A short case on MMM for lottery client.

1. LOTTERY CORPORATION
MARKETING EFFECTIVENESS MODEL

2. 2
THE KEY QUESTIONS TO BE ANSWERED
 How do media and marketing contribute to overall Lottery Corp. revenues across the
total enterprise and by regions?
 How has media and marketing impacted Lottery Corp. revenue growth over the past
year? Which elements of the marketing-mix were driving this growth?
 Is our total marketing investment profitable or unprofitable?
 What are the returns per dollar across media channels and across media for different
games such as instant, draw games or multi-state jackpot games?
 How effective are POS promotional materials and which games have the highest sales
lift using these tactics?
 How has the economy affected Lottery performance and growth over the past year?
How is it likely to affect the business in the coming year?
 Are there significant interactions or “synergies” across the State Lottery Corp.
marketing mix? Which activities and events require the most coordination?

3. 3
THE KEY QUESTIONS TO BE ANSWERED-
CTD.
 What are the threshold levels of jackpot payout needed to drive growth for Mega-Millions
and Power Ball?
 What are the returns to highly-discounted “draw-station” media time-slots?
 What would be the impact on sales if we increased the number of lottery-selling outlets by
+2 percent next year?
 What are the returns to various digital media channels such as banner ads, paid search, etc.?
Should we invest more in these channels?
 How does the Lottery’s public reputation as expressed through social media, affect business
performance, if any?
 What would be the returns and growth impact if we increased overall media spend by $3
million next year?
 If we optimized our marketing spend next year according to the measured productivity from
this model, how much additional sales could we expect if we held our overall marketing
budget constant? Which media channels and games should we invest more and less?

4. STATE LOTTERY CORP. MODEL ARCHITECTURE
Weekly Total
State Lottery
Corp.
Revenues
New Game &
Instant Promos
Direct
Marketing
State Unemploy-
ment rate
Educ/Brand &
Spons Media
TV & Radio
Core Promos
By Event
DrawGames
Media, TV & Radio
Instant Games
TV & Radio
By Week
7/1/06 –
6/26/10
$ Spend
$ Spend
$ Spend
$ Spend
$ Spend
$ Value
Timing
Timing
Macro-Economic
Available Jackpot $
No. of active
Customers
By Week
7 Regions
Revenues
Seasonality
Jackpots
The diagram shows the data
and inputs to the Lottery
Model.
We start with weekly total
lottery sales by region. The
drivers or inputs include:
1. Weekly media spend or
GRPs by channel and
game
2. Promotions
3. New Game Launches
4. Macro Economic factor
such as unemployment
5. Number of active outlets
6. Available game jackpot
sizes
7. Recurring seasonality
Multi-State Games
Media, Radio &
OOH
Draw Station
Media $
Outlets
Selling
4

5. $0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
Model
Actual
ACTUAL AND MODELED STATE LOTTERY
CORP. REVENUES
5
R2=99.1%, Holdout R2=99.5%, MAPE = +/- 0.8%
 Once the predictive model is completed, we validate by showing how well it fits versus
actual sales. We also withhold at least10% of the data from model calibration to
determine how well the model predicts.
Holdout
Period

6. HOW DOES MEDIA AND MARKETING CONTRIBUTE TO OVERALL
STATE LOTTERY CORP. REVENUES FOR THE CURRENT YEAR?
79.3%
3.6%
2.0%
5.5%
0.4%
1.7% 1.4%
0.4%
4.0%
1.0%
0.5%0.0%
Base Jackpots Direct Instant-Games.Media
New.Instant Game.Promos InstantGame.Promos Multi-State Games Media Draw.Games.Media
Brnd/Educ/Spons.Media Draw.Stations Instore.POS Core.Promos
Core.Promos
Total Instant(scratch) Games
7.3%
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 the year. Draw
station media generated 4.0% of total revenues, with a value of $145MM retail dollars.
F2010 Annual State Lottery Corp. Games Revenue Decomposition
6

7. HOW HAS MEDIA AND MARKETING IMPACTED STATE
LOTTERY CORP. REVENUE GROWTH?
-2.8%
-2.7%
-1.2%
-0.4%
-0.2%
-0.2%
-0.1%
+0.1%
+0.2%
+0.5%
+0.5%
+0.6%
+1.5%
+3.5%
-$150,000 -$100,000 -$50,000 $0 $50,000 $100,000 $150,000
FY2010Variance.Impact$000
Marketing Variance Impact. F2010 v. Year-Ago
Base Monmentum
Multi-State Games Media
Jackpots
Draw Stations
No.Stores Selling
Draw Games Media
Direct
Brand/Educ/Spons. Media
Core Promos
New-Games Promos
Instore POS
Instant Games Promos
Economy (Unemployment)
Instant Games Media
We quantify and determine the contribution and impact of each media and marketing driver on yea-
over-year growth. We will also be able to identify those factors that are impediments to growth.
7

8. WHICH MEDIA CHANNELS & GAMES DRIVE THE MOST REVENUE
& RETURNS?$0.02
$0.07
$0.17
$0.17
$0.19
$0.24
$0.34
$0.37
$0.60
$0.90
$1.14
$1.18
$1.43
$1.89
$2.07
$2.61
$4.04
$4.62
$5.58
$8.10
$8.28
$11.03
$24.54
$28.03
$0
$5
$10
$15
$20
$25
$30
Incremental Revenue per Dollar Spend
We are able to quantify and identify the specific incremental revenue and returns of
each media channel and game. Overall, we see the high value of marketing for the
Stare Lottery Corp. One dollar of spend generated $4.62 of revenue and $1.91 of net
profit. Marketing is highly profitable here!
8

9. WHAT IS THE OPTIMAL MARKETING SPENDING
ACROSS GAMES?
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
Draw 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
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Instore POS
Brand/Educ/Sponsorship Media
Draw Games Media
Multi-State Games Media
Direct
Instant Games Media
9
Based on the model, we determined that revenue gains of +3% can be achieved through a more efficient
allocation of budget dollars across different games. This can be achieved without an overall increase in
spending
Total 41,586,752 41,586,749