Reflecting on these observations and considering market changes over the past decade, we find an even more compelling case for the implementation of such a strategy.

Regulatory shifts in most European countries have opened the gates for licensed Commercial Operators in lottery markets, intensifying competition and exerting downward pressure on profitability. Sports betting, once boasting gross gaming margins of up to 18.5%, now sees lottery operators struggling to secure a mere 3%  with significant operational costs.

State Lotteries have employed noteworthy strategies to navigate this challenging digital market, reaching the point, of acquiring Commercial Gaming Operators to establish a stronger foothold in the interactive domain. These moves signify the lengths traditional lottery operators are willing to undertake to maintain competitiveness. However, they also highlight weaknesses within the traditional lottery structure and its response to modern market dynamics.

Looking ahead, some industry professionals favouring the concept of a shared multijurisdictional Sports Betting platform have even suggested the increasing relevance of Betting Exchange platforms. This model focuses on a set commission from winning bets, thereby eliminating operational risk and liability. It also substantially limits the need for multiple operator technological platforms and specialised trading teams.

However, implementing such a model naturally raises a number of fundamental questions. How do we ensure liquidity for a substantial in size, Sports Book? How do we overcome engagement resistance from players due to the perceived complexity of exchange platforms? How is the Gross Gaming Revenue (GGR) defined and distributed amongst the Lottery Operator and its land-based agents? What concessions need to be granted by the Gaming Regulatory Authority for this to become a viable operational segment? How can an Operator maintain a Responsible Gaming framework…?

These are critical issues that need to be defined. However, upon informed investigation and review, we believe that with careful strategic planning, solutions can be found. The industry has already seen successful implementations of such radical ideas, as has been the case with multi-jurisdictional Lottery Draw platforms e.g. EuroMillions and EuroJackpot.

Admittedly, this approach was also instigated by another potential threat — the advancement and use of artificial intelligence (AI) in predicting event outcomes. By all accounts, AI could significantly disrupt traditional Sports Betting operations, with seemingly no practical countermeasures available to operators besides barring punters — a move which is inherently counterproductive.

AI challenges the bookmaker model because algorithms can exploit odds inefficiencies faster than human traders. However, in an exchange platform model, AI usage by participants does not affect the operator’s profitability. The platform remains agnostic as long as liquidity and trading volume are sustained.

In the face of such disruptive potential, the case for a cross-European exchange platform may gain an even stronger following. By completely alleviating risk and liability, improving profitability and providing a robust counter to the AI threat, it may present a transformative opportunity for the European (and not only) lottery industry.

Regulatory complexities and multi-jurisdictional collaboration undoubtedly pose challenges yet the potential benefits render this pursuit both feasible and worth investigating (- Italy has implemented a licensing model). The practicality of such an implementation has, in any case, been already proven by the success of multi-jurisdictional Draw Games.

The rise of AI event outcome predictions also brings about another issue related to players’ engagement triggers. While an exchange platform alleviates risk for the operator, it doesn’t necessarily solve the problem of AI-assisted betting within the market itself. If bettors feel they are competing against super-efficient AI algorithms rather than other human beings, it could make sports betting feel less like a game and more like a mathematical exercise. Moreover, without dismissing the randomness of event outcomes, if AI becomes prevalent in sports betting, it could lead to a situation where bet pricing becomes increasingly efficient and margins narrow further.  This factor could reduce the excitement and unpredictability that makes sports betting appealing to many people.

The industry’s evolution has proven the foresight of our past recommendations. As we progress, the embracement of innovative strategies and shared cross-border platforms appears crucial for maneuvering the emerging challenges and seizing future opportunities. The future of sports betting will likely require innovative thinking and bold action from industry leaders. Operators must decide whether to compete with AI or adapt their business models to coexist with it — favouring exchange-based, volume-driven structures over risk-based ones.

In essence, addressing the challenges of sports betting in the age of AI may not be about preserving the old model, but about redefining what sustainability and excitement mean in a data-driven world.

A recent analysis by iGaming Business highlights that while AI-assisted sports betting offers improved risk management and pricing accuracy, it can also flatten margin volatility — ultimately reducing profit potential for operators grammerheist.com+1anteupmagazine.com+1grammerheist.com+7igamingbusiness.com+7symphony-solutions.com+7.

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Aqueria International’s revolutionary concept, PaaLs (Prizes-as-a-Lifestyle), is at the forefront of this evolution representing a 21st-century non-zero-sum prize draw innovation. Designed to transcend the limitations of traditional offerings, this product redefines the concept of prize-draws by integrating innovative features that cater to a diverse range of applications and audiences.

Key Highlights of PaaLs:

• 1.  A Lifestyle-Centric Model: Moving beyond traditional prize draws, PaaLs integrates itself into the daily lives of users, providing multiple value propositions that resonate across demographics.

• 2.  A Non-Zero-Sum Proposition: Unlike conventional lotteries, PaaLs emphasizes a model where all participants derive value, ensuring long-term engagement and trust.

• 3.  Transformational Potential: With the ability to disrupt entrenched industry practices and empower consumers, This non-zero-sum prize draw innovation introduces a ground-breaking economic model that prioritizes transparency and shared benefits.

At its core, PaaLs is a versatile solution that can be applied as:

A Standalone Competitive Product: Offering an unparalleled mix of interactivity, transparency and value, it can stand on its own to attract a new generation of members while reinvigorating traditional markets.

A Supplementary Offering for Existing Lottery Operations: Seamlessly integrated into existing lottery frameworks, it enhances player engagement, broadens the customer base, and provides fresh revenue streams.

A Tailored Customer Rewards Platform: Beyond the gaming sector, its features can be adapted to various industries, providing corporations with a compelling tool for customer engagement, loyalty, and brand building.

PaaL’s pioneering characteristics: including omni-channel accessibility, innovative prize structures and embedded social responsibility; position it as a disruptive force in the market. Furthermore, its flexibility to align with specific cultural, regulatory and consumer dynamics; makes it a truly global proposition.

