Lottery Corporation Media Mix Optimisation BLA Global

470 views
402 views

Published on

Media Mix Modeling (econometrics) case study from BLA Global.

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
470
On SlideShare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
0
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Lottery Corporation Media Mix Optimisation BLA Global

  1. 1. Lottery Gaming Corporations: Tools for Maximizing Marketing Effectiveness Marketing Optimisation Modeling Case for Fiscal 2010 1
  2. 2. Destination Help State Lottery maximize growth by providing insight into how to most effectively spend their marketing dollars across the marketing mix 2
  3. 3. Our Methodology We will leverage marketing science and predictive modeling for the purpose of understanding marketing productivity in all its detail, by drilling down into the media and marketing events for individual games 3
  4. 4. Our Agenda: The Key Questions 1. How do media and marketing contribute to overall State Lottery Corp. revenues across the total enterprise and by regions? 2. How has media and marketing impacted State Lottery Corp. revenue growth over the past year? 3. Which media-game messages drive the most revenues? 4. Which POS promotional events drive the most revenue? 5. Which New-Instant Game Events drive the most revenue and which are likely to drive the most gains in revenue going forward? 6. Which Core Promotion Events drive the most incremental revenue? 7. Are there significant interactions or “synergies” across the State Lottery Corp. marketing mix? Which activities and events require the most coordination? 4
  5. 5. Our Agenda: The Key Questions 8. How has the recession impacted State Lottery Corp.’s business and what are the direct and indirect effects? 9. What impact does available Jackpots for certain games have on State Lottery Corp. revenues? 10.What impact does draw-station TV drawings have in driving State Lottery Corp. revenues? 11.What has been the impact of Power-ball on total State Lottery Corp. revenues and what is the optimal investment required going forward? 12.Given the insights from this exercise, what is the optimal mix of marketing spending for State Lottery Corp. across games, regions and media? What is the upside benefit for State Lottery Corp. in implementing an optimal spending plan? 5
  6. 6. Executive Summary • Marketing spend has generated a strong and positive ROI over the past year • Each marketing $ 1 spent = $4.49 in additional revenue • Over the past six months in particular, revenue for the State Lottery Corp. has slowed considerably and the fiscal year is likely to end with a -0.5% decline. The major factors explaining this slowdown include the -38% decline in spending on instant games media and also the +2.1 point increase in State unemployment. • Draw Station TV exposure stimulates 4.4% of total State Lottery Corp. revenues, larger than any single media group except Instant Games. • There continues to be significant evidence of strong synergies across the State Lottery Corp. marketing mix. In particular, the evidence grows even stronger that Instant Games media is a key catalyst driving revenues across the entire product mix. • Optimization of marketing spend, by moving dollars from less to more productive activities, can drive an estimated +3% in revenues. This calls for increased investment in Instant Games, Megamillions media, In-store POS and Direct. It also means relative spending reductions in Market A and Market F, with increases in all other markets. • Evidence indicates that the State Lottery Corp. over-invested on the Power-ball launch. The revenue returns for Power-ball media were sub-par. Our optimization solution calls for a reduction in Power-ball media investment from $3.3MM to $1.8MM, and to reinvest that difference in other media. 6
