程阳：美国马萨诸塞州彩票40年成功路

Massachusetts Lottery Celebrates 40 Years of Success

 

Forty years after its launch in March 1972, with a cumulative $86 billion in sales and almost $19 billion in net profits, the Massachusetts Lottery is often referred to as the most successful lottery in the United States. Of course, success is relative, but by many measures, Massachusetts leads the pack.

 

Their success has been driven by a strong portfolio of instant games, intensive market penetration and the knowhow that lets it run its own gaming system, the only lottery still doing so. There have been some bumps along the way, inevitable with any organization. With a particularly strong team in place now under the direction of Executive Director Paul Sternburg, the future looks bright.

 

Last month, the Lottery held a special 40th birthday party at the State House in Boston, and luminaries from past and present were on hand to mark the milestone. Among them, former state Treasurer and founding Lottery chairman Bob Crane, the person charged with taking the vision and making it happen.

 

“In the beginning, it was an inter- esting challenge,” recalled Crane. “We had no office, no ticket, no typewriter, no ad agency, no legal department, no place to hang our hats. All we had is a lot of chutzpah and $1 million that the legislature saw fit to give us to start the lottery in six months. We had to be very careful.” What they did back then was hire the best and the brightest people – 96 to begin with, some of whom are still with the Lottery today. And the rest is history.

 

In Massachusetts, one of few Commonwealths in the United States, the Lottery comes under the direction of the state Treasurer, who serves as chairman of the Lottery Commission. Steven Grossman took over that role in January 2011, and one of the first things he did was lure Sternburg back from the Connecticut Lottery. A previous 10-year employee of the Massachusetts Lottery, Sternburg was honored to be invited back. “It’s a privilege to work fo the number one lottery in the world in my eyes. It was nice to come home, and it’s been a great experience so far.”

 

The current Lottery staff numbers just over 400 – incredible for an entity that brings in nearly $5 billion in revenues. What they do provides much-needed revenues for the cities and towns of the Commonwealth, and for the thousands of mostly small businesses that serve as lottery agents. With about $300 million annually going to retailers, “that’s a lot of jobs and economic growth,” said Grossman. “We should never underestimate the importance of small businesses in the health and well being of the Commonwealth.”

 

Significant Achievements

 

Over its 40 years, the Massachu- setts Lottery is known for several total achievements and major contributions to the lottery industry. Among them:

 

Instant Tickets: Massachusetts introduced the very first instant ticket in 1974, and the product changed the lottery industry forever. Instant tickets generated $32.5 billion in sales for all U.S. lotteries in fiscal 2011,or 58 percent of total sales of traditional lottery products. They have been the impetus for unprecedented growth by providing variety and the flexibility to easily adjust the prize payout and price points.

 

Instant games account for 68 percent of sales in Massachusetts, $3 billion in fiscal 2011 with an increase expected for the current year. Only the New York Lottery sells more instant tickets, and it has a population base almost three times that of Massachusetts.

 

“Jim O’Brien worked here for 20 years – he was a genius and the brains behind instant tickets,” said Sternburg. “He paid attention to detail. A lot of the success is owed to him, and it continues to be.” But he added that the easy things have been done with instant tickets, and for Massachusetts at least, there’s little opportunity to increase payouts even further or to add higher price points. As a result, it’s an increasing challenge to maintain growth.

 

Proving the Correlation Between Prize Payouts and Sales: With an average prize payout across its entire portfolio of well over 72 percent, highest of any U.S. lottery by a comfortable margin, Massachusetts customers know they have a great chance of winning. “Our players continue to play twice as much as any other lottery in the country,” said Sternburg. “That in itself tells you that the model works. It shows you that we are getting a return on our strategy.” He’s not sure the Lottery could go any higher, that it is probably reaching the point of diminishing returns; he called it the “perfect mix” right now. He added that there are examples where other states have had the prize payouts cut, and sales and profits both decreased, exactly the opposite of the desired effect. “That’s something you can never, ever do.”

 

Market Penetration: The Lottery current has some 7,400 retailers in its network, averaging one agent per 833 residents, a significant number compared to other lotteries. 95 of those retailers have been with the lottery since its inception. On average, lottery retailers earn $37,000 a year in commissions, and they use that to create jobs and otherwise stimulate the economy. “People don’t play where they live, they play where they work,” said Sternburg, explaining the current retail distribution.

