Idaho – Inflation and Rising Gas Prices
By Jeff Anderson, Director of the Idaho Lottery
In my nearly 16 years as Director of the Idaho Lottery, we’ve never experienced a marketplace like we have today. Idaho is one of the fastest-growing states in the nation. Idaho’s response to the pandemic in 2020 and 2021 was less restrictive than elsewhere. Statewide, the Governor believes in subsidiarity and granted authority to local municipalities and health districts to address the issue (within limits) as they saw fit. Some cities such as Boise were more aggressive with business closures than other places. That flexibility created an environment for our economy to thrive despite the disruption and change of the pandemic. That boom, though, caused skyrocketing housing costs. Nationally, enormous fuel price increases and market inflation has added more uncertainty and grief for everyone.
We’ve overcome rising fuel prices in the past, but not concurrently with historic general market inflation and soaring costs of housing. Disruption and change did create opportunity and advantage, though. We were prepared and had an excellent couple of years in FY2021 and FY2022.
$1 and $2 Instant Tickets
To your questions about $1 and $2 games, in my view, they remain important to consumers. $1 probably more than $2. While unit sales continue to decline, they still represent a popular component of our portfolio, only eclipsed in unit sales by $5 games that include extended-play games.
In 2019, the Idaho Lottery explored ways to arrest the annual decline in $1 unit sales. This was, of course, pre-pandemic. In January 2020, we changed the value proposition of $1 games with a “new and improved” campaign. Prize expense was increased from 58% to 68%, $1 game weekly second-chance draws were introduced for the first time, and plan-o-grams called for 3-5 games in-counter and in vending.
The results were positive in three ways. First, we arrested the annual decline in $1 unit sales. Admittedly, sales fell back in FY2022 but so did facings. Second, the second-chance draw opportunity created new loyalty club members. We track KPIs and have been able to watch their behavior in the club and how they engage with us. Not surprisingly, when they become members, they become frequent customers and frequent customers who enjoy multiple price-point games.
Third, the cost of customer acquisition has been advantageous to the Idaho Lottery. One hypothesis we started with was $1 games remain an important entry point for new players. It is well-known that retaining a customer is less expensive than acquiring one. Much of the added small wins were churned back into more ticket sales. We affordably acquired many new customers, and we can engage with them in meaningful ways. Frankly, I believe our increased popularity with new players led, in part to, the 34% increase in FY2021.
Legacy draw games seem to have a harder time moving the ball downfield with the higher priced points. We did raise the price of Powerball to $3 by adding a required PowerPlay purchase. We lost boards played but got 50% more on all tickets sold. Demand is somewhat inelastic at the border, but in other parts of the state we may have lost some regular players since we changed the price when the game added the third draw each week. When the frenzy over a “big” jackpot comes, price becomes almost meaningless. Frankly, some have opined that variable pricing (think plane tickets) has been discussed in the past. It may be our future.
It will be interesting to see what Mega Millions does going forward. They may seek to add more value at a higher price. Frankly, it’s about time both games did something different with the value proposition.