Aqueria’s Lottery Consultants approach combines deep industry expertise, advanced technology and a vision for sustainable growth. This non-zero-sum prize draw innovation platform not only aims to redefine entertainment but also to contribute positively to communities through transparent social impact initiatives. Early feedback from industry stakeholders and partners underscores its potential to redefine the player-brand relationship across multiple verticals.

Our executive report outlines a 360o proposition. The strategic framework, technical specifications / technology platform partnerships and market potential of this innovative solution. It serves as both a roadmap and a strategic framework for investors, stakeholders and industry leaders who recognize the untapped opportunities in this evolving space.

By engaging with this next-generation proposition, you are not just contributing to a commercial success story but becoming part of a broader narrative that reshapes how people connect with gaming and rewards in the modern era.

For an example of how this model applies to charitable funding, see our article on Charity Lotteries and the Cost of Living Crisis.

You can also watch our introductory video to see how PaaLs brings this concept to life.

Kon Kalemis / Teemu Lehtinen

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Initial research reveals that a growing number of people are struggling to make ends meet, leading many to cut back on non-essential expenditures. Vulnerable groups are increasingly turning to charities for assistance, which has dramatically escalated the demand for services such as food banks in the UK—something that was relatively uncommon just a few years ago.

Data from KPMG highlights that individuals are reducing non-essential spending and actively seeking ways to save money. This trend includes re-evaluating direct debit payments and subscriptions, leading to a decrease in donations to charities. Britain Thinks reports that nearly 25% of people have either cancelled or reduced their charity donations, with an additional 39% intending to cut back further. The ripple effect of these changes is significant, impacting not only the most affluent but also the lower-income groups who have historically contributed to charitable causes.

The financial squeeze has forced many charities to cut back on services, reduce operational costs, or in some cases, shut down entirely. This reduction in services leaves many vulnerable people without the crucial support they need, exacerbating issues like mental health and overall wellbeing.

Given the dire situation, it is imperative for charities to explore alternative funding sources. One such potential avenue is a hypothised lottery or raffle draw for their particular cause. While lotteries are not a complete solution and charities still need direct donations, they offer a unique opportunity to engage a broader audience. Charity Lotteries can attract individuals who are interested in the fun of a possible win while also wanting to support charitable causes and decide on the cause they wish to support.

Economic downturns can present significant opportunities for lottery operations, which often see an increase in sales as they provide hope to a wide audience. However, success in this area requires effective marketing strategies, understanding the needs of players, and crafting compelling messages that resonate with potential customers. In particular, they need a compelling game that isn’t an off the shelf / one size fits all solution but rather one that is tailored to their charity, to help stand out in a crowded space.

At Aqueria International Ltd., established in 2009, we bring over 100 years of collective Lottery Consultancy experience in the sector. We have a proven track record of supporting both established and emerging lottery operations around the world. Our expertise encompasses the operational challenges faced by the industry, successful methodologies and innovative solutions necessary to create competitive and diverse offerings.

Launching yet another lottery draw in a saturated market can be time-consuming and expensive, with a lengthy period before any return on investment is seen. Instead, Aqueria excels in developing innovative prize draws that stand out with unique value propositions. These draws not only differentiate against competition but also appeal to a broader customer base, particularly targeting younger demographics. Additionally, we have established a partnership with highly proficient technology providers to offer a fully operational / turn key platform with a minimal upfront installation cost and a small percentage of sales model, making it more accessible for charities to launch their own Charity lotteries offers.

Our focus on developing marketing strategies, understanding player behaviour, and product innovation has not only created legacy products in many jurisdictions but also generated millions in revenue for charitable causes. We believe that with the right approach, Charity lotteries can play a pivotal role in helping charities increase their funding, particularly during challenging economic times.

The cost of living crisis is expected to persist and its impact on charities that rely heavily on donations is profound. However, by leveraging lottery operations, charities can secure an additional funding stream that helps them continue their vital work. Aqueria’s extensive experience in the lottery industry can provide the expertise needed to maximize the potential of lotteries to benefit charitable organizations and grow their customer base.

If your charity is interested in exploring how a lottery can help boost your funding or if you are looking to enhance the revenue returns from your existing lottery / raffle offering, we would be delighted to discuss how we can assist you in achieving your goals.

To see a real-world application of our approach, watch our introductory video on the PaaLs platform, which outlines a fully developed, non-zero-sum, prize draw model tailored for today’s social and economic realities. You can also read our article “Introducing PaaLs – A Non-Zero-Sum Prize Draw Innovation” for a brief overview of the concept and how it could support your charity’s long-term funding goals.

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While technically Gaming/Gambling is prohibited in the U.A.E., a select group of operators have been offering for some time now, Prize Draws (Raffles and Lottery number Draws), seemingly with the State’s tolerance. However, as more Operators seek to enter the market, the pressing need for State regulation becomes evident, both to safeguard its citizens and ultimately, to harness potential new revenue streams.      

For the past 15 years, Aqueria’s Lottery Consultants have played a crucial role in fostering the growth and establishment of Gaming operations in emerging Sharia gaming markets, with a particular emphasis on Sharia-compliant states, including the U.A.E.

Consumer habits continue to evolve at pace – driven by convenience, new distribution channels /products / services, technology and changes to the way disposable income is spent. BUT at Aqueria we believe it should be highlighted it is not simply a case of ‘If you build it, they will come’. Brand affinity and consumer demand to play the games must be generated to earn the Player’s advocacy and discretionary spend – ultimately to avoid a Business Plan reliant on impulse purchases alone.

Beyond our hands-on involvement, we’ve consistently championed the need for tailored portfolio innovations with compelling reasons to play, over a “one size fits all” solutions traditionally seen in the lottery sector. This includes products, marketing and services that offset the inherent Zero-Sum characteristics of the Draw Game model – by advocating: greater transparency in Social Welfare Causes, the introduction of value-added propositions and participation benefits. In order to sustain engagement, authentic CSR initiatives need to be developed that not only make a quantifiable positive impact on society but also contributes to significant and ongoing growth for businesses.