 

Operating its Own System: As the only American lottery that still owns and operates its own gaming system, Massachusetts reaps several benefits, the most important being cost savings. “I think that’s one of the secrets to our success,” said Sternburg. “Our overhead is only two percent. There is no pressure to change the way we do business because we are returning so much money to the Commonwealth.” For a one-time investment, which can be paid off with profits in one year, the lottery saves a lifetime of percentage payments to a third party. However, the current system is quite old and as a result there are some limitations, but a little creativity can help overcome some of those in the short term before a new system is installed.

 

While these are the Lottery’s main achievements, certainly there have been others. And like any lottery, Massachusetts has had its share of stumbles along the way – no organization escapes the normal course of human (and technological) nature. But the key is to handle such situations with full transparency.

 

A case in point – a local newspaper’s investigation into Cash Winfall led to the discovery that players and agents were taking advantage of the game’s rolldown design, often tying up the lottery’s terminals for hours at a time printing tickets at times when a rolldown was imminent. The problem wasn’t with the game or its integrity, but rather that the agents weren’t complying with the rules, one of which was that no single customer could make transactions for more than three minutes at one time. When the issue came to light, “we came in and made sure our employees knew about the rules and regulations of the game to make it clear how the retailers were supposed to behave,” explained Sternburg. “We then educated the retailers and suspended any who were in violation.”

 

“We are a public agency, one built on public trust,” added Beth Bresnahan, the Lottery’s Director of Marketing and Communications. “If there are issues that come up, we have to be open and transparent in addressing them.”

 

Current Strategies

 

Despite its success over the years, Massachusetts was not immune to market forces with the economic downturn and product maturity. Sales declined by more than five percent in fiscal 2009 and were down marginally in fiscal 2010. When Grossman took office, he had one prime directive: to run the Lottery as business.

 

Sternburg immediately went to work putting together a team to examine every aspect of lottery operations. The obvious tools lotteries have used weren’t available – massive retail expansion, prize payout and price point increases, since those were already at their limits – so more finesse would be needed.

 

Overall Portfolio Assessment:

 

Upon close examination, there were several things that needed to be addressed across the Lottery’s game mix. One of the first things was the realization that Cash Winfall, after seven years, was in decline and needed to go. The need to find a replacement helped serve as the genesis for the New England multistate game Lucky For Life, which launched in March.

 

Mass Cash, a five-number lotto game, was running three nights a week and it was expanded to seven nights. That move worked quite well, noted Sternburg.

 

The Daily Race Game, a monitor game, will also soon be history. It’s a good game with great graphics, but it’s just not resonating with players, bringing in $20 million in sales compared to $770 million in regular keno. So a new monitor game will likely be launched later this year as the Lottery goes out to bid for a new concept.

 

Instant Tickets: The lottery’s bread-andbutter instant games also needed a serious overhaul. “The product wasn’t appealing, the design wasn’t appealing,” said Sternburg. “We needed to get back to basics, find out what our players like and design the games accordingly. So we have adjusted our portfolio to meet the marketplace.” A lot of that was in relatively simple things like colors and designs to create more appealing, attention-grabbing tickets.

 

Focus groups are critical to the process, to listen to players and learn what they want. Every potential ticket undergoes detailed scrutiny and can go through several iterations before it is released.

 

Sternburg praised its three instant game suppliers, Scientific Games, GTECH Corp. and Pollard Banknote. For every ticket they provide, the Lottery’s team goes through a creative process that could mean 14 or 15 changes before it ends up on the retailer shelf. “It may look nothing like it did in the beginning, but we saw the potential and worked on it. Paying attention to the details is making a huge difference.”

 

As an example, he cited the Lottery’s new suite of lifetime prize instant games, released in February. With four price points (a $1 game with a prize of $500 a week for life; a $2 game with a $1,000 weekly prize; a $5 game with a $2,500 weekly prize; and a $10 game with a $5,000 weekly prize), the suite had to somehow stand out in the lottery’s lineup. Separate dispensers were out of the question, so they went with fluorescent inks to make them pop. “It’s probably the best decision we made on a ticket in a long time,” said Sternburg. “Those tickets are just flying off the shelves – you can’t miss them in a store.”

 

The Lottery also uses a few licensed games, along with sports franchise games, to help attract new players. “They are good for the core player but also might attract people who might not normally play.”

 

All these strategies are bearing fruit – instant sales are up some $182 million this year without new price points, despite the Lottery’s inability to do any significant advertising. The games are speaking for themselves.

 

Creative Advertising: For most in the advertising world, “creative” is a noun – the product being produced. For the Massachusetts Lottery, and many others with limited advertising budgets, creative is an adjective describing how to get the most bang for a seriously limited buck.

