involves providing individuals with a code that will entitle them to some kind of benefit, such as a discount or free item. Therefore, this article will unpack some common ways businesses use promotional codes to market their business. It will also examine things to watch out for, and highlight what to include in your promotional code terms and conditions.

Types of Promotions

You can use promotional codes to market your business in several ways. Some popular methods include the following. 

Email Marketing 

Your business may choose to email your marketing list with a promotional code to attract people to visit your website and make a purchase. If you are emailing individuals a promotional code, you should make sure that you comply with any relevant spam laws and are allowed to send such emails.

Promotional Code Vouchers

Some businesses may prefer to go to the streets to hand out promotional code vouchers. This involves giving passers-by a card or flyer with a code on it. The intention is that this will incentivise them to use your business by offering them a benefit they can redeem.

Refer a Friend Promotions 

It could be said that the best promoters of your business are your existing customers. For this reason, some businesses will choose to give their existing customers promotional codes to share with their friends. If their friend signs up for your services, you may give the referrer and the new customer a benefit. These types of promotions have strict rules under the Australian Consumer Law and will be outlined below. 

Beware of Refer a Friend Promotions

Refer a friend promotions are a popular way for businesses to grow their customer base. However, if you want to run this type of promotion, you need to make sure that your promotion is not ‘referral selling’. This is because referral selling is illegal under the Australian Consumer Law. 

Referral selling involves persuading an individual to buy your goods or services with the promise that they will receive a particular benefit, rebate or commission. This practice is illegal when you sell goods or services by representing that:

  • a prospective customer will receive a discount, commission or another benefit after the purchase is made; and
  • the prospective customer will receive this benefit only if the referrals provided by them result in further sales.

An example of this is advertising that if a prospective customer refers four friends and each spends $50 on your website, you will give the customer 25% off their next order.

However, the Australian Consumer Law does allow you to offer a benefit to a customer if they refer a friend who successfully signs up for your product or service. However, that customer must be an existing customer. 

This means that you can provide your existing customers with promotional codes to share with their friends and family. For example, you can offer your existing customers $10 off their next purchase if their friend uses the promotional code on their purchase too.

Important Terms to Include

You should have a set of terms and conditions that govern how your promotional code campaign will operate. Some of the key clauses to include in your terms and conditions are listed below. 

How to Use the Promotional Code

You should clearly set out how your customers can use the promotional code. If this is not obvious, then you may miss out on the benefit of using the promotional code in the first place as no one will know how to use it.


It should be clear what the promotional code is valid for and when it is valid. This means having a start and end date and time and clear restrictions on what the customer cannot use it for.


Consider whether certain people will not be able to benefit from your promotional code. This may include people in areas outside of Australia, individuals under 18 years old or employees of your business.


Make sure your promotional codes only entitle customers to discounts or other benefits and are not redeemable for cash or able to be sold. In addition, you should consider what will happen if someone uses a promotional code and is then entitled to a refund. 


In your terms and conditions, you should limit your liability. This will be for things like website failure, promotional code errors, any malfunction of computers and any loss or damage caused by a promotion.

When advertising your promotional codes, make sure you are not making any misleading or deceptive statements. For example, offering a promotional code that entitles a customer to $10 off but then including hidden fees that customers are not aware of at checkout.

Key Takeaways

Promotional codes are a great way to market your business and expand your customer base. However, if you are going to run a marketing campaign using promotional codes, you need to make sure your plans are compliant with the Australian Consumer Law and Spam Laws. You should also ensure that you have a set of terms and conditions governing the promotion. These will ensure the customer know what is and isn’t included in the promotion. It will also make it clear who can and cannot participate. This will help to limit any liability you may incur. 

If you need help drafting promotional code terms and conditions, contact LegalVision’s commercial contracts lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is a promotional code? 

A promotional code often provides individuals with some kind of benefit, such as a discount or free item. 

What type of promotional codes can I use? 

You can use promotional codes to market your business in several ways. Some popular methods include email marketing, promotional code vouchers, and refer a friend promotions. However, be careful when using refer a friend promotion. 


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