We have found that such forward-thinking offerings to Sharia gaming markets do not only appeal to today’s discerning and also at times, fickle consumers but are also more likely to receive a favourable reception from a Muslim State and its Sharia authorities.

For an example of how this model applies to charitable funding, see our article on Charity Lotteries and the Cost of Living Crisis.

You can also watch our introductory video to see how PaaLs brings this concept to life.

Kon Kalemis / Matt Osgood

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The future of Lotteries.

Over the past decade, lottery participation rates in mature markets have been steadily declining. This raises the question of whether lottery products still hold the same relevance today — and what the future of lotteries might look like.

In the not too distant past, engaging with lottery products was seen as a recreational activity. Players purchased their lottery tickets and eagerly awaited the weekend draw in the hope of winning a life-changing prize. And even if they didn’t win, there was some consolation in knowing that a portion of the money spent contributed to social welfare causes.

However, consumer perceptions have shifted in recent years, particularly among younger generations who are more “educated” and aware of the remote chances of winning a major prize. Furthermore, there is also a growing perception that a significant portion of the funds generated by lotteries do not actually reach social welfare causes, but instead are used to fill the State’s fiscal gaps. While mobile app games and social media platforms have emerged as more appealing forms of entertainment, better suited to meet the needs and attention of today’s consumers.

In this post, we will look into some factors influencing the changing perception of lottery products and explore potential strategies for the industry to maintain relevance in the modern era.

Shifting Consumer Perceptions

Lottery participation was historically seen as a socially acceptable and inexpensive form of entertainment. However, as governments began relying on lottery revenues, the industry faced increasing pressure to boost sales. This led to (amongst other) the introduction of more games, higher ticket prices, the expansion of retail outlets, the introduction of interactive platforms and aggressive marketing campaigns… Bringing in as far as consumer perception is concerned, Lottery Operations on par to engaging with Commercial Gaming Operators and potentially, any negative stigma attached.

Disruptions in the Digital Era

The advent of mobile devices and social media platforms has transformed the consumers’ view of what is “entertaining”. Instant access to personalized and interactive experiences is drawing attention away from lottery engagement.

Engaging the Younger Generations

Younger generations are more educated; possess unique consumer characteristics and preferences that pose both challenges and opportunities for the lottery industry. This generation is motivated by social values, cultural diversity and experiences. With limited disposable income, they are price and value conscious.

Strategies for Maintaining Relevance

To ensure the continued relevance of lottery products in the 21st century, the industry must consider the following strategies:

Realignment with Core Values

Lotteries need to revisit their core values and refocus on the social benefits which they were originally created to facilitate. By enhancing transparency in fund distribution and actively communicating the impact of lottery revenues on social welfare causes, lotteries can restore trust and reinforce their relevance.

Technological Adaptation

Embracing interactive technologies and developing user-friendly mobile applications can enable lotteries to meet the evolving consumer expectations. These advancements should aim to provide convenient access, incentives for mobile app usage and seamless integration with social media platforms. As discussed in http://aqueriainternational.com/lottery-land-based-distribution-network/ these adaptations also need to bridge any e-commerce generational gaps.

Collateral Participation Benefits

Draw game innovations coupled with the introduction of collateral participation benefits can enhance the value proposition for lottery players. This can include incorporating prize-linked rewards and directing a portion of the prize pool directly towards social welfare causes to align with corporate social responsibility initiatives. Such initiatives can foster brand integrity, consumer trust and differentiate an offering in a competitive market.

The evolving landscape of the lottery industry requires a proactive approach to maintain relevance in the modern era. By understanding the factors influencing the changing perception of lottery products and embracing innovative strategies, lotteries can navigate these challenges and continue to provide the social benefits they were created to facilitate. Ultimately, those who fail to anticipate the future of lotteries risk falling behind in an increasingly value-driven, digital-first market.

To see how one next-generation model responds to evolving consumer expectations, watch our short video introducing PaaLs – a non-zero-sum prize draw innovation.

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The land-based distribution agents are, for all practical purposes, the ambassadors of state lottery operations and fundamentally constitute their greatest asset. Yet, despite their crucial role, we consistently witness long-term operational strategies that sideline the land-based agents, as evidenced by the steady reduction in agent fees.

A land based distribution network offers several advantages for lottery operators:

Wide Reach. A land based distribution network allows the lottery operator to reach a more diverse customer base across different regions. Retail locations strategically placed in high-traffic areas provide convenient access for customers who prefer in-person interactions.

Accessibility. Land based distribution networks provide customers with easy access to purchase lottery tickets as part of their regular consumer routines. This is particularly beneficial for customers who may not have access to online or digital platforms, may be less familiar with e-commerce, prefer anonymity and exhibit impulse purchase behaviour.

Customer Engagement. Physical retail locations enable lottery operators to engage with customers face-to-face. Retail staff can provide information, answer questions, and offer personalised recommendations, fostering loyalty and enhancing the customer experience.

Cash Transactions. Land based distribution networks facilitate cash transactions, accommodating customers who prefer using physical currency or lack access to digital payment options.

Marketing and Promotion. Retail locations serve as valuable marketing platforms for promoting lottery games and special promotions, creating brand presence and awareness, and generating interest among potential customers.

Trust and Transparency. Physical retail locations help establish trust and transparency in the lottery industry. Some customer demographics may have more confidence in purchasing physical tickets from authorized retailers, alleviating concerns about digital engagement and the risk of fraud or scams.

Competitive Advantage. In licensed gaming markets the retail network also provides a competitive advantage as many commercial gaming operators predominantly distribute their products and services online.

Community Engagement. Lottery operators with a land based distribution network can actively engage with local communities, supporting retailers through joint marketing initiatives, sponsoring local events, or contributing to charitable causes. This enhances brand reputation and builds positive relationships within the community.