  7. 7. State Lottery Corp. Model Architecture Note: There are two new additions to this version of The State Lottery Corp. model. These include 1) using Unemployment as a macro-economic driver and 2) the addition of the value of draw station’s equivalent media value. $ Spend Direct Marketing $ Spend Instant Games TV & Radio $ Spend Online Games Media, TV & Radio $ Spend Multi-State Games Media, Radio & OOH $ Spend Educ/Brand & Spons Media TV & Radio $ Value Draw Station Media $ Timing By Week 7/1/06 – 6/26/10 7 Regions Revenues Weekly Total State Lottery Corp. Revenues Core Promos By Event Timing Macro-Economic Available Jackpot $ No. of active Customers By Week New Game & Instant Promos State Unemployment rate Jackpots Outlets Selling Seasonality 7
  8. 8. 1. How do media and marketing contribute to overall State Lottery Corp. revenues and by region? 8
  9. 9. How did media and marketing contribute to overall State Lottery Corp. revenues for F2010? Marketing drives 17.1% of total State Lottery Corp. annual revenues, with Jackpots contributing an additional 3.6%. Instant Game media and promotions contributed 7.3% of total revenues for F2010. Draw station media generated 4.0% of total revenues, with a value of $145MM retail dollars. F2010 Annual State Lottery Corp. Games Revenue Decomposition 3.6% 2.0% 5.5% 0.4% 1.7% 79.3% 1.0% 1.4% 0.4% Total Instant Games 7.3% 4.0% 0.5% 0.0% Base New.Game.Promos Brnd/Educ/Spons.Media Core.Promos Jackpots InstantGame.Promos Draw.Stations Direct Multi-State Games Media Instore.POS Instant-Games.Media Online.Games.Media Core.Promos 9
  10. 10. How did media and marketing contribute to overall State Lottery Corp. revenues by Week? A strong sales lift from Instant Games promotions tends to occur every January. There has also been a visible decline in Instant Games media contributions since January 2010 InstantGame.Promos Core.Promos New.Game.Promos Sales Rev $ Instore.POS Draw Stations Brnd/Educ/Spons.Media Online.Games.Media Multi-State Games Media Instant-Games.Media Direct Jackpots 5/1/2010 3/1/2010 1/1/2010 11/1/2009 9/1/2009 7/1/2009 5/1/2009 3/1/2009 1/1/2009 11/1/2008 9/1/2008 7/1/2008 5/1/2008 3/1/2008 1/1/2008 11/1/2007 9/1/2007 7/1/2007 5/1/2007 3/1/2007 1/1/2007 11/1/2006 9/1/2006 7/1/2006 Base 10
  11. 11. How do media and marketing contribute to revenues by region? Market C is the most marketing driven region, due mostly to the large impact of instant-games media. However, if we include the impact of Draw Stations, Market A has the highest proportion of incremental revenue. F2010 Annual Revenue Decomposition by Market 100% 90% InstantGame.Promos Core.Promos 80% New.Game.Promos Instore.POS 70% Draw.Stations 60% Brnd/Educ/Spons.Media 50% Online.Games.Media 40% Instant-Games.Media Multi-State Games Media Direct 30% Jackpots Base 20% 10% 0% Market A Market B Market C Market D Market E Market F Market G 11
  12. 12. 2. How has media and marketing impacted State Lottery Corp. revenue growth over the past year? 12
  13. 13. How has media and marketing impacted State Lottery Corp. revenue growth? Overall YOY found State Lottery Corp. revenues flat at -0.5%. Reductions in spending on Instant Games media and the economy (unemployment) were the key drivers affecting the softer performance. Marketing Variance Impact. F2010 v. Year-Ago Base Monmentum Multi-State Games Media FY2010 Variance.Impact $000 +3.5% +1.5% Jackpots Draw Stations +0.6% +0.5% +0.5% +0.2% +0.1% No.Stores Selling Online Games Media Direct Brand/Educ/Spons. Media -0.1% -0.2% -0.2% -0.4% Core Promos New-Games Promos Instore POS -1.2% Instant Games Promos -2.7% -2.8% Economy (Unemployment) Instant Games Media -$150,000 -$100,000 -$50,000 $0 $50,000 $100,000 $150,000 13
  14. 14. How has media and marketing impacted State Lottery Corp. revenue growth across Regions? 63% of the revenue decline was concentrated in the Market A region. Market C showed the strongest performance at +1.5%, with Market D the only other region with a small revenue increase. Total GLC Revenue Variance F2010 v. YA Base.Momentum Market G -1.7% Market F -1.6% Market E -1.7% Jackpots Direct Instant-Games.Media Multi-State Games Media Online.Games.Media Market D Market C Draw.Stations Instore.POS +1.5% Market B Market A Brnd/Educ/Spons.Media +0.3% New.Game.Promos Core.Promos -0.4% InstantGame.Promos Stores.Selling - -6.00% Economy (Unemployment) -4.00% -2.00% 0.00% 2.00% 4.00% % of Total State Lottery Corp. Revenue Variance 6.00% 14
