Arizona Lottery beefing up marketing plan, seeking more retailers

by Adnan Alam

By KRISTENA HANSEN
Cronkite News Service

PHOENIX _ The Arizona Lottery needs to overhaul its marketing plan to maximize sales and to make the most efficient use of an increased advertising budget authorized by the Legislature, an oversight group suggests.

A report released in March by the State of Arizona Office of the Auditor General said addressing marketing is especially important because lottery sales growth has leveled off in recent years, resulting in a decline in contributions to state programs.

Meanwhile, the report said, the lottery’s current marketing plan has been almost nonexistent since fiscal 2007.

“They did provide us with something, but it was more of a marketing initiative,” said Dot Reinhard, manager of the performance audit division at the auditor general’s office. “The content was really lacking.”

Reinhard said that without restructuring the plan the lottery is in danger of inefficiently spending its advertising dollars, which players fund through ticket sales.

“It can affect the lottery’s performance,” she said. “In previous years it was better.”

The audit said better management of the lottery’s advertising costs could have eased the blow to fiscal 2009 beneficiary distributions, whose 12 percent drop was the largest in nearly two decades. Some beneficiaries got nothing.

Fiscal 2009 was the year the lottery’s advertising budget doubled from the year before to about $20 million. That change was one provision in a larger bill intended to boost revenues and beneficiary distributions.

Kim McGlothlen, the lottery’s sales and marketing director, said there’s nothing wrong with the existing plan but added that it might look inadequate to outside parties because the format is difficult for them to follow.

“It wasn’t in the format that they recommend that’s compared with other states,” she said. “They can be big, bulky documents.”

McGlothlen said the lottery is working on a new format for fiscal 2011, as well as making it a priority to expand its player base and recruit more retailers this year.

Arizona’s sales per capita was 24th out of 28 comparable lotteries and was last place for retailers per capita in fiscal 2008, according to the Auditor General. This could be largely due to the state’s 36 percent population increase from fiscal 1999 through 2008, the audit said.

McGlothlen said reductions in staffing, hiring freezes and mandated furloughs related to the poor economy are contributed, but she said those aren’t deterring the lottery from pursuing its goals.

“Everything we’re doing right now is to attract more players,” McGlothlen said. “And also getting those people who play to play more.”

In April, the Arizona Lottery launched MegaMillions, a multistate game with jackpots on the scale of Powerball. With drawings on Tuesdays and Fridays, MegaMillions is intended to help boost ticket sales on slower days for lottery sales.

Karen Emery, the lottery’s deputy director, said big-prize games such as MegaMillions help attract more casual players _ or “jackpot hunters” _ who only play when the prize is a certain amount or when they feel lucky. Some games are kept the same for traditional players, the lottery’s largest audience, but isn’t cost-effective to create games aimed at luring those with no inclination to play, she said.

Some of the newer games might offer prizes that would might attract a younger audience, such as music downloads, she said. The main goal is attracting the widest possible audience, but core players tend to be older and to play more traditional games, Emery said.

Appealing to a wide audience also means expanding the lottery’s retailer base not only in numbers but in type, according to the Auditor General’s report. The bulk of fiscal 2009 revenues came from convenience stores; the remaining $171 million came mostly from supermarkets.

With that in mind, McGlothlen said the lottery has joined the Arizona Restaurant Association with a goal of expanding into restaurants and bars.