Regulatory changes in the European Lotteries’ market are prompting Operations to upgrade their technological infrastructures, develop their Interactive channels and introduce new Gaming products in order to respond to evolving Player preferences and provide a market competitive offering.
However change (especially on this scale), naturally evoke concerns regarding the transition period and the potential impact these developments will have in the overall business…
So, can these emerging Lottery trends threaten the performance of the Land-based network?
In order to meaningfully address this question and assess the impact these market developments are having, we examined the performance of the EU State Lotteries that have established an Interactive distribution channel since at least 2010 (EU Interactive Lotteries – EUILs)*.
In our research we are carrying forward a key notion, specifically that:
Lottery Players have a set of Preferences & Values whose determination are dependent on age, gender, culture, demographic profile, education, experience, individual taste… And are motivated in their selection by Products and Services that provide the greatest level of satisfaction and needs fulfilment.
The key for Lottery Growth potentially lies within the understanding of the demographic profiles of the Player Base and how each correlates to the Products and/or Services on offer.
Land-based Vs. Interactive
The Lotteries’ land-based distribution network has up to recently been the sole engagement channel for the Demographic profiles that constitute the Core of the Lotteries’ Player base.
And this channel continues to be the preferred medium of Lottery engagement since in most jurisdictions, it inherently permits: anonymity and consequently less restricted Gaming, facilitates players that are adverse or unfamiliar with Interactive technologies, supports Gaming as part of a social consumer routine, etc. (EUILs 2012 LB Sales represented 88.5% of total sales)
Recognising these network attributes and in order to achieve an optimum POS/Population ratio, most EUILs (71%) have invested in the further development of their LB distribution network with positive results.
In addition to the LB distribution developments, the EUILs have achieved a significant increase in their Interactive channel Sales (2012/10 CAGR 38.5%) while in 2012, the Interactive channel contributed by 85.6% to the Lotteries’ growth.
Acknowledging that the emergence of Interactive Gaming has resulted in the broadening of the Player base and created opportunities for Operators to access previously untapped demographic profiles; the above data supports the notion that the distribution channels fundamentally appeal to different demographic profiles of the Player base and while there are areas they overlap, they function complementary to each other rather than in competition.
Any performance differences between the channels can be attributed to the fact that the LB network has reached a level of maturity in as far as its market Penetration Rate and consequently, would more obviously reflect market dynamics (ex. economic climate); in comparison to the Interactive channel which has emerged as a new engagement platform with rising popularity.
This is also the case with the emergence of Interactive mobile platforms (smart phones / tablets) and the development of mobile applications that facilitate the distribution of Lottery products. Since Mobile e-commerce proposes to leverage its intrinsic attributes of time & place convenience and by utilizing digital marketing strategies to generate, higher and more frequent participation rates.
The introduction of new Games
The European Lotteries’ LB network ranges from the Shop-in-Shop setup – including POS Franchise Groups, dedicated Kiosks – usually established in Shopping malls, Sports Betting Bars and exclusively dedicated Agencies.
When it comes to promoting and selling lottery products, each of these Sales environments has its inherent strengths and weaknesses. For example, while a Shop-in-Shop Lottery outlet leverages its foot-traffic to generate: routine, impulse and associated sales; Lottery products are usually competing for space and vendor attention.
Accordingly, while this setup could serve at a satisfactory level the sales of Lottery Draw Games and Instant Win tickets; it is usually not as suitable for the distribution of Rapid Draw and Sports Betting Games which are better facilitated by dedicated Agencies and Sports Bars.
Overall, the Lottery industry has seen a gradual decline in traditional Lottery Draw games (since the peak of 2008/2009) and that Players are increasingly engaging in High Churn and Skills games.
When reviewing EUIL’s Gaming performance (2010/12) we find that the main drivers for Sales growth were Sports Betting and IWG products and that each Gaming Category’s performance is relevant to the product’s maturity, distribution Channel and the way it correlates with specific profiles of the Player base.
Our research indicates that the development of a market competitive Interactive offering and the introduction of new games results in:
- The broadening of the demographic profiles of the player base and are accompanied by overall higher levels of player participation.
- Do not appear to be significantly conflicting with the Land based network performance since fundamentally they respond to different profiles of the Player base.
- Establish the foundation for new / younger Player participation assuring thus, future continuity.
- When developed in conjunction with the competitive advantages of the Land based distribution network, can further strengthen a Lottery’s presence in the market space.
Lottery Operations will need to develop a cross-channel Strategy to assure that both channels perform at an optimal level and provide total Player convenience.
Within this approach, lotteries will be required to re-assess their organisational structure in order to explore the opportunities provided with the “bridging” of the distribution channels and create higher Player value.
Land based channel innovations “will bring the power of the web right were the Players can touch it”.
This will see the development of cross-channel synergies with the introduction of new types of Loyalty programs and Bonusing systems accessible on multiple touch points. Content rich visual display units and Self-Service-Terminals to enable Players to engage in all the Games offered by a Lottery Operator… – Omni-Channel Strategy.
* Indicative State Lotteries: Austrian, Belgium, Croatian, Denmark – Danske Spil & Danske Klasselotteri, Estonian, Finish – Veikkaus, French, Hungarian, Irish, Italian – Lottomatica & Sisal, Latvian, Lithuanian, Luxemburg, Netherlands – Staatsloterij & De Lotto, Portuguese, Slovakian, Slovenian – Sportna, Spanish – ONCE & Del Estado, Swedish and U.K.