  15. 15. 3. Which media-game messages drive the most revenue? 15
  16. 16. Which media messages drive the most revenue? State Lottery Corp. media generates $4.62 per dollar of expenditure. The top 5 Revenue generating media include Direct, Megamillions radio, Instant Games radio, Education TV and Mega-millions OOH. Sponsorship media and Online media tended to generate low revenue per dollar of expenditure. Power-ball media also tended to have low average revenue returns. With a media value of $6.6MM, Draw-Station returns are very high at $24.54. $24.54 $30 $25 $28.03 Incremental Revenue per Dollar Spend $4.62 $4.04 $2.61 $2.07 $1.89 $1.43 $1.18 $1.14 $0.90 $0.60 $0.37 $0.34 $0.24 $0.19 $0.17 $0.17 $0 $0.07 $5 $0.02 $8.28 $8.10 $10 $5.58 $15 $11.03 $20 16
  17. 17. 4. Which POS promotional events drive the most revenue? 17
  18. 18. In-Store POS Marketing Contributions total 0.3% of Annual Revenues The New Games and Mega-millions POS events captured 77% of the total revenue impact for FY2010. In-store POS contributed 0.3% to total revenues. Revenue Contribution Shares for In-Store POS by Game 1% 5% 0% 0% 1% 3% 5% 6% 47% 31% InstoreRaffle InstoreWeeklyWInFall InstoreWFL InstoreCash3 InstoreCash4 Instore SitandWin InstoreKeno InstoreMegaMil 18
  19. 19. In-Store POS Incremental Revenue per Dollar POS promotions, on average, generate over $16 in revenue per dollar Spent. Mega-millions and New Games were the strongest events. Instore POS: Incremental Revenue Per Dollar $45 $40.37 $40 $35 $30 $25 $23.16 $20 $16.41 $15 $13.29 $11.45 $10 $5 $7.15 $4.39 $5.29 $5.38 $2.67 $0 19
  20. 20. 5. Are there significant interactions or “synergies” across the State Lottery Corp. marketing mix? Which activities and events require the most coordination? 20
  21. 21. Are there significant interactions or “synergies” across the State Lottery Corp. marketing-mix? Which activities and events require the most coordination? Synergies across the marketing mix have actually expanded over the past year. The large and significant synergies continue to focus on instant games and clearly shows that instant games are key sales catalysts across the entire productmix. There are also significant synergies with Draw Stations. Interactions or Synergies Across the Marketing Mix % of Revenue 16.0% Synergy from Coincident Execution 14.0% Impact from Separate Executions 12.0% 10.0% 8.0% 6.0% 4.0% Online Games Media & Draw Stations Online Games Media & Direct Online Games Media & Core Promotions Online Games Media & POS Promotions Instant Games Media & Draw Station Instant Games Media & POS Promotions Instant Games Media & Megamillion OOH Instant Games Media & Direct 0.0% Instant Games Media & New Game Promos 2.0% 21
  22. 22. 6. How has the recession impacted State Lottery Corp.’s business and what are the direct and indirect effects? 22
  23. 23. How has the recession impacted State Lottery Corp.’s business and what are the direct and indirect effects? State’s unemployment has increased +2.1 points in the past year and has depressed State Lottery Corp. revenue growth by -2.7%. Sensitivity of State Lottery Corp. Annul Revenue to State Unemployment Rate Revenue Index 105 104 103 Impact of Economy on Media Productivity for GLC 102 101 16.0% 14.0% Reven… 100 14.1% 11.4% 99 12.0% 98 10.0% 97 96 8.0% 4% 6.0% 6% 8% 10% 12% 14% 4.0% 2.0% 0.0% Media Impact w/o Recession Media Impact w Recession One of the key “indirect” effects of the economic recession is that it has had a negative impact on media productivity. 23
  24. 24. 7. What impact does available Jackpots for certain games have on State Lottery Corp. revenues? 24
  25. 25. What impact does available Jackpots for certain games have on State Lottery Corp. revenues? Total State Lottery Corp. Revenue Impact to Lottery Jackpots Sales Index Over the past year, due primarily to the introduction of Power-ball, State consumers had a significantly greater pool of large jackpots. This had a +0.5% positive impact on revenue. 103 102 101 100 99 98 97 96 Jackpots Impact $- When compared to the large Jackpot Multi-state games, jackpot increases for the online games Fantasy 5 and Cash 3 actually have a larger impact on revenues per dollar of jackpot. $20.0 $40.0 $60.0 $80.0 $100.0 Revenue Impact per Dollar of Jackpot $54.79 $60 $50 $40 Jackpot.Megamillions $30 Jackpot.Powerball $20 Jackpot Cash3 $10 $0 JackpotFantasy 5 25 $0.84 $1.12 $1.45 Revenue Impact per $1 Jackpot
