What do you know about a specific player? Do you know the basket size of their last purchase? What products did they purchase together? Do you know what channels they interacted with you through? Or what pain points have they felt? If they’re happy or mad?
For most U.S. lotteries, the answer “not much.” One-to-one marketing is an elusive beast for the industry, which relies almost entirely on anonymous purchases at retail. Second-chance programs and digital couponing have been helpful to begin to understand their players, and for states allowed to sell online, iLottery systems have been a blessing. Yet, even in the best-case scenarios, lotteries only know specific information for roughly 20% of their player base.
Many lotteries are turning to robust loyalty programs as the next best option to understand their player base. Of course, these programs have many benefits, from creating a positive customer experience to encouraging referrals, but for lotteries, they also provide a ton of data. When players enter their purchases or swipe a loyalty card before buying, then marketers can send personalized messages, coupons, and offers to individuals based on their preferences.
“It’s the number one way to create a relationship with a customer. I don’t know how any company exists without a loyalty program,” said Sherie Moody St. Clair, Marketing Director, Idaho Lottery.
Most companies outside the industry feel the same way. In a recent Harvard Business Review Analytic Services study, 88% of consumers hold memberships in customer loyalty programs, adding up to 3.8 billion memberships! But there is a clear distinction between the best and the rest.
As of October 2021, the Starbucks program, Starbucks Rewards, had nearly 25 million members. It represents 53% of spend that occurs in their stores. The coffee giant is at the top of its game because of its attention to customer experience and finding ways to achieve business goals without sacrificing customers’ needs. They use a hybrid program with “Earn and Burn,” “Tiers,” and “Gamification” features to maintain consistent engagement with their consumers. An “Earn and Burn” program allows customers to spend their points to buy products. A “Tiered” program allows customers to accrue points to get into tiers, and each tier gives special privileges, promotions, or discounts. A “Gamification” program allows customers to engage with the customer through game mechanics and leaderboards. A “Hybrid” program involves elements of multiple types of programs. This mix of elements has helped Starbucks reach a genuine 1:1 relationship with their members. By monitoring interactions with the program, they can give their customers personalized offers based on their preferred products, purchase behaviors, and other factors.
These programs set the new standard of what consumers expect from a loyalty program. Consider that while the average consumer is part of 16.6 loyalty programs, Bond reported in 2022 that they were only active on about 7.6. While lotteries’ monopoly protects them from direct competitors, players will judge lottery loyalty programs with best-in-class offers. If it isn’t attractive enough, then most players will ignore it.
The cost of digital acquisition is getting more expensive each year. Research conducted by Business Insider and MediaPost has shown that Facebook ads have become markedly more expensive, with cost per mille (CPM) increasing by 89%. Google has become even more costly, with ads on Google and YouTube costing 108% more.
Even more concerning is the potential death of ‘cookies.’ Cookies are small files that websites send to devices and are then used to monitor and remember certain information about you. Google has announced that it will stop using third-party cookies in Chrome by the end of 2024, joining a growing list of browsers ditching the notorious tracking technology.
“I think all marketing departments are getting very scared of this cookie-less future. It’s going to be much harder to market to potential new players or retain existing players. If you don’t have first-party data, you don’t have a solid marketing plan,” Chris Abate, Marcus Thomas, VP, Lottery Solutions, said.
With acquisition and retention costs increasing, lotteries must start engaging their players on a 1:1 basis. “I feel this urgency for us as an industry to make sure we’re building customer intelligence so that we can create a lasting relationship,” Moody St. Clair said. “It is going to get harder to advertise to them if you don’t have a current relationship with them. ”
The benefits of reaching a 1:1 relationship would be significant, but even at the aggregate level, lotteries would see critical trends, like purchase combinations and basket size.
For example, in the fast food industry, if most people who purchase a hamburger also always buy french fries, then fast food marketers could do a promotion where if people buy a hamburger and french fries, they can buy an ice cream cone for a discount. While simple, this example shows how this information could immediately help lotteries encourage players to try new games and generate more revenue for good causes.
The Holy Grail for the industry is to understand retail players—everything from their purchase behaviors, basket sizes, product combinations, and even crossover between traditional and online play. That data could help lotteries create win-win opportunities for their player base, retailer base, and the good causes they support. These possibilities are why the Idaho Lottery built a new loyalty program, which they released in September 2021.
Lottery Loyalty Programs
Moody St. Clair felt their previous loyalty club wasn’t meeting modern expectations. The loyalty club was cumbersome, unable to integrate easily with third-party services, and difficult to upgrade. Worst of all, it wasn’t giving them the player data the marketing team needed.
“We knew we had a data issue,” Moody St. Clair said. “We knew we had the data there but couldn’t get to it as easily as we wanted to.”
They looked at all the best-in-class loyalty clubs, from Starbucks to the major airlines. After looking at multiple options, they chose to work with Brandmovers, a global leader in loyalty programs.
