2011 was overall a good year for the EU Lotteries that incorporated Interactive distribution channels. Total sales were up by 10.7% with land-based sales increasing by 9.2% while interactive channel sales increased by 27.4% on the previous year. Furthermore, the interactive channel’s contribution to total sales rose to 8.4% (from 6.8% in 2010) and accounted for 21.5% of the total growth.
At first, the above figures indicated that Lottery sales and growth are being reinforced by the development of the interactive distribution channels and it was also indicated, that the channel’s increasing popularity provided further scope for improvement.
However, when reviewing the individual performance of the Lotteries it became evident that some initial assumptions were not representative of the true picture. The interactive sales of three lotteries alone – Lottomatica (€1,725m), Camelot (€1,194m) and Austrian Lotteries (€1,186m) accounted for 62% of the EU Lotteries’ Interactive sales, while with the addition of Sisal (€669m) and Veikkaus (€541m) this contribution reached 80%.
Consequently while interactive sales were a growth factor, the channel’s actual contribution for the majority of Lotteries, ended up being rather moderate.
This performance disparity naturally raised a question. – “In the land-based Vs. Interactive channel relationship, is it possible to identify some common key factors that contribute to a Lottery’s successful performance”?
From the 23 Lotteries examined: 17 increased sale in both distribution channels, 4 recorded a slight drop in retail sales yet managed to increase interactive sales and 2 recorded an increase in retail sales yet experienced a drop in interactive sales.
Assuming that a Lottery’s interactive performance must be to some extent relevant to the range of the products portfolio on offer, we were unable to identify any clear correlation…
Indicatively, while a number of high performance lotteries (Lottomatica, Sisal, Danske Spil and Svenska Spel) offered a full products suit;1* Camelot (one of the year’s high growth achievers) only offered Draw and Instant games and in the case of the Austrian Lottery, its Casino Games portfolio alone, accounted for 39% of total sales and 95% of the total interactive sales.
Upon further investigation of some other parameters and while accounting for pre 2010/2011 results, we started to gather some clues as to the underlying truth…
We noticed that overall the incremental yet consistent growth in the interactive channel sales, was proportionate to the number of years a lottery had launched its interactive platform but more importantly, that this growth appeared to be irrespective of the performance of the land-based distribution channel.
Acknowledging then that more meaningful sales increases came from the land based distribution channels (2011 growth – LB €6.65b Vs. Interactive €1.82b), we investigated the lottery market’s “internal and external” dynamics. Indicatively, the number of retail outlets (POS) and the ratio of population per POS, each market’s regulatory framework, the level of commercial gaming competition, the prevailing economic climate, etc. Whilst these dynamics were all relevant to a lottery’s performance, again we could not establish any outstanding correlations.
What did appear more evident was the fact that while the land-based channel’s performance appeared to be influenced for example by the prevailing economic climate, the performance of the interactive channel appeared to be unaffected.
This lead us to the realisation that the differentiating factors to the lotteries’ successful performance were actually driven by consumer preferences and that the key for growth, potentially lays within the understanding of the demographic profiles of the customer base and how each correlates to the products and/or services on offer.
Lottery consumers have a set of preferences and values whose determination are dependent on age, gander, culture, demographic profile, experience, individual taste… and are motivated in their selection by products and services that provide the greatest level of satisfaction and needs fulfilment.
Within a Customer Centric approach, Lottery operators get to understand their consumers’ preferences by conducting research to analyse the Gaming market and how their products/services competitively respond to the customer’s expectations.
Furthermore, by segmenting the demographic profiles of the customer base and establishing links with the relevant product groups, they are able to identify the most important characteristics and determine how to best deliver products/services that enhance the level of engagement. While on-going demographic analysis will also provide insight on how consumer preferences’ evolution and how demand is created for new products.
Admittedly via technological innovations and improvements in global communications, we are witnessing an accelerated convergence of consumer preferences to new global products. However this process, will always be dependent on consumer determinations which will require time to become evident.
*1 Draw Games, Instants, Casino, Sports Betting, VLTs, Poker
“Consumer Preference”: Dominick Salvatore – Microeconomics, Dr Cachel Cordo – Principals of Microeconomics