A whole new Ball Game

Phil Smith has just landed a difficult, and some would say impossible, job. As Camelot’s new commercial director, he has vowed to reverse the decline in National Lottery sales of the past two years, saying he wouldn’t have accepted the job unless he believed this was an aim that could be realised. But others are sceptical that the lottery can improve on the &£36bn it has raised since its 1994 launch during its next seven-year licence period.

An ideal mix

In Smith, Camelot has found a marketer with a mixture of retail, packaged goods and Internet experience, which it believes will be invaluable in reviving the fortunes of the National Lottery. He takes over from former marketing director Ian Milligan, who is leaving the organisation to spend more time with his family. As board level director, Smith says there are plans to hire another marketing director, and a sales director. A former Kraft European vice-president, and one time marketing director of the Kwik Save and Somerfield supermarket chains, Smith is certainly familiar with the UK retail scene. Since he was forced out of Somerfield in a messy restructure in July 1999 (MW July 22, 1999), he worked briefly at online casino Kismet.com, before taking over as deputy managing director of website, improveline.com, which matches builders with clients over the Internet. This experience stands him in good stead for Camelot’s plans to market the lottery over the Net and other new technology, such as mobile phones.

Following two years of declining sales in its main Saturday and Wednesday draws, Camelot is preparing for the next licence – which begins on January 27 – and is planning a relaunch in the spring.

But while sales for the main game slipped by seven per cent to &£2.11bn, scratchcard sales have unexpectedly risen after many years of poor performance – up seven per cent to &£290m in the six months to September 30, mainly because of the success of the &£1m Millionaire game. The strength of scratchcards suggests that while the lottery is in decline as a national game, it is doing better with a more segmented approach. But concentrating on scratchcards will not enable it to significantly boost overall sales, and the lack of balance could be seen as a worrying development if the pattern continues.

Camelot promises some “surprises”, though of little surprise to many has been its backsliding on its original pledge in its bid against Sir Richard Branson’s The People’s Lottery, to raise sales in the next licence period by 40 per cent to &£50bn – bringing in &£15bn for good causes.

Smith says: “There are a lot of conditions that have to be right for that sales increase to happen. It would be premature for me to be talking about the programmes that might or might not achieve it. But I obviously believe that top line growth is a do-able thing, at very least in principle, or I wouldn’t have accepted the challenge.”

He says that he has studied the situation and everything is up for review – including advertising – and he will start making decisions when he takes up the post in January. He adds: “The best part of the past couple of years has been fallow as a result of bid uncertainty. There’s a huge amount of investment planned over the next few years. The knowledge that there are new channels opening up gives me encouragement.”

The challenge

The lottery operator has earmarked &£1bn to spend on marketing and upgrading the lottery, and Smith will be the man who decides how much of this is spent. But as interest in the lottery diminishes, many are wondering what steps can be taken to revive interest in the game.

According to former Camelot marketing director Jon Kinsey, who is now managing director of London Electricity Group, the National Lottery has a “really difficult challenge” to increase sales, and is hamstrung by its refusal to change the format of the main game. He says: “The main game is tired, and after seven years people have realised that the chances of winning are slim. I would have changed the game to increase the number of jackpot winners.”

Kinsey believes that advertising and marketing have only a limited role to play in lifting sales, as people play mainly to win big prizes.

Rollover rumble

Meanwhile, Ian Walker, an economics professor at the University of Warwick, says the most important thing is to “de-couple” the Saturday and Wednesday draws. His analysis of how people play the lottery shows that spending goes up whenever there is a rollover, but if there are too many rollovers, people tend to defer playing until the jackpot is big enough. Striking the right balance in games is crucial. He believes that the current game, where players choose six numbers from 49, is ideal for the Saturday draw. But the Wednesday game is much smaller – with 25 million tickets sold compared with 50 million for the Saturday draw, so the six out of 49 format is inappropriate.

He suggests that another game structure is needed to make the Wednesday game yield more jackpot winners and become more attractive. If Saturdays rolled over directly to the next Saturday, the rollover jackpots would be larger, thus attracting back more players who have deserted the game. He argues that players who have been enticed back often tend to play for a few weeks after they have returned.

Going upmarket

Walker also believes that the Lottery Extra game – where players buy an extra ticket to play separately on the main game – has failed because people delay playing until there is a large enough rolled-over jackpot. This creates a vicious circle where the absence of players leads to a smaller jackpot, which in turn deters people from playing. With sales of about &£1m for each Lottery Extra game – well below Camelot’s target, which Walker believes to be about &£10m (though Camelot denies this figure) – Camelot may choose to axe the game, though it says it has no plans to do so.

Other observers are concerned with what they see as the increasingly downmarket direction that the National Lottery brand is taking. Michael Parker, chairman of Team Saatchi, and one of the original Saatchi & Saatchi executives who launched the National Lottery in 1994, says: “They have improved some retail outlets, but the majority are this appalling dirty experience of finding a bit of paper on an old lottery station.” He believes the image of the lottery has been damaged by the retail experience, which is potentially worth hundreds of millions of pounds in equivalent advertising exposure.

Gambling deregulation

Smith’s experience at Kwik Save – where he introduced a plan to make the stores more modern and upmarket – will be useful in the attempt to improve the retail experience. Parker believes that this should include moves such as creating National Lottery facias for independent stores, in the same way that tobacco companies and Cadbury have done.

Brand consultancy Wolff Olins board director John Williamson says the lottery brand needs to become more inclusive, and regain its status as a national institution, in a similar way to the National Health Service. He sees it as too downmarket, targeting working-class players and missing out on the opportunities of sales to higher income earners. He adds: “The logo is the weakest brand symbol in the world. It should be inclusive, it should move up the scale.”

Camelot refuses to reveal its plans for the relaunch, but has made much of the Budd Report, which recommends deregulating gaming in the UK by, for instance, allowing other betting companies to make side bets on National Lottery numbers, which is at present illegal. Camelot says that this is the greatest threat to its attempt to increase sales.

There appear to be two views about reviving the lottery – one says that people would respond to a general upgrade of the lottery experience, from advertising and retail, to being able to play through new channels such as the Internet. The other view says that its success will all be down to how the main game is structured and how often there are rollovers. While Smith will be able to affect the first set of conditions, he will have no influence over the second, as these are already set out in Camelot’s bid document. Smith’s pledge to raise sales is one he can only influence in certain ways. But if he pulls it off, this would go down as one of the greatest marketing turnarounds of the decade.