by Matt Rosenberg May 21st, 2012
It’s the size of the jackpot and economic factors that really influence the volume of Washington Lottery ticket sales, not the $12 million per year the lottery spends on advertising, according to a newly-released report from Washington State’s Joint Legislative Audit and Review Committee (JLARC). The report concludes, “JLARC found almost no statistically significant relationship between advertising expenditures and ticket sales.” The analysis looked at the period of 2009-11.
The report says it’s not clear exactly why the lottery ads on TV, radio, in print and online had no appreciable effect on ticket sales, but possible reasons might include, “too much advertising, too little advertising, ineffective advertising, or a public that does not respond to advertising for lottery products in general.”
Jackpot size, date of drawing were biggest sales influencers
For the report JLARC ran several analyses which isolate the effect of different variables while all others are held constant; an often-used method called multivariate linear regression. According to the regression analysis, the amount of the jackpot has been a significant factor when ticket sales have risen. The bigger the jackpot, the greater the increase in sales. Drawings on or very near the first of the month or major holidays also have a significant positive effect on ticket sales, the report said. (Update: JLARC staff said economic factors had mixed correlations with ticket sales, but were more significant statistically one way or another than advertising. Employment, unemployment and continuing unemployment insurance claims were examined and in isolation were associated positively in some cases and negatively in others with ticket sales for different games).
Change in lottery beneficiaries didn’t spark more sales, either
The report was requested by the state legislature in the 2011-13 budget. JLARC was also directed by lawmakers to assess in the report whether a change n the key beneficiary programs of the state lottery would increase ticket sales, as had been intended. Before fiscal year 2011 the key beneficiary under state law had been school construction, but that was changed to programs for early childhood education and higher education scholarships. Legislators thought that might well inspire greater ticket sales, but the report found that wasn’t the case.
Despite focused ads, awareness of new beneficiaries was scant
One-quarter of the ad budget for fiscal 2011 went to promoting the new beneficiaries, but in the same period lottery monthly surveys of players showed only a very small handful (six percent) were even aware of the change and an even smaller sub-set (two percent) said it might influence their ticket purchasing decisions.
JLARC recommends lottery issue new plan for effective ads
JLARC says more research is needed to learn the key causes of the problem, and recommends the agency submit to its board, the state lottery commission, a plan on how it will make its advertising more effective. The plan should be implemented in time for the fiscal year 2013 lottery marketing budget cycle, the report says. The state’s fiscal year begins in July of the preceding calendar year. Lottery officials said in a letter appended to the report that the agency “believes in the value of their marketing and promotional programs” and that they’ve developed a new plan. (UPDATE: Lottery staff later clarified that an in-depth roundtable conversation occurred at the commission’s April meeting about new marketing ideas for the lottery, and in late June key performance indicators for lottery advertising will be finalized.)
The advertising program management vendor for the lottery has been the Seattle firm of Cole and Weber United, which secured the work through a competitive bid process. According to JLARC report, the company took $2.5 million in fees for its work in 2011, with another $9.6 million being spent on media buys, ad production, and other ad-related costs. That $12.1 million was part of a larger state lottery marketing budget in 2011 of $17.5 million, not including the agency’s in-house marketing staff equivalent to 11 full time employees.
Advertising management vendor’s contract has already been renewed
The state lottery has already renewed for one year its advertising services contract with Cole and Weber, from its expiration in November 2011 until November 2012, according to the JLARC report.
The lottery was created in 1982 and for the last five years has generated about $500 million in annual ticket sales, with 60 percent going back to players in prize money, 15 percent to operations and administration, and 25 percent to beneficiary programs.