“State lotteries are at an inflection point, and while the choices are not easy, the results from moving toward best practices and embracing change would be well worth the investment.” From 2009 Frost & Sullivan report

ELP Group Project Nancy Williams, David Kan, Ron Jackson, and Sandy BeCoats “If it doesn’t make money, it doesn’t make cents.”

Outline Team Assignment Our Strategy Financials

Team Assignment What are the biggest issues facing the Tennessee Education Lottery (TEL)? Looking at the corporation’s business what does management need to accomplish over the next five years? How can the corporation increase sales and raise more dollars for the programs it funds?

Issues Facing the TEL Increase proceeds to fund scholarships Improving the quality of TEL retailer base Minimize disparity between instant and online sales

Business Plan A multi-faceted plan for the next five years Expansion of sales channels Taking advantage of emerging technologies

Strategy Presentation: Ticket Checker via Smartphone App 2-D Barcodes on Instant Tickets New Business Model for Big-Box Locations ­Manned Kiosks ­Self-Service Lottery Kiosks ­Vouchers Predictive Ordering System

There’s an APP for that! Several smartphone APPs already scan barcodes Players can scan tickets to determine winners, which reduces retailer fraud Communicate through a web service to lottery host system to validate tickets Reduce cost of purchasing ticket checker terminals

“Big-Box” Stores

“Big-Box” Barriers To Entry Not enough resources to manage inventory Better tracking of inventory ROI does not justify labor costs

“Big-Box” Concept Manned In-Store Kiosks Self-Service Lottery Kiosks (Unmanned) New Corporate LSR position Vouchers to redeem winnings

Manned Kiosk Pre-determined store locations Staffed by entry-level lottery associates Evening and weekend coverage

Successful Business Models

Self-Service Kiosk Combines successful business models Offers online sales, instant sales, validations, and ticket checking Serviced by Corporate LSR Redemption of cash vouchers at any cash register

2-D Barcodes

Vouchers

Manned Kiosks Gross Sales$5,500,000 Free Tickets($600,000) Net Sales$4,900,000 Less: Gross Prize Expense$3,223,000 Vendor Fees$116,000 Staff/Other Expenses$228,000 Lease Commission$55,000 Estimated Return to Education:$1,279,000 Return %:26%

Self-Service Kiosk Gross Sales$4,500,000 Free Tickets($500,000) Net Sales$4,000,000 Less: Gross Prize Expense$2,637,000 Vendor Fees$94,000 LSR/Other Expenses$90,000 Lease Commission$90,000 Estimated Return to Education:$1,089,000 Return %:27 %

Predictive Ordering System Web-based system used in conjunction with Tel-Sell ordering application Analyzes instant game variables and low-tier validations to calculate the optimal combination and quantities Identifies the right products, the right place, the right time, and the right amount

Predictive Ordering System Benefits: Provides accurate forecasting to increase sales Recommends chain/corporate specific product mixes Considers marketing campaigns Assists with retailer training to promote online games

Predictive Ordering System Benefits cont’d: Reduces returns Reduces out-of-stock conditions Recommends sound replenishment estimates Provides retailer specific plan-o-grams

Projected FY Instant Sales (using Predictive Ordering System) % Increase Projected Net Sales Projected Net Gain Projected Return to Education Low Range (3% increase) $520 M$15 M$4 M High Range (5% increase) $530 M$25 M$7 M

Conclusion Ticket Checker via Smartphone App 2-D Barcodes on Instant Tickets New Business Model for Big-Box Locations Manned Kiosks Self-Service Lottery Kiosks Vouchers Predictive Ordering System Projected Net Return to Education of $5 to 8 MILLION annually

Q & A If it doesn’t make money, it doesn’t make cents.