Benefits and Issues
Despite New Jersey being the only state to have formal laws regulating this service, domestic couriers are operating in multiple states across the country. “In New Hampshire, it came out as a review of our laws and that there is nothing that prevents it. New Hampshire is a very pro-business state. There is nothing we can do to prevent it, and we don’t stand in the way of it too vehemently,” McIntyre said.
With these services already operating, it is essential to understand the benefits and issues that could arise in the future. One concern is the threat of potential brand erosion, particularly regarding the protection of consumer data and funds. If any loss of data or money occurred, this could hurt the lottery in the public eye due to a reduction of trust for both the courier and the lottery. “As is the case with any online transaction, personal and financial information (data that is not captured in traditional lottery ticket sale) must be protected, and it is imperative that transactions conducted using any third-party services are held to the highest level of integrity and security standards,” DC Lottery Executive Director Beth Bresnahan stated.
The potential issue could be melded into a benefit. Data leaks due to hacking are more prevalent than ever. Offloading that responsibility to a third party service could be a bonus.
“The fact that we don’t know precisely who buys most of our stuff is more and more distinctive of the lottery industry. The private sector regards customer data as a big asset that can be used to personalize service and build loyalty. When data is stolen, it becomes clear that having custody of personal information is also a liability. Governments are very sensitive to liability, and may direct lotteries to keep only the data absolutely required for reporting,” Dr. Stephen Wade, Principal, Lottery Management Consulting, LLC said. “In this situation, it would serve a lottery well to let someone else acquire and work the data to get the insights, and leave the sensitive personal information management to someone else.”
The biggest immediate benefit of the service is clear. For lotteries that do not have an internet solution for any myriad of reasons, they now have a turnkey solution. After all, lottery games are impulse purchases, and the internet will help capture more sales, especially during big jackpot rollups. The added element to reach an entirely new demographic is also a big incentive. Lotteries know there are nonplayers/infrequent players who simply don’t play because it isn’t easy enough.
“We live in an age of extreme convenience in which with a few simple clicks just about anything can be purchased and delivered to our doorsteps. As such, selling online presents tremendous growth opportunity for most U.S. lotteries. For those jurisdictions that cannot directly offer online lottery sales, courier services can provide a means to potentially reach new players and capture new revenue,” Bresnahan said.
However, other directors were not convinced that the courier services would ultimately drive sales significantly. One suggested that the lottery and retailers are already marketing to the same people that the courier services would be.
Finally, one of the most interesting benefits could be in the way it helps lotteries acclimate the public to being able to purchase tickets online. “Probably the most significant aspect of the emergence of courier services will be their ability to make legislators comfortable with the notion of internet lottery sales. There isn’t anything the courier services offer that couldn’t be done better and cheaper by the lotteries themselves, but lawmakers balk at lotteries selling over the internet. Courier services may be a ‘transitional’ business model to get political acceptance of the concept of iLottery sales. Eventually, they would fade away as lotteries incorporate mobile/internet sales into their own business models as simply another distribution channel for their products,” Gordon Medenica, Director, Maryland Lottery and Gaming Control Agency said.
The Domestic Couriers
The most well-known domestic courier services are Lottery.com, formerly AutoLotto, and Jackpocket. Lottoland USA and other companies could also become a domestic courier, although they are better known currently for other business operations. For this article, all quotes pertain only to their domestic courier offers.
Jackpocket CEO Peter Sullivan explained there are more benefits than the ones described in the previous section. For instance, Jackpocket would be able to push players to scratch tickets by helping them find stores. It would also greatly reduce unclaimed prizes as players wouldn’t be responsible for holding onto their tickets and potentially losing them.
But couriers can also solve regulatory issues by ensuring players cannot avoid taxes or child support by transferring their tickets. Last autumn, there was a series of articles on players, who won far more than was statistically possible, that was published. One of the suggestions was that these players were receiving winning tickets from other sources. But a courier service would eliminate this threat. As the courier has detailed information on each one of their clients, the lottery would ultimately be able to know that the person who bought the ticket was the person who was awarded the prize.
Finally, the courier services would expand sales at no incremental cost. Jackpocket’s website states that the average Jackpocket user is male, 36-years-old, married, with a college degree and an income over $65,000. This would be a very new audience for draw games, which generally have a much older core audience.
All these factors combined reveal a lucrative opportunity. “The opportunity there is to have a 3.5x increase in draw game revenue. This is a combination of attracting new players as we make the lottery accessible and attractive to millennials as well as enabling time-pressed professionals to purchase lottery tickets with higher frequency,” Sullivan said.
Tom Metzger, CEO of Lottoland USA, is also closely monitoring courier services as a potential opportunity to help New Jersey grow lottery revenue. He expressed similar sentiments. “U.S. lotteries are in a unique position to capitalize on the convergence of all types of gaming. Many lotteries already monitor VLTs in addition to their traditional draw and instant games… It is in all of our best interests to find ways to reach new customers, grow revenue now, and stay ahead of the curve.”
The other important benefit is that the overall gambling industry has very high customer acquisition costs (CAC). Michigan Lottery’s press release with Income Access gives a CAC example: a $200 purchase would reward a player with a $100 bonus. Off-loading the CAC expense, as well as any retention cost, could be a large cost savings.
“A key benefit of courier services that I haven’t heard widely discussed is that the courier will be responsible for new customer acquisition, marketing, and service. Most state lotteries only have 1-2% of sales allocated to their advertising budget. Effectively acquiring and keeping customers online is an expensive proposition that is not only high reward, but if not done correctly can also be high cost,” said Metzger.