My economist friend M., having pointed out that if we want more players in our instant games, we might want to be more generous with prizes (what he calls “pricing for penetration”), followed up with an insight about how quickly we need to prove our generosity. It is pointless, he says, to focus on prizes that are unlikely to be won unless a player is spending big. The challenge is to design games that will keep players engaged who are spending small. I related our conversation in NASPL Insights October 2013.
Category: strategy
what to sell to whom
Can We Stretch Elasticity? The Tradeoffs of Prize Expense, Sales, and Customer Base
My economist friend M. pointed out some time ago that the way lotteries build instant tickets embodies a doctrine about pricing. The doctrine expressed by most lotteries might be called “best deals for our most committed customers”- that is, the players who are willing to spend $20 per ticket get our most generous payouts. This doctrine tends to concentrate the business on a small and very avid player base. Most lotteries claim to want something different- a broad base of players, none of whom plays excessively. A pricing doctrine better suited to producing this result is called “pricing for penetration”. Have you ever heard of this in the lottery context? Neither had I when I published this article in NASPL Insights August 2013