By leveraging a land-based distribution network, lottery operators can cater to diverse customer preferences, maximize market potential and create stronger customer relationships. This complements online channels and offers a distinctive edge in an industry where digital platforms dominate.

While we agree that digital interactive platforms will inevitably become the major point of contact, we argue that an omni-channel distribution network should be exactly that. As online sales continue to grow, lottery operators need to strike a balance between these two channels and develop strategies that reduce the gap and support the customer’s transition. Some good examples we find in the industry include the introduction of self-service terminals, mobile terminals and e-ticket mobile applications.

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While State Lotteries strive to integrate emerging technologies to their land-based business and in doing so, further enhance the competitive advantage a land-based distribution network offers. So do the requirements increase for higher quality secure network connectivity and data transfer.

Today more than ever, the technological infrastructure connecting a Lottery Operator with its land-based agents is not merely limited to the critical network uptime requirements of the normal cycle of ticketing transactions. The networks must also cope with the increasing requirements for data transfer. To either: inform/alert the agents of any notable events or to advise players (via Visual Display Units) on jackpots, launches of new games, cross-sales promotions and announcements of general social interest.

When it comes to Lottery network connectivity supply, traditionally lottery operators turn to major telecommunications companies in their state/territory and negotiate a package deal for a generic internet service (LAN and/or mobile) for the total number of distribution agents and merchants.

However, this commodity approach to networks has its inherent deficiencies. When comparing specialised connectivity services to the typical commodity connectivity supply around the world, we have noticed practically and without exception that:

1. There are substantial regional variations in the quality and speeds offered by even the more advanced telecommunications providers – be it LAN and/or mobile SIM-card based connectivity solutions.
2. Most connectivity packages negotiated, follow exclusively a price sensitive mass supply approach and are fundamentally structured to accommodate the average per site requirements. They do not account for the actual varying requirements from one land-based Agent to another, nor peak transactional requirements during a typical Lottery day or a week.
3. Due to the lack of forward-looking active network management, any downtime experienced is typically dealt by the telecommunications provider only once the problems have been escalated. And usually falls in the client emergency tray along with any other client network failures.

Yet there are effective ways in which each individual Agency’s connectivity requirements can be addressed. Especially when the focus is predominantly on the quality of service rather than the cost alone. Since let’s face it, it is the quality of the connectivity service that assures revenues.

Indicatively, such services could include: network agnostic SIM-solutions, financial transaction grade security and network integrity, proactive monitoring of the performance to ensure an optimal level of uptime and superfast recovery, in the event any downtime is experienced.

Get in touch with our team to discuss how we can help you to address your Lottery Network Connectivity challenges, to grow your land-based business and ultimately increase designated funds for good causes!

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Over the past decade, lottery participation rates in mature European markets have been steadily declining. This decline can predominantly be attributed to several factors:

• Natural Attrition: The traditional lottery customer base is naturally diminishing.
• Emerging Alternatives: New forms of entertainment, especially through interactive channels like mobile apps, are becoming more popular.
• Lack of Innovation: There is a significant lack of innovation in traditional draw games.
• Changing Consumer Preferences: Evolving consumer decision-making processes and preferences are shifting away from traditional lottery products.
• Engagement of Younger Generations: There is a notable lack of engagement from younger generations.

While these factors are at play, our industry involvement suggests that solutions exist and are readily accessible. These solutions, driven by the player base itself, fundamentally relate to a long-overdue realignment with core lottery values and the development of various “Collateral Participation Benefits” that add tangible value for the player.

This is good news if you, like us, want state lotteries to continue providing the social benefits they were originally created to facilitate.

Understanding the Influencing Dynamics

If we understand the influencing dynamics, we can modernize the age-old lottery model, ensure its social benefits endure, and minimize the tendency toward harmful gambling.

Evolution of Consumer Beliefs and Values

Developments in interactive technologies are consistently reshaping how we perceive and interact with the world. Consumers today have access to readily available information, empowering them to reassess traditional beliefs and how they interact with businesses.

Shifts in consumer preferences relate to two main aspects:

1. Adaptability: The ability to understand the importance of change and make decisions on where to invest or spend resources.
2. Trust in Businesses: The realization that businesses do not always have the customer’s best interests at heart, leading consumers to seek alternatives that better meet their requirements, convenience, and overall satisfaction.

According to the 2017 Edelman Earned Brand study:

“57% of consumers around the world will buy or boycott a brand solely because of its position on a social or political issue… with 30% saying they make these belief-driven purchase decisions more than they did three years ago.”

This study highlights two key engagement drivers:

• Rising Consumer Expectations: Consumers expect brands to help solve societal problems.
• Belief-Driven Purchases: Millennials (60%), Gen Z (53%), and Gen X (51%) increasingly buy based on a brand’s values and beliefs.

Given that state lottery operators are traditionally seen as champions of welfare causes, why are we, especially the younger generations, engaging less with lottery products?

State Lottery Evolution

Historically, many state lotteries were founded to address extraordinary cases of human suffering, providing relief for victims of war, epidemics, and natural disasters. More recently, lottery operators have maintained their social contribution by supporting numerous welfare projects and providing employment to thousands of families.

Traditionally, lottery participation was part of a weekly routine, offering entertainment through the anticipation of winning a life-changing prize and the knowledge that a substantial portion of the funds contributed to social welfare causes.

Within this framework, lottery draw game participation, including raffle tickets and scratch cards, was seen as a socially acceptable and inexpensive form of entertainment. In contrast to other forms of gambling, such as casinos and horse racing, lottery players would fill in a coupon with their lucky numbers, pay with some loose change, and wait for the Saturday night draw.

However, lotteries are typically state-run, serving government policy. As lottery operations grew, so did government interest in exploiting this source of financial liquidity. Lottery revenues became a significant part of government budgets, providing funds for reallocation as needed.

