BuSiNeSS PlAN - California Lottery

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Other Strategies to Maximize Scratchers SalesThe CSL has recently adopted a more aggressive approach tothe use of callout messaging on Scratchers tickets. Callout messagesseek to capitalize on a game’s particular strength, suchas a large top prize or good overall odds of winning. Over thepast year, the CSL has added more ticket messages about topprizes, the number of prizes in a game, or the total amount ofprizes in a game. While the results have been generally positive,the CSL has a need to better understand exactly how and whycallouts drive consumers to buy a particular game. To answerthese questions, the CSL formed a joint initiative with ScientificGames to determine the optimal number and type of callouts forthe purposes of maximizing Scratchers sales. The end result ofthe research is a secure, interactive database containing detailedinformation about over 15,000 Scratchers games, over 500,000weeks of sales data, and over 7,100 ticket images. All of this datais sorted and filtered to help us determine the optimal messagingstrategies for different types of Scratchers games.In fiscal year 2005-06, the CSLsupported local businesses by payingretailers sales commissions of over$252 million.Another strategy the CSL has used to stimulate incremental Scratcherssales has been to increase ticket prices and providing a more involvedgaming experience which takes longer to play. Again, this has been anindustry best practice, but it effectively requires higher prize payouts tosupport the more expensive games where players have come to expectmore value.Figure 4.13 – Scratchers Game Price Point Distribution5.13 Scratcher’s Game Price Point Distribution Calendar Year 2006Calendar Year 200645%40%35%44.00%IndustryCalifornia30%25%20%15%13.80%19.80%25.20%20.60%24.00%15.60%19.70%10%8.60%8.00%5%0%0.00%$1 $2 $3 $5 $10 $20+0.00%Source: La Fleur’s 2007 World Lottery Almanac– 54 –California Lottery 2007–2010 Business Plan
As shown in Figure 5.13, the lottery industry is introducing much higherprice point Scratchers games than California. Most state lotteriesoffer both $10 and $20 Scratchers games and, in 2006, over 27% ofall Scratchers game sales within the lottery industry came from $10and $20 games. California has yet to introduce a $10 or $20 game, andcan only occasionally introduce $5 games due to its limited prize fund.Portfolio OptimizationOne strategy that can be applied to both draw games and Scratchersgames is the concept of portfolio optimization. Portfolio optimizationrequires aligning, positioning, and setting prize payouts for each gamewithin the portfolio to maximize revenues.For every game of chance, including lottery games, there is an optimumprize payout level that maximizes the amount of revenue generated. Forexample, casino keno and bingo games tend to pay out in the range of80% of the dollars wagered. This payout level is presumed to maximizecasino profits, because if casinos could make additional profits by loweringthese prize payouts, they clearly would. Slot machines tend to pay outat about 94% of sales and, again, this is based on business decisionsdesigned to maximize profits.The CSL only has the ability to pay out just under 54% of total salesfor prizes. However, this overall payout level can, and should, vary byindividual lottery game. And, as is the case for casinos, the CSL shouldadjust individual game payouts to optimize revenue for education. Becausethe CSL’s total prize payout capabilities are capped, the challenge is tooptimize total profits, recognizing that we can never maximize revenuefor education under current payout restrictions.For every game ofchance, including lotterygames, there is an optimumprize payout level thatmaximizes the amountof revenue generated.Historically, the CSL has introduced games on an ad hoc basis with littleregard to the positioning of games within the portfolio. An assessmentof all games within the portfolio may reveal that the CSL is not optimallydistributing prize funds across games or positioning games within itsportfolio. An example is the CSL’s lotto game portfolio. SuperLOTTOPlus is in direct competition with MEGA Millions. Both games havesimilar play styles and offer large jackpots.California Lottery 2007–2010 Business Plan – 55 –
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CommissionersJOHN MASS, of Los Ange
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Introduction
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IntroductionIn order to fulfill the
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focus on huge jackpots and more foc
Page 14 and 15: Figure 1.2 - 2004-05 K-12 Percent o
Page 16 and 17: 1.1% General Operating ExpensesGene
Page 18 and 19: SupermarketsAlthough supermarkets h
Page 20 and 21: handles all Spanish language advert
Page 22 and 23: Fantasy 5Value Proposition: The bet
Page 24 and 25: 1.6 Organizational Structureof the
Page 26 and 27: ITSD consists of four offices and t
Page 30 and 31: Integrity,Security,Honesty,and Fair
Page 32: The CSL not only employsinternal au
Page 35 and 36: Since its inception, the CSL has wo
Page 37 and 38: Last year, the California Problem G
Page 39 and 40: Marketanalysis
Page 41 and 42: EthnicityThe following charts show
Page 43 and 44: GenderThe household incomeof past m
Page 45 and 46: 3.2 Consumer ProductSales Compariso
Page 47 and 48: Technology TrendsAll of these techn
Page 49 and 50: are large, to maintain sales in lot
Page 51 and 52: IntroductionIn FY 05/06, the CSL re
Page 53 and 54: Figure 4.2 is a list of some of the
Page 55 and 56: Figure 4.4 - Overall PRIZE PAYOUTS
Page 57 and 58: Figure 4.5 shows that in terms of p
Page 59 and 60: Raffle GamesRaffle-style games are
Page 61 and 62: Pursuant to section 8880.64 of the
Page 63: Fig. 5.12 CSL Scratchers Game Growt
Page 67 and 68: Fig. 5.15 Sales per RetailerFigure
Page 69 and 70: etailers with special “Check-a-Ti
Page 71 and 72: Gaming System ComplexityThe CSL’s
Page 73 and 74: Fig. 5.19 Budgeted Per Capita Adver
Page 75 and 76: There is an opportunity to reverse
Page 77: Public Relations and OutreachOur fr
Page 80 and 81: Ticket Dispenser RestrictionsThe re
Page 82 and 83: IntroductionA careful analysis of o
Page 84 and 85: Unfortunately, increasing jackpot s
Page 86 and 87: Key StrategicInitiatives
Page 88 and 89: Shift the Jackpot ParadigmOur strat
Page 90 and 91: 12. Recruit Non-traditional Retaile
Page 92: www.calottery.com600 North 10th Str
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