 

The Massachusetts Lottery, with sales approaching $4.7 billion this year, has a paltry $2 million advertising budget. But that must seem like a ton of money compared to the $400,000 the Lottery had available just a few years ago. Of that $2 million, $200,000 goes to the local problem gambling council, so really there’s only $1.8 million to work with. Most of the emphasis is on POS materials at retail to attract player attention. And much of that comes during the holiday season, which is very important to the Lottery’s overall year. The Lottery produces its own POS materials on a state-of-the-art copier that produces exceptional quality materials for everything that is done in-house.

 

It is difficult to launch a new game without media advertising support, and Lucky For Life was given a brief radio and television campaign to get it going. But the primary advertising comes through POS and word of mouth, with social media becoming an increasingly important channel.

 

Social Media: A relative newcomer to social media, having just launched last July, the Lottery has quickly taken advantage of much of what it has to offer. Bresnahan is in charge of social media efforts, and she is involved almost around the clock since she rejoined the Lottery a year ago. “Taking advantage of social media was one of the Treasurer’s priorities and that was one of the reasons I was brought on board,” she said.

 

New games and promotions are easily publicized through these channels, and for the first time since 2004, the Lottery can show game drawings in their entirety, using Facebook, YouTube and its own Website. All draws are done inhouse now, saving a considerable amount of money from when they were done for television. An added benefit is that people can now see the drawings from start to finish, not just seeing the wheels stop at the end for television. It adds even more transparency to the Lottery’s operations.

 

But the value of social media is two-way communication. “The important thing is that our players are engaged, they are talking to us,” Bresnahan explained. “They know they will get an immediate answer if they send their questions via Facebook.”

 

System Replacement: Sternburg hopes to replace the Lottery’s aging system in the 12 to 18 months. It is currently seeking a consultant to help the purchase decision. Since it will likely be kept for a long time, it has to fit current needs as well as anticipate what is coming in the future. The current system, some 16 years old, does have limitations. “It means we have to be more on our toes, we have to be more creative with our POS, we have to make sure our product is what our players want,” said Sternburg. “We are doing great with a twentieth century system, but moving into the 21st century can only help us.” A new system will allow the use of player video monitors at retail, promotions and other things that will be welcome additions.

 

Retail Initiatives: Even with its superior market penetration, there is still room to expand, as 36 of Massachusetts’ 351 communities do not currently have lottery retailers. But the expansion will be strategic. “We’re looking for new sales, without cannibalizing existing retailers.”

 

A pilot program with CVS will be launched this summer, and the Lottery has already made inroads with retailers it hasn’t reached before, including 19 K-Mart stores. One key initiative involves the addition of GTECH’s Gemini vending machines that allow play of all games. Those should help reach new types of retailers.

 

The Internet: There is a task force looking into the potential of Internet sales right now, with members from the Lottery, the Treasurer’s office, the legislature, the Governor’s office and private industry. Spectrum Gaming is serving as a consultant for the research. The task force is looking at it from all possible angles, with primary emphasis on any retail ramifications and the social responsibility aspects. “Our retailers are our partners, and we don’t want any adverse effects on them,” said Sternburg. “And we certainly don’t want to exacerbate any problems people have with gambling.” And of course, overall profitability will also be taken into account. The task force report should be out in November and will determine what approach the state will take.

 

The Next 40 Years

 

With all of these measures, Sternburg thinks there is still room for the Massachusetts Lottery to grow, and that there’s plenty of life in the industry. “You just have to be innovative and creative and come up with concepts that will appeal to players and hopefully a younger demographic. We’ve proven that here with our instant sales up 7.5 percent this year without any new price points or advertising.” One big challenge ahead will be the coming of casinos – they were legalized last fall. It will be at least a couple of years or more before they begin operating, but when they do, the Lottery will feel the competition. “There are only so many discretionary dollars available, and I think we’ll take a hit of anywhere from three to 10 percent,” said Sternburg. “But once that happens, our play level should come back to where it was, and perhaps even do better.” By continuing to tweak the portfolio, with creativity and market penetration, the impacts can be minimized. Plus, the casinos could be a new outlet for the Lottery’s keno game, providing a good new source of revenue.

 

All in all, he’s bullish about the future. “We want people to play for fun and enjoy themselves, for the entertainment. That’s the model we are based on. We don’t sell the dream, or the lottery as a way out, we want people to have a little fun. It’s entertainment.”