As government requirements for additional revenues increased, so did the pressure on lotteries to boost sales. This led to:

• Increased Draws: More draws per week and the addition of new draw games.
• New Game Introductions: Development of new games and gaming segments.
• High Payout Games: Introduction of high payout and multi-jurisdictional draw games.
• Ticket Price Increases: Incremental increases in ticket prices.
• Expanded Retail Networks: Increased number of retail outlets and the introduction of interactive platforms.

In a relatively short period, the lottery industry transformed into a gambling network, necessitating addressing responsible gaming and problem gambling issues.

Despite the popularity of big prize draws, especially multi-jurisdictional games, which engage a broader demographic, shifts in player preferences toward games offering high churn, instant gratification, and perceived skill (like sports betting, VLTs, and casino games) have reduced gross gaming revenues for operators, ultimately decreasing state revenues .

As state revenues decline and the gap between lottery and commercial gaming operators narrows, governments are moving toward:

• New Regulatory Frameworks: Developing new regulations.
• Additional Gaming Licenses: Issuing more gaming licenses.
• Gaming Taxes: Introducing new gaming taxes.
• Privatization Considerations: Considering the privatization of state lottery operations.

Lottery Evolution and Public Perception

Over the past two decades, State Lotteries have gone to great lengths to develop products and distribution services that appeal to a broad range of Player profiles. In most cases they have been quite successful in doing so. Yet, they may have also fallen into the trap of shifting the public’s perception away from their traditional identity as they appear to focus more on the regular “Gambler” rather than the recreational “Lottery Player”.

In today’s comparatively more informed society, any form of recreational gaming/gambling is not perceived as a social taboo however addictive gambling is, and it is frequently a focal point of social discussion

State Lotteries have been, and inherently are, “all player inclusive” champions of social welfare causes (such as: the arts, sports, culture, education etc.). Their core products and main differentiaton has always been the Lottery Draw Games (the monopoly status of which is still broadly protected by regulation) and have traditionally consolidated their presence through their land-based distribution network.

Within a competitive, open and regulated Gaming landscape it is vital for State Lotteries to accommodate evolving and shifting Player preferences. Yet we suggest that this must not obstruct focus and the prospect of further enhancement of a Lottery’s unique and differentiating attributes i.e. its draw Games and Agent’s Network.

“Good Causes”… Where’s the money?

According to the EL Association 2016 Report:

“money contributed to society by 49 EL Members in the EU (that reported their contributions) amounted to €21.3bn. The funds have been channelled towards sports, funds for other good causes and taxes for treasury…”

While Lottery Operations generate a phenomenal amount of money for good causes, the management and distribution of these funds are the responsibility of the respective State Treasuries. This process is often unclear to the general public as to who manages the distribution process, what amounts reach the intended recipients and what amounts are redirected to cover fiscal shortfalls.

This lack of clarity and transparency obviously creates a conflict of interest. Since the public may not understand the process and associate the lack of Good Causes funds visibility a fault of the Lottery rather than the Government [3].

The need for Draw Games Innovation

As mentioned, big Prize Draw pay-outs (especially multi-jurisdictional Draw Games) receive popular support by capturing the public’s imagination. However more intuitive (customer focused) draw game innovations have been few and far apart.

There are two notable and well received exceptions.
(1) The “Second Chance Draw” which gives lottery ticket and/or scratch card purchasers the opportunity to register tickets that have not won a prize into an additional pre-defined Prize draw.

(2) The “Bonus / Seasonal Prize Draws”- which guarantees an additional number of big prize winners at no additional cost to the Players.

In various Lottery panel discussions, there is an increasing call to re-examine the traditional “hourglass” division pay-out structure – one in which, the majority of the prize pool is distributed to the highest and the lowest matching number pay-out divisions.

Some Lottery professionals have suggested that there is a need to develop greater Draw matrix flexibility. E.g. in high roll-over jackpots, an increase in the allocated prize pool for division #2 and #3 winners or alternatively; to fund such prize increases, with a slight reduction to the Lottery’s GGR. Furthermore, the questions have also been raised regarding the “value” of small division pay-outs especially when considering the allocated portion of the Prize Pool required to fund it and whether this truly encourages player engagement (“Goods vs. Money” section below) [5].

“Under normal circumstances, I do not play the lotto. If I happen to be at a convenience store, I may play the state lotto, but even then it’s a ridiculous waste of money… The odds are horrible…”

Millennial – Jeff Van Dien, Portland, Oregon[4]

Land Based Agents Have the Power to Engage

No matter how you look at it, the greatest asset a State Lottery Operator has is its human resources and its most critical component is its Lottery’s ambassadors – its land-based Agency network.

Interactive platform developments are imperative to ensure the future viability of any Lottery Operator. To an extent the industry has also briefed the benefits (cost, time and access efficiency) of POS Lane networks [6]. However, no one should undervalue the significance the traditional agent network has had and continues to have, as a preferred point of purchase of what still constitutes the core of a Lottery’s customer base.

Overall, apart from providing invaluable “Brand Publicity” and customer services support. The land-based agents network also contributes the greatest part of a Lottery Operators’ GGR. Yet in most cases a Lottery Operator’s development strategies overlooks the agents’ contributions and interests (e.g. interactive channel developments).

As a result, most European Lottery agents have been experiencing a steady decrease in their revenues from Lottery product sales. This ultimately undermines the Agent’s loyalty to the Lottery Operator and potentially results in the loss of the agent’s interest in promoting, dedicating time and effort to lottery sales. The result – Declining Lottery Engagement.

Two Critical Disruptions

Era of Mobile Devices

Social media platforms and digital gaming engagement (predominantly via mobile devices) are becoming an ever-increasing recreational source across all age groups and demographic profiles. These instant access points of alternative and personalised entertainment naturally compete for consumer’s attention, time and disposable income from what most Lotteries currently offer [8].

The obvious challenge Lottery Operators are facing is to develop mobile applications that are practical and create the right circumstances (incentives) to encourage mobile app download and, in particular, usage.

