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Scratch That Itch!: The California Lottery Was Limping Along Until It Changed the Game 

Tuesday, Sep 30 2014
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Reaching the right players is crucial. Nationwide, about 5 percent of lottery players — not just of scratch tickets, but all lottery games — contribute more than 50 percent of all lottery receipts. "What that tells us is that there's a definite target for the marketers of the lottery," says Erik Owens.

High school dropouts and African-Americans spent disproportionately high sums on the lottery nationally. The California Lottery estimated that Californians from all racial backgrounds play the lottery in rough proportion to their prevalence in the population — for example, whites in California make up 47 percent of the adult population and represent 45 percent of lottery players. But the information released by the California Lottery doesn't identify demographic information about "core players," the small minority of players who account for a large percentage of revenues.

The Lottery had an idea who they were. To reach players willing to spend $20 on a single ticket, the agency seized on two sets of data. One was the forms filled out by lottery winners. The other was the lottery's database from its 2nd Chance games, which allow players to submit as many as 1,000 losing tickets (the Lottery calls them "non-winning") into drawings each month. In these drawings, even losing tickets can become winners.

Hasegawa and others at the lottery focused on players in the databases who were purchasing $10 scratch tickets, then the priciest on the market. They also sent out a questionnaire to players of such games. "A very high proportion were coming from Asians," Hasegawa said. About 20 percent of sales from a group that represents 14 percent of the population, he told the industry conference.

Asians tend to play the lottery less than other groups, though a 2006 report by the California Office of Problem and Pathological Gambling noted that gamblers in the Bay Area were more likely to be Asian than in other parts of the state.

To promote the $20 scratcher, the Lottery launched a campaign targeting two specific groups of players. It was the first dual campaign in the lottery's 29 years. One target was likely players, Hasegawa said, who were identified as younger, male, and with higher incomes than the Lottery's regular base. The other group was Asian-Americans. The Lottery saw an opportunity with the new ticket to reach these players.

With that strategy in mind, the Lottery handed the torch to its ad agencies, with the message to get players to "really embrace the biggest instant scratchers jackpot ever," Hasegawa said. Higher jackpots, the agency hoped, would drive sales of more expensive tickets.

Time Advertising crafted a TV spot for Chinese, Korean, and Vietnamese speakers. The ads feature a split screen with two images of a brawny young Asian man. On the left, he's a man of modest means: He stuffs his Mini Cooper with cheap luggage and gives his disappointed fiancée a tiny diamond. On the right side, the same man sips champagne in a limousine and impresses the same woman with a gargantuan diamond. It all hinges on his decision to buy a $20 scratcher.

Hasegawa told the conference the Asian-language ads were "driving home the message of 'bigger is better' and the sheer size of the $5 million jackpot." Lottery documents describe the message of the ads as: "It is the biggest California Scratchers ever, go buy it now!"

"It's concerning," says Kent Woo about the ads. Woo is executive director of the NICOS Chinese Health Coalition, which runs a hotline and programs to reach problem gamblers in San Francisco's Chinatown. "One, because the lottery tickets are so much more expensive than what we're traditionally used to. But also because it portrays hope in terms of making money off the lottery."

He says that the California Lottery's direct marketing towards Asian-Americans, which is common in casino advertising, "is a bit of a concern, especially since the Lottery is something that's state-run."

Lottery spokesperson Lopez downplays Woo's concerns: "When the Lottery purchases advertisement in ethnic media it is because the Lottery's research has indicated that particular markets enjoy particular games."

To expand, the Lottery needs to overcome perceptions that dissuade people from buying its tickets. Its latest business plan addresses these issues, among them: "perception of types of stores where tickets are sold and type of people who buy tickets — particularly Scratchers." A quarter of scratchers are sold at liquor stores.

In marketing $20 scratchers to dedicated players, the California Lottery relied on radio broadcasts around the state, many from liquor stores. Targeted online ads placed piles of cash next to landmarks like the Golden Gate Bridge and Lake Tahoe. The agency bet its big-money message would entice players.

In the week after the $5 Million Jackpot launched in September 2013, players bought 860,000 tickets. At $20 apiece, sales totaled $17.2 million, a figure a Lottery press release trumpeted as "extraordinary."

The $20 scratchers were a hit. And they pulled up sales of other lottery tickets with them. That week, the Lottery sold more than $66.8 million worth of all types of scratchers, which was the most of any week in the California Lottery's history. The higher overall sales, Hasegawa said, showed the players weren't simply spending the same amount of money on more expensive tickets. They were spending more on tickets in general.

Early big winners included an L.A. hairdresser and a Temecula retiree — and the California Lottery. Hasegawa told the lottery conference that scratcher sales as a whole had been lifted by more than 10 percent since the launch of the $20 scratcher.

Hasegawa speculated that the targeted marketing drove sales. "What we spent on media for the $20 game effort was less than one-sixth of what we typically would spend in the less-targeted campaigns," he said, citing the ubiquitous holiday ads for scratchers. Unlike those holiday ads, which blanket television shows and adorn bus stops throughout the state, the $20 scratcher was promoted by a handful of radio broadcasts, Asian-language TV spots, and online ads.


About The Author

Aaron Mendelson

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