  26. 26. 8. What impact does Draw Station TV drawings have in driving State Lottery Corp. revenues? 26
  27. 27. What impact does Draw Station TV drawings have in driving State Lottery Corp. revenues? In F2010, the State Lottery Corp. received Draw Station TV exposure with an equivalent on-time value of about $6.6MM. This exposure generated retail sales of over $161MM. Market A and Market F had the greatest impact from these events. 7.0% 6.5% 6.3% 6.0% 5.0% 4.4% 4.0% 3.3% 2.9% 3.0% 1.9% 1.6% 2.0% 1.0% 0.0% 27 Draw.Station Rev Contribution Total GLC Region G Region F Region E Region D Region C Region B Region A 0.0%
  28. 28. 9. What has been the impact of Power-ball on total revenues and what is theoptimal investment going forward? 28
  29. 29. What has been the impact of Power-ball on total State Lottery Corp. revenues and what is the optimal investment required going forward? Power-ball has had about a +2.5% overall sales lift on State Lottery Corp. revenues. The good news is that this incremental impact has been growing over time. However, for the past 6 months, this impact has not been sufficient to offset the negative impact from spending reductions on other games, particularly instant games. 140 100 80 60 40 20 GLC Rev$ W/O Powerball Powerball Lift 6/26/2010 6/12/2010 5/29/2010 5/15/2010 5/1/2010 4/17/2010 4/3/2010 3/20/2010 3/6/2010 2/20/2010 2/6/2010 1/23/2010 1/9/2010 12/26/2009 12/12/2009 11/28/2009 11/14/2009 10/31/2009 10/17/2009 10/3/2009 9/19/2009 - 9/5/2009 Sales Index 120 29
  30. 30. What has been the impact of Power-ball on total State Lottery Corp. revenues and what is the optimal investment required going forward? Media Revenue per Dollar Spend As shown on the top chart, Powerball media performance to date has been somewhat sub-par. $5.00 $4.61 $4.00 Powerball TV Powerball Radio Powerball OOH Based on where Power-ball media generates its highest revenue returns, current spending of $3.3MM should be reduced back to about $1.8MM $3.00 All other GLC Media Avg. $2.00 $1.89 $1.43 $1.00 $0.60 $0.00 State Lottery Corp. Revenue and Power-ball media spend 100.40 2.50 State Lottery Corp Rev. Index Rev per Expenditure 100.30 2.00 100.20 100.10 1.50 100.00 GLC Revenues 99.90 1.00 Revenue per $ Current Spend 99.80 30 99.70 0.50 99.60 99.50 - 1 2 3 4 5 6 7 Power-ball Spend $MM
  31. 31. 10. What is the optimal mix of marketing spending for State Lottery Corp. across games, regions and media? What is the upside benefit for State Lottery Corp. in implementing an optimal spending plan? 31
  32. 32. What is the Optimal Marketing Spending across Games? Our optimization indicates growth of +3%, and involves higher relative spend on instant games media, POS, Multi-State games (Mega-millions) and direct marketing. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Instore POS Brand/Educ/Sponsorship Media Online Games Media Multi-State Games Media Direct Instant Games Media Revenue Contribution Current Spend Optimal Spend Instore POS 56,127,458 1,595,115 3,078,000 Brand/Educ/Sponsorship Media 11,840,546 5,238,046 5,053,760 Online Games Media 20,585,269 11,564,829 4,874,495 Multi-State Games Media 170,934,009 9,880,967 10,771,097 Direct 125,921,765 1,254,502 2,419,397 Instant Games Media 302,827,982 12,053,292 15,390,000 32
  33. 33. What is the Optimal Marketing Spending by Region? On a region basis, this same solution calls for relative spending reductions in Market A and Market F, with increases in all other markets. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Market G Market F Market E Market D Market C Market B Market A Revenue Contribution Current Spend Optimal Spend Market G $75,375,781 $2,756,744 $3,933,000 Market F $47,202,436 $3,781,267 $2,538,671 Market E $32,710,019 $921,184 $1,375,307 Market D $55,688,517 $1,061,122 $2,025,999 Market C $106,689,244 $2,352,979 $3,535,073 Market B $32,055,315 $1,990,626 $2,528,700 Market A $473,314,982 $28,722,829 $25,650,000 33