“Social networking, listening to music, watching videos and playing games represent the bulk of what people do with their smartphones and tables. Essentially it’s about communication and entertainment, two things that help people to cope with the level of stress in today’s world.” – Artyom Dogtiev

Prize-Linked Products and Services

Offering prizes as part of a customer reward program is becoming an increasingly popular way for corporations to establish direct links with their existing and potential customer base. On a fundamental level the use of a prize in a giveaway, contest or sweepstake acts like a catalyst in motivating people to engage.

These types of corporate marketing and/or customer retention campaigns are a great way for businesses, (including Lottery Operators), to:
•      build on brand integrity and consumer trust,
•      retain customers by rewarding them for their loyalty,
•      differentiate an offering by providing meaningful value to targeted demographic groups,
•      gather vital customer information, and
•      monitor consumer behaviour.

These “Prize-Linked Rewards” fundamentally represent a manifestation of a wider “do good” attitude of the corporation and become an entrenched function of their CSR policy.

The worth of the offering in these programs is not just the financial value – although it is very important. The real impact comes from linking the brand, customer and the customers’ inherent beliefs and values in an engaging, fun and rewarding manner.

Accordingly, additional collateral benefits are often incorporated which fit well into the Corporate Social Responsibility strategy. Indicatively, parts of the prize pool can be directed to social welfare causes on behalf of the customer or they can extend a corporation’s CSR. For example, in the case of a bank – to fund a Financial Inclusion programme with the support of prize draws.

Admittedly, many corporations still have a fragmented view of how to develop a comprehensive 360° customer rewards programme. However, as they come to appreciate the marketing value such a programme can provide these reward programmes will inevitably impact on a Lottery’s offering since ultimately, participation is becoming part of a consumer routine and requires no additional financial commitment!

The Millennial Challenge

“Some observers believe that Millennials’ relationship with the lottery will be shaped predominately by their life-stage progression, a view that may be limiting and misses a unique opportunity to capture the momentum and energy of a wave that can help to propel the industry forward. What’s more, since Millennials’ digital gaming habits are likely to get stronger as they age, neglecting to appeal to them today risks losing this group for the long term.” Gerard Caro, IGT Report.

“Entitled”, “narcissistic”, “lazy”, “delusional” [9]. The largest and most educated generation in human history is also “entrepreneurial”, “optimistic”, “idealistic” and leverages interactive technologies and social media in its quest to understand and interface with the world around it [10].

Naturally cynical towards authority (Government or big business) and disgruntled with the ills they have inherited, this generation is motivated by social values, cultural diversity, family, career and intrinsically focused on “living in the present” and “experiencing life” [11].

In their every-day reality many Millennials are struggling to find suitable employment (matching their qualifications), are historically underpaid, carry high student and/or personal debt and opt (many out of necessity) to live at their family home. While their vision for a financial future and independence, with runaway housing prices and poor pension prospects, appears rather grim [12].

Having experienced first-hand the 2008 Global Financial Crisis and the subsequent economic instability the Millennials are likely the most price/to value-conscious and risk averse generation ever [13].

At the risk of being overly-stereotypical, with comparatively less disposable income and diverse interests when it comes to what they considered entertainment, they prefer to spend much of their time on social media channels. They spend little money on music, digital games, internet/mobile services and save some money to travel. However, when it comes to transacting with business, Millennials prefer access to convenient interactive platforms and demand to be generously rewarded for their loyalty [14].

Therefore, the challenge is to engage these Millennials with Lotteries and/or prize-linked products which are (i) low cost (ii) represent a social worth (iii) are immediate and interlink with a social network, and (iv) represent intrinsic value or reward.

Solutions

Lottery Participation Benefits – LPBs

Traditionally, State Lottery Operations have been protected by their monopoly status. However, as industries are evolving to tackle the digital era challenges, so does the need arise for Lottery Operators to transcend beyond their traditional boundaries. They need to reassess their business policies, investigate ways in which they could leverage their brand equity and diversify their offering to incorporate value-added propositions.

Many of these propositions could be developed and managed by the Lotteries themselves. Yet, it is also suggested that Lotteries should look outside their industry and enter into synergetic ad hoc collaborations and longer term joint-ventures with other high profile and reputable brands that reflect the “right image” and wish to engage with a Lottery’s sizable customer base.

The introduction of such propositions could (amongst other):
•      Advance brand equity – especially to younger generations
•      Provide additional forms of player amusement
•      Cost efficiently supplement prize pools
•      Counterbalance the intrinsic “zero-sum” gaming propositions
•      Engage and drive customer participation and attract new customers
•      Establish meaningful, from the customer’s perspective, communication links (e.g. App installation and usage)
•      Differentiate a Lottery’s offering against competition
•      Reactivate and enhance agents’ loyalty as new revenue streams could be realised
•      Generate additional profitability
•      Make a greater impact on society

In order to maximise the impact such services could have, we recommend both a micro and a macro level approach. To offer products and services that:
(1) respond to the needs and expectations of specific player demographic groups and individuals, and
(2) appeal to the greater consumer base.

“When it comes down to it, isn’t that (creating welfare/positive value) the objective of most organizations?” – Varun Malik

Goods Vs. Money

Typically, more than 35% of a prize draw prize pool is allocated to fund lower division prizes (€1 to €10). Traditionally this may have been seen by players as a pleasant consolation prize and worked well for Lottery Operators as, most often, these prizes were instantly converted into next draw ticket purchases.

However, taking into account the increasing disparity between first division prizes and lower prize pay-outs the question arises: Would it not be more meaningful for players to receive a portion (or the whole) of the lower division prize pool in the form of goods and/or services, or even be given that option?

Lottery Operators have the ability to achieve substantial volume discounts and the prospect of further reducing any procurement costs with the potential sponsorship contribution from participating corporations. In managing this, the ultimate value of goods could substantially surpass the nominated monetary prize value.

