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At the bottom is an example of one Michigan Lottery’s surveys!
Many lotteries are used to hearing the argument from their retailers that lottery is a mature product. The definition of a mature product is that it is expected to see a gradual decrease in sales volume over a period of time. Yet the instant category has seen tremendous growth over the past five years with eight lotteries increasing their total instant sales by over 50%. Michigan Lottery, which has increased its instant sales by 71.26% has had the second highest growth over that period of time. They share the spotlight with other lotteries like California and North Carolina in that regard.
But what stands out as being unique is they are the only lottery to have–every year–a larger percentage growth in instant sales than the year before. In fiscal 2017, Michigan saw a 16% growth increase, which was the fourth year in a row with double-digit percentage growth. This is particularly impressive since it was a relatively down year for the category across the industry. While in fiscal 2016, 12 lotteries experienced double digit growth, fiscal 2017 only had two lotteries (Maryland and Michigan).
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Advertising
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“Those numbers are obviously impressive,” Glenn Strong, Deputy Commissioner, Games & Marketing at the Michigan Lottery said. “If I’m being perfectly honest with you I’m a bit mystified myself. I’ve never seen that type of growth before and I can’t tell you that it’s due to one thing in particular. Rarely is it a single change that creates this type of sales growth.”
Product Enhancements
Strong attributes part of the success to the emphasis on scratcher family games. Starting in 2015, the lottery has launched a four-ticket family in January and May with $1, $2, $5, and $10 price points. The industry is well aware of how economical family games are since one marketing and advertising campaign can support multiple price points. But Michigan also employed some unique twists to maximize the games’ efficiency.
For instance, Michigan has used family games to acquire new digital players. “We print an acquisition code on each ticket with the offer to receive $10 worth of online free play when they create a new online account,” Strong said. “Also, if they fund their account with a minimum of $10 we give them a $10 Off coupon that’s redeemable for a future retail purchase. That strategy has been really successful for us in that it creates new account holders and it drives traffic back to retail.”
Another adjustment is lowering the $1 print run for the family games as they feel it is imperative that the game sells out within 10 to 12 weeks in order to provide impulse buyers with more variety, compared to the other price points which could last for two years.
Michigan has also created a more robust evaluation procedure to determine which instant tickets to sell. While they use focus groups to get qualitative feedback on concepts, they augment that research with SurveyMonkey to get a wider range of opinions. They invite michiganlottery.com account holders to participate in the surveys. “We score those survey responses and combine them with the focus group results in order to create a popularity ranking to help drive our decisions,” Strong said.
This method of research and evaluation goes hand in hand with their other initiative to solicit ticket concepts from all three printing vendors beginning in fiscal 2018. All concepts are put through the same feedback process. “It does create a level of competition we’ve never experienced before,” Strong said.
Cashword, a crossword-style game, has also proven to be a consistent sales driver. While Michigan has sold $2, $3 and $5 Cashword games for many years, they launched a $10 version in 2014 and a $20 in 2017. They now sell Cashword at five price points and generate approximately $185 million annually from this category.
Strong added one comment. “Regarding all games, one of the big things that I think we’ve addressed is prize structures. In the last several years we’ve been working very closely with IGT on prize structures as well as with Pollard. We’ve done a lot of research on prize structures. The interesting thing about the research results are that much of it is inconclusive; the results are a little bit different each time. Nothing stands out of being consistent so we’re continually experimenting,” he noted.
Retail Initiatives
Michigan’s retail initiatives are essentially small changes that add up to big sales increase for retailers, like focusing on new game activation rates. Retailers are required to activate at least one pack of every new game within three days after receiving it in order to remain eligible to receive a quarterly bonus commission. Michigan’s concerted effort–which included calls and visits to retailers who fall behind–has been so effective that now 99% of retailers hit that goal. It might seem like a small change, but it can have a drastic effect on sales.
But one initiative that stands out is the effort to have as many retailers as possible accept debit and credit. Michigan Lottery incents retailers to accept cards by increasing their instant game sales commission by 1%. The lottery is now approaching 54% of all retailers accepting debit and credit cards.
“Anecdotally, we always ask focus group participants about their decision making process when they walk into a store. What influences your decision to purchase a ticket? Recently, a woman said the first thing that she wants to know is if that retailer accepts debit because she only uses her debit card. She doesn’t carry cash anymore,” Strong said. “I hate to make a blanket statement from what I heard from one player but I don’t think that’s an uncommon thought process.”
“We are one of the few vendors in a retail location that is willing to offset the cost of cashless transactions for a retailer. A retailer may have better margin on other products but at the end of the day those product vendors are not helping them with their cashless fees; we are. We actually have skin in the game and we’ll go to bat for the retailer to help them recoup some of that cost. I think that gets us a lot of positive feedback from our retail partners, which helps us sell-in other programs,” Michigan Lottery Instant Product Manager Travis Priest said.
Another significant change to increasing sales has been the effort to increase facings. “Over the last couple of years, really since the growth started, we have made an effort to increase the facings at retail,” Strong said.
This is achieved by putting more responsibility on the LSRs to roll out more facings in a controlled manner. Instead of forcing more facings across the board, LSRs pinpoint retailers primed for growth. “If you increase facings at the right accounts, you’re going to increase sales,” Strong said.
The good news for Michigan is that their unprecedented growth might not be over any time soon. “18% of our sales are generated by $30 tickets, which are only 10% of facings and the $10 and $20 price points are 20% of our sales but are 10-13% of our facings. We’re systematically under faced,” Priest said. “But that’s okay because we’re still in growth mode. It’s a moving target.”
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Download
[/fusion_text][fusion_button link=”https://lafleurs.com/wp-content/uploads/2018/05/Data_All_10Nov2017.pdf” title=”Download the Magazine” target=”_blank” link_attributes=”” alignment=”center” modal=”” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” color=”custom” button_gradient_top_color=”#2e3092″ button_gradient_bottom_color=”#2e3092″ button_gradient_top_color_hover=”” button_gradient_bottom_color_hover=”” accent_color=”” accent_hover_color=”” type=”flat” bevel_color=”” border_width=”” size=”xlarge” stretch=”yes” shape=”” icon=”” icon_position=”left” icon_divider=”no” animation_type=”” animation_direction=”left” animation_speed=”0.3″ animation_offset=””]Michigan’s Survey Monkey Example[/fusion_button][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]