  34. 34. What is the Optimal Marketing Spend Analysis across the Media-Mix? Likewise, this solution also calls for higher investments in radio, OOH, direct and POS, with reductions in TV advertising. 100% 90% 80% 70% POS 60% Direct 50% Print 40% OOH 30% 20% Radio 10% TV 0% Revenue Contribution Current Spend Optimal Spend POS 105,050,803 1,595,115 3,078,000 Direct 146,554,731 1,254,502 2,419,397 Print 1,412,426 $95,083 $202,389 OOH 228,436,901 $4,875,328 $8,584,867 Radio 178,650,466 $9,158,625 $10,832,852 TV 152,411,295 $24,608,097 $16,469,248 34
  35. 35. Summary & Recommendations (1) State Lottery Corp.’s marketing spend of about $24 million generates very high positive returns of $4.49 per dollar spent. Clearly, marketing is a positive revenue generating investment for the State Lottery Corp.. (2) Over the past six months in particular, revenue for the State Lottery Corp. has slowed considerably and the fiscal year is likely to end with about a -0.5% decline. The major factors explaining this slowdown include the -38% decline in spending on instant games media and also the +2.1 point increase in State unemployment. (3) For the past six months, Power-ball has had a +2.5% net impact on State Lottery Corp. revenues. Unfortunately, this gain has not been sufficient to offset the impact of reductions in spending on other games, particularly instant games. Our analysis also indicates that the State Lottery Corp.’s $3.3MM marketing investment in Power-ball was somewhat excessive and we believe that reductions to about $1.8MM going forward are warranted, along with reinvestment in other games, particularly instant games. (4) By identifying less productive marketing activities and moving funds away from these to more productive ones, State Lottery Corp. has a tremendous opportunity to drive as much as +3 percent higher growth, all without increasing total marketing budgets. 35
  36. 36. 11. Appendix 36
  37. 37. State Unemployment State’s unemployment has been above 10 percent for 13 straight months. This has clearly had some depressing impact on overall State Lottery Corp. revenues. 12 10 8 6 Unemployment 4 2 0 37
  38. 38. State Lottery Corp. Index of Sales and Marketing-Spend Per Capita by Region Spending in Market F and Market A are both out of proportion to their per-capita sales. Our spending optimization calls for reductions in relative spending in these markets and clearly recognizes that investment should be more focused in higher per-capita markets. Index 250 200 Index of Sales Per Capaita Index of Mktg Spend Per Capita 150 100 50 - 38
  39. 39. The original basis of the spend guidelines: Incremental returns per dollar of investment Incremental $ per $ Spend Direct, In-store POS, Instant Games and Multi-State games represent the State Lottery Corp.’s best incremental investment, while expected returns from Online media and Brand/Educ./ Sponsorship are significantly lower. Total Avg POS Instore Brand/Educ/Sponsorship Media Online Games This formed the framework of the original spend recommendation. Incrementsl $ per $ Spend Multi-State Games Media Instant Games Direct $- $10.00 $20.00 $30.00 39
  40. 40. The original basis of the spend guidelines: Incremental returns per dollar of investment Incremental $ per $ Spend Market D, Market C and Market E as the most attractive markets for incremental investment. By contrast, Market F and Market A were found to be the least favorable markets. This formed the framework of the original spend recommendation. Total Avg Market G Market F Market E Market D Market C Incremental $ per $ Spend Market B Market A $- $10.00 $20.00 $30.00 40
  41. 41. Actual and Modeled State Lottery Corp. Revenues $90,000,000 R2=99.1%, Holdout R2=99.5%, MAPE = +/- 0.8% $80,000,000 $70,000,000 $60,000,000 $50,000,000 Model $40,000,000 Actual $30,000,000 $20,000,000 $10,000,000 $0 41
  42. 42. Follow-Up and Contact Michael Wolfe, Principal Bottom-Line Analytics Global 770.485.0270 (o) 678.314.8446 (m) mjw@bottomlineanalytics.com www.bottomlineanalytics.com Masood Akhtar, Analytics, EMEA Bottom-Line Analytics Global 44 7970 789 663 (m) ma@bottomlineanalytics.com www.bottomlineanalytics.com 42

×