Overall, It is suggested that the selected Prize goods should be relevant to a chosen Gaming Segment and the anticipated appeal it has to correlating player groups.

The Question

The above is quite positive and potentially adds an extra dimension to Lottery engagement. However, it does not go as far as to strongly redefine the relationship between the Lottery Operation and its potential customer base; nor does it realign prevailing perceptions towards Lotteries in contrast with what they inherently represent.

“Consider the notion of a Lottery working with Society and through participation, everyone benefits… not just good causes as per the traditional model”… David Evans

Lottery operations have the opportunity to “take up the call” again and address two critical challenges.

1/ To counteract social and academic reaction to the way they the conduct their business.
“A fairly sizable body of literature has explored the relationship between the socioeconomic characteristics of a state’s population and lottery ticket sales. These studies generally find that lottery sales are higher for individuals who belong to minority groups, individuals with little or no college education, residents of urban areas, and individuals between the ages of 45 and 65”. – Thomas A. Garrett / Russell S. Sobel.
&
2/ Make a genuine impact on the challenges faced by today’s society.
For example, much research identifies how the Millennials are distressed about their short and long term financial future [15]. The challenges they face in saving money in the present and contributing to a future pension plan. How socioeconomic changes are creating “unbanked generations” with potentially disastrous ramifications for both the Finance Industry and Governments alike [16].

Thus, it follows that the natural question to ask is:

Wouldn’t be a novel idea if Lottery Operations could actually assist its customers in long-term saving, or to save money in their everyday shopping and home bills or be offered affordable insurance plans…?

Well, I’m glad to report that this is not just a novel idea. That crucial innovations that resolve a number of seemingly intractable issues faced by the Lottery industry today have already been developed: They have received (wherever presented) broad Institutional and Governmental support and are being implemented.

If it’s any measure of how successful this approach has been, it should be noted that in one particular country of implementation, a client of ours has been granted a Fatwa and Religious Ruling for the Sharia compliance of the Products and Services co-developed.

This model is the result of the cumulative effort of a team of leading professionals dedicated in developing solutions that counteract the “zero-sum game” proposition associated with traditional Lotteries. This model takes into account the dynamics described in this report, and goes even further in creating totally new value propositions that reward customer participation. The ultimate objective being, to give back to society in a novel way and to create a genuine win-win situation for all parties involved.

“The Lottery Industry’s future will belong to visionary corporations and creative thinkers. Corporations that focus on real social values, provide real customer centric services and consistently evolve to meet customer needs and expectations….”[17].

Acknowledgements

Special thanks for their inputs and guidance: Christophe Stourton, Teemu Lehtinen, William Taylor, David Evans and the Omarco Team.

Notes

1. 2016 EL Report – EU El Member sales Y.O.Y. 2011-2015 0.5% / GGR 0.4% – The argument is that sales are maintained via repeated cross-sell to the core customer base.
   Reports: Per Binde / Anil Dawar / John W. WelteEmail authorGrace M. BarnesWilliam F. WieczorekMarie-Cecile TidwellJohn Parker – “Gambling Participation in the U.S.—Results from a National Survey”
2. Anders Leonhard / EL Association Report 2016 – EU El Member sales Y.O.Y. 2011-2015: DBG -1.5%, IWG 4.1%, SB 8%.
3. Lottery Operators have a natural obligation to raise public awareness of the funds contributed. This in turn, puts pressure on the Government to be more accountable.
4. Zack Huffman reporting for VICE.
5. T. A. Garrett. “The results show that ticket sales are significantly influenced by the size of the top prize and the odds of winning it, but ticket sales are not significantly affected by the expected value of the lower prizes.”
6. Offering Lottery products via retail chains e.g. supermarkets, convenience stores.
7. Due to rapid increase of POS/Capita, Interactive Channels growth, market share competition.
8. Statistica.com – 2018 est. Smart Phone users 2.53b reaching 2.87b in 2020.
9. Simon Sinek on Millennial and Internet Addiction – https://www.youtube.com/watch?v=OPaQPWfqjmw&t=12s
10. http://www.youngadultmoney.com/2017/11/08/statistics-millennials-and-money/ https://millennialmoney.com/the-millennial-generation/
11. Ibid
12. Aime William’s – FT©. – Special thanks for your most insightful work.
13. Matt Cohen / Mrinalini Krishna / Matthew Harrington
14. Kendra Thompson, Edward Blomquist – Accenture / MILLENNIALS & MONEY: THE MILLENNIAL INVESTOR BECOMES A FORCE
15. Aime William’s – FT©.
16. Harlan Landes / First Data.
17. Paraphrasing Henri Arslanian – Talking on evolutions in the Finance Industry – https://youtu.be/pPkNtN8G7q8

References

MillennialMoney.com, “The Millennial Generation”,
millennialmoney.com/the-millennial-generation

Sarah Landrum, “How Millennials Are Doing Money Management Differently”, Forbes.com

Accenture, “Millennials and Money – The next era of wealth management”
https://www.accenture.com/gb-en/insight-millennials-money-wealth-management

Matt Cohen, “Millennial Engagement is not a Zero-sum Game” https://www.linkedin.com/pulse/millennial-engagement-zero-sum-game-matt-cohen-mba/

Aime Williams, “Why millennials go on holidays instead of saving”, Financial Times https://www.ft.com/content/94e97eee-ce9a-11e5-831d-09f7778e7377

Mrinalini Krishna, “Millennials Are Risk Averse and Hoarding Cash” June 20, 2017, https://www.investopedia.com/news/millennials-are-risk-averse-and-hoarding-cash/

Anders Leonhard, “Danish Games sells record-wide games to the Danes – but earns less money”, FINANS – 28.02.2018

The European Lotteries Association – Report on Lottery Sector, 2010-2016

Zack Huffman, “Are Millennials Killing the Lottery Industry?”, VICE – Oct 13 2017
https://www.vice.com/en_us/article/a3kaza/are-millennials-killing-the-lottery-industry

