Promoted feature: Ten years of insights

The lottery industry has evolved since the Department of Justice’s 2011 Wire Act opinion allowed the sale of online lottery games. In FY21, revenue from the 12 lotteries offering some form of online sales, represented less than 5% of the $95bn US lottery industry[1]. Although this growth is impressive, most online states are facing awareness challenges, presenting opportunities for even greater player acquisition and penetration. And now, only four years since the Professional and Amateur Sports Protection Act (PASPA) was overturned, more than two dozen states have legalized online sportsbooks and icasinos, providing even more challenges to ilottery marketers.

As pioneers in the ilottery industry, the team at NeoPollard Interactive’s (NPi) Ignite Player Marketing know it’s time to think differently about ilottery marketing. We believe the key to sustainable ilottery growth lies in understanding the player lifecycle and leveraging the most sophisticated player intelligence, marketing, and UX strategies to appeal to new, valuable types of players.

Understanding the ilottery adoption curve

We’ve found that the adoption of online lottery play somewhat mimics the traditional technology lifecycle, but with a few game-changing differences. The classic Rogers’ bell curve theorizes that people have different levels of readiness to adopt innovations. Leveraging our industry-leading experience in online lotteries and gaming in North America, we’ve amended the lifecycle model to show the typical ilottery adoption curve.

As in the traditional model, ‘lottery enthusiasts’ and ‘early adopters’ are the first to try online play. They are eager, high-value players already engaged in retail lottery play and most likely already reside in the lottery’s database. With low cost per acquisition and high conversion, players in a lottery’s existing database have proven to be an invaluable foundation to driving engagement in the launch phase of a new ilottery program.

However, Year 2 becomes a bit more challenging. Although ilotteries generally see a continuous increase in the number of active depositors, the ‘early majority’ is more practical and deliberate and can be more expensive to acquire and retain. Although they represent a more significant segment of the population, their expectation set is higher. Marketers will have to work harder at explaining the benefits of online play and building upon the trust in the lottery brand to win these players over. While the ‘early majority’ is motivated by high jackpots and will use those occasions to play online for the first time, the risk of churn in this group is unexpectedly high. In fact, about 80% of ilottery players who join during high jackpot runs are at risk of churning. Predictive analytics can help forecast which players are most susceptible, while sophisticated campaigns and bonuses built using player analytics can retain these players and increase their lifetime value.

As an ilottery program matures into Year 3 and beyond, many early online players have succumbed to natural churn, and those who haven’t tried ilotteries are risk-averse and have high barriers to entry. This ‘late majority’ of players will require additional effort through player research and targeted marketing plans to attract these hard-to-convert consumers. This period is referred to as the ‘player acquisition doldrums’. In the ‘doldrums’, ilottery programs could face challenges in increased player churn, lower play frequency and lower average deposits compared to enthusiasts, early adopters, and the early majority. Subsequent years are even more challenging, as the change-resistant ‘laggards’ become the remaining cohort.

Five tips for avoiding the player acquisition doldrums

How can lotteries prepare for this curve and avoid the pitfalls of the ‘player acquisition doldrums’? NPi’s Ignite Player Marketing team has five recommendations for new and legacy ilotteries ready to strengthen their player intelligence and marketing programs:

1. Perform ongoing consumer research – understanding consumers’ barriers and motivators of online play is critical to the success of an ilottery marketing strategy. Attitude and usage studies should be conducted annually to inform media plans and creative strategies. In addition, persona development exercises should be performed every two years. Although these research programs have high costs, the benefits of more accurate targeting, more relevant creative messaging, and lower cost per acquisition will undoubtedly result in a positive return of investment (ROI).
2. Reinvent yourself in Year 2 – the strategies that brought in ‘lottery enthusiasts’ and ‘early adopters’ at the beginning of the program may not be relevant to the ‘early majority’. Lotteries should be prepared to cast a wider net with their digital media programs. Also, because these consumers have not played the ilottery frequently, they will need more education on the play experience and registration process to overcome their misconceptions regarding security.
3. Prepare for higher media and bonus investments – while most digital marketers strive to constantly refine their cost per acquisition key performance indicators (KPI), lotteries will need to adjust expectations around higher cost per acquisition (CPA) and invest more in bonuses and free games to get the attention of new players, especially in markets where sports betting and online casinos are competing for players.
4. Leverage subscriptions – ilottery subscriptions and auto-renewal programs are an essential part of your marketing program. Players who participate in subscriptions have a higher player value. In addition to convenient ‘set it and forget it’ transactions, they also play incrementally. A strategic retention program targeted to this segment can successfully introduce them to new games and motivate additional play with bonuses and offers.
5. Get ready for Generation Z – more than 86 million strong, this generation, born beginning in 1996, is larger than the Baby Boomer or Millennial generations. Now entering their 20s, members of Gen Z belong to the generation of employees, consumers, and trendsetters that is emerging fastest, not only because of its sheer size but also because of its comfort with technology. Because members rely on technology, they are an ideal audience for ilottery games. But game selection, the registration experience, and above all, advertising strategy are critical to acquiring this elusive demographic.

Want to know more?

Are you ready to ignite your player marketing strategy and avoid the player acquisition doldrums? NPi’s Ignite Player Marketing team powers results by empowering players. Our team of experienced lottery marketers puts players first and generates responsible growth by fusing insights, creativity, and technology. If you need help to develop your end-to-end program, give the Ignite team a call at 734 725 8372 or e-mail jessica.powell@neopollard.com.

[1] TLF Publications, LaFleur’s Lottery Fast Facts 2021, US Lotteries Unaudited FY21 Sales, Prizes & Government Transfers, Page 8.

Jessica Powell is the director of NPI’s Ignite Player Marketing Group. She is a 30-year veteran of the marketing industry and a specialist in the gaming category. She has worked in every facet of the gaming category including state lotteries, Las Vegas mega-resorts, Monte Carlo Resort Casino, dockside and riverboat casinos, and tribal gaming properties. Powell’s wealth of industry experience enables her to transform analytics into player insights and inspire the attention-grabbing creative strategies that yields powerful results for good causes.