“Players and consumers today expect a loyalty program to deliver a streamlined, frictionless customer experience that treats them as unique individuals and provides them with personalized opportunities, perks, and benefits. A highly perceived, well-designed loyalty program does just that, equips lotteries with all the tools they need to communicate, engage, interact and build a relationship,” Oliver Mitchell, Vice President of Sales, Brandmovers, said.
With Brandmovers, the Idaho Lottery built a Hybrid program, using aspects of “Earn and Burn” and “Tiered” programs, which may be a first for U.S. Lotteries. For the Idaho Lottery, players are entered into the Silver Tier when they join. To get to the next tier, they need to accrue a certain amount of points. Players can earn points through nonwinning scratch tickets, by purchasing draw tickets with a VIP Card, participating in bonus promotions, and taking surveys.
Each tier gives them certain benefits, including draws to win lottery tickets. Players can also redeem points to purchase featured items, enter sweepstakes, or donate to public schools.
“Each month, this program receives project requests from our public school educators, and we fund up to $10,000 a month in wishes. Instead of using their points to enter for sweepstakes cash or prizes, VIP Club players donate their points toward these projects to ‘fund’ them,” Moody St. Clair explained.
The true power of modern loyalty programs revolves around player engagement. The Idaho Lottery Club tracks all player purchases, social media engagement through Facebook Pixels, and any other interaction, like contest entries, quizzes, and polls.
They’ve linked their Club with Marketo, their marketing automation system, which manages their programmed emails, texts, and manually pushed communications. It has let them improve various touchpoints throughout the customer’s journey. For example, players now get email confirmations when they purchase or enter a contest.
“This is all about communication and transparency. If you shop online and make a purchase, you get an email confirming you made the purchase. We have to stick to those standards. That is basic digital customer experience,” Moody St. Clair said.
Moody St. Clair is also using this automated messaging to nurture newer players. “One of our goals is to create new VIP members because we know we can connect with them and teach them about the other games. Our theory is that $1 players are likely new. Once they become a VIP member, depending on what they do, we send them more education on the Lottery, the games, and how they can use their points to keep them engaged.”
Other lotteries modernizing their loyalty programs also stressed the importance of two-way dialogues with players. Since the goal is to build a relationship, giving players a voice through the program is imperative. There are various options to do this. Things as simple as surveys can do the trick, but letting players pick future products or upload user-generated content is the goal. By encouraging two-way dialogues, lotteries will also help promote brand advocates, which will only help with acquisition and retention on an organic level.
“The more avenues lotteries can communicate with their customers, the better,” Mitchell said. “Additionally, loyalty programs also enable lotteries to get Zero Party Data from their players via surveys, polls, quizzes, etc., which can help them plan for the future and optimize the program on an ongoing basis.”
However, they’re still only at the tip of the iceberg, and they have a ton of future initiatives they want to pursue. They could start drilling into the shopping carts of their players to see various trends, which could lead to new product developments, personalized promotions, and more. But the most ambitious plan is their new app.
When discussing loyalty programs, it becomes readily apparent how difficult it is to only focus on them. For many lotteries, the discussion quickly evolves into CRM, data management, wallets, apps, etc. Loyalty clubs are the core that ties a lot of various components together.
The Idaho Lottery’s marketing team’s next step is to develop a perfect touchpoint for their customer base. “We’re switching the whole focus of our app,” she said. “If you look at any apps now, it’s focused on the member experience.”
They found that 80% of the people using the current app were VIP members scanning tickets and entering second chance drawings. While their existing app has VIP Club functions, it was hidden away and made it difficult for players.
“We shouldn’t have to make a player search for the winning numbers when we know that they bought a ticket,” Moody St. Clair said. “The winning numbers for the games they’ve played will be served up to them when they log in.”
Instead of the smartphone version of the Lottery’s website, the new app will change for each user and allow users to customize their home-screen. It will ping them every time they have a new coupon or an offer and alert them to how many points they accrued, which is possible because of their Club.
“It is these little detail things that create this ultimate customer experience. Even a small greeting in the morning when they log in makes you feel like you are part of the family, like you’re part of the Lottery,” Moody St. Clair said. “There’s complete transparency, and you feel this connection and trust with that entity.”
Other lotteries are pursuing this same mentality for modernizing their app, with many adopting the “Mindless, Thoughtless, Seamless” mentality. They want to minimize friction for players as much as possible. It needs to be obvious for players to access what they want, whether that’s how to join the players club, enter a second chance program, access their coupons, etc.
The eventual future for the industry is to create a “Golden Record.” A golden record combines meaningful, reliable data from multiple systems into a single view that’s ideally more accurate and complete than the data from any single source.
“It all starts with having that single customer view, where you see all their activity across all touch points. Lotteries will be able to measure every purchase behavior, retail engagement, website, mobile apps, even calls into customer service,” Abate said.
Loyalty programs are a vital part of this entirely seamless omnichannel player experience. So, while right now, “what do you know about this player” is “almost nothing,” some lotteries have never been closer to answering it.