Gerard Caro, “Millennials Matter: Tapping Into the Preferences of a Game-Changing Demographic” New IGT White Paper – 09/27/2017

Simon Sinek, “Millennials in the Workplace”, https://www.youtube.com/watch?v=As8XkJNaHbs&t=570s

Gary Green, “The Ugly Truth About Millennials and the Future of Casino Gambling”
https://www.linkedin.com/pulse/ugly-truth-millennials-future-casino-gambling-gary-green/

Emily Kumler, “Gaming the System: Why We Need Millennials to Gamble”, 7/9/2017
www.bostonmagazine.com/news/2017/07/09/millennials-gambling

Goldman Sachs (Research) – “Millennials Coming of Age”
http://www.goldmansachs.com/our-thinking/pages/millennials/

LinahAburahmah, HajarAlRawi, YamamahIzz, LiyakathunisaSyed, “Online Social Gaming and Social Networking Sites”, https://www.sciencedirect.com/science/article/pii/S1877050916300254

Ofcom (Research), – “Adults’ media use and attitudes Report 2017”, https://www.ofcom.org.uk/__data/assets/pdf_file/0020/102755/adults-media-use-attitudes-2017.pdf

Sarah Perez, “Time spent in apps grew just 6% last year, down from 11% in 2016”
http… techcrunch.com/2018/01/16/time-spent-in-apps-grew-just-6-last-year-down-from-11-in-2017

Artyom Dogtiev, “App Download and Usage Statistics 2017”
www.businessofapps.com/data/app-statistics

Hackernoon.com, “How Much Time Do People Spend on Their Mobile Phones in 2017?”
https://hackernoon.com/how-much-time-do-people-spend-on-their-mobile-phones-in-2017-e5f90a0b10a6

Peter Tufano, Nick Maynard, Jan-Emmanuel De Neve, “Consumer Demand for Prize-Linked Savings: A Preliminary Analysis” http://www.hbs.edu/faculty/Publication%20Files/08-061_17c22e32-fe06-4b4a-8b5e-e09227fc8104.pdf

Shawn Allen Cole, Benjamin Charles Iverson, Peter Tufano, “Can Gambling Increase Savings? Empirical Evidence on Prize-Linked Savings Accounts” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2441286

Harlan Landes, “Young Americans Likely to Be Unbanked Regardless of Income Level”, Forbes
https://www.forbes.com/sites/moneybuilder/2012/05/25/young-americans-likely-to-be-unbanked-regardless-of-income-level/#63b203f4928a

Matthew Harrington, “Millennials: The “Risk-Averse” Generation?”, ATD https://www.td.org/insights/millennials-the-risk-averse-generation

Per Binde, “Fewer Swedes gamble”, The Anthropology of Gambling,

Bruce LaFleur, “Lottoland: The Force”
https://www.linkedin.com/pulse/lottoland-force-bruce-lafleur/

Varun Malik, “Is Market Value enough? A proposed method for measuring an organization’s “Real Value”, https://www.linkedin.com/pulse/market-value-enough-proposed-method-measuring-real-varun-malik/

Anil Dawar, “Even MORE difficult to win as National Lottery player numbers crash to 32%”, Express – UPDATED: 09:28, Thu, Sep 28, 2017
https://www.express.co.uk/news/uk/648300/difficult-win-National-Lottery-player-numbers-crash

Thomas A. Garrett, Russell S. Sobel “STATE LOTTERY REVENUE: THE IMPORTANCE OF GAME CHARACTERISTICS”, https://pdfs.semanticscholar.org/3651/e3d7f7af27e001d14bf536eb23c37fab283d.pdf

First Data, “The Unbanked Generation: A Guide to the Financial Habits of Millennials”
https://www.firstdata.com

David Carlson, www.youngadultmoney.com
www.youngadultmoney.com/2017/11/08/statistics-millennials-and-money

Edelman.com/research
https://www.edelman.com/research/millennials-money

The post There are Solutions to Declining Lottery Engagement appeared first on Aqueria International – Lottery Consultants.

Aqueria International, in conjunction with its technology and Marketing Partners, is developing a multiple touch point platform (PC/Laptop, Tablet, Smart Phone, SmartTV) that facilitates: Prize Draw Customer Rewards Programmes, informs customers of running and seasonal promotions and updates on corporate news and developments.

Our platform’s integrated system automates most of the customer interface and management processes ensuring thus, high levels of security and confidentiality in the handling of the customer information and efficient productivity.

In the course of designing and developing our integrated platform we have focused on ease of use, 24/7 accessibility, the support of plug-in functionality for extensions (ex. social media channels), the flexibility in managing the customer data base and system maintenance.

The ultimate objective being, the enhancement of the quality of services provided and solid customer engagement.

Indicative Key Features:

• Highly focused on Customer Engagement, Acquisition and Retention
• Supports brand awareness, product integrity and consumer trust
• Enhances customer confidence to participate through the system’s transparent engagement processes
• Enables automated registration/entry via social media platforms
• Flexible and highly automated technology – designed to be managed with minimal effort by in-house Marketing Teams
• The platform can be used as a separate “stand-alone” web interface or in conjunction with an existing corporate site
• Flexible Random Number Generator matrix
• The system generates and forwards Prize Draw entry numbers prior to any scheduled Draws and allocates such to participating customers enhancing thus: participation, anticipation and loyalty
• Enables promotional/informational email push campaigns to total customer base and/or selected demographic segments of the  customer base
• Generates reporting regarding customer engagement and conversion rates

Aqueria Int. applies its customer centric knowledge and insights for the development of innovative and vividly compelling Prize Reward Programmes which tap into the consumer psychology, are engaging, value driven and flexible so that they consistently meet evolving customer preferences. (Case Study: https://www.linkedin.com/pulse/prize-linked-products-services-kon-kalemis/ )

The post Prize Draw Customer Rewards Platform appeared first on Aqueria International – Lottery Consultants.