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Response to Q3 ALL SLIDES – EXHIBIT E
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Response to Q1/14/37/38/40/52/54
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Source: KLC Consumer Tracking Study Past 6 Month Players of Each Game – Rolling 2 years (8 Quarters) ending FY16Q2 Red/Green Highlighting is lower/higher than players of All Lottery Products at 90% confidence. Black numbers are not statistically different from players of All Lottery Products Past 6 Month Players All Lottery Products Powerball Mega Millions Pick 3Pick 4Cash Ball5CCKeno Scratch- off P6M Players N=3,036N=2,214N=1,570N=392N=296N=140N=108 N=216 N=1,458 % Male 50%53%55%46%45%56% 61% 45% 18-34 27%20%19%21%22%15%27%34% 35-54 41%44%46%48%47%43%40%41%39% 55+ 32%36%35%31% 42%33%25%27% Avg. Age 46.048.048.246.946.450.246.343.143.0 % Caucasian 86% 85%75%74%83%84%87%86% % $35k- 27%22%20%42%40%29%40%27%35% % $35k-$70k 31% 32%29%32%39%27%30%31% % $70k+ 37%42%44%26%25%30%31%38%30% % College Degree + 53%54%56%35%38%48% 52%45% 5 Portfolio Consumer Demographic Profile
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6 Kentucky Lottery 6 Segments Solution – 6 Month Roll-Up (Q2/Q3 2016) In 2013, the KLC conducted a separate segmentation study, also fielded by Leger. Definitions of the segments were placed into the tracking study to understand whether the Lottery was “moving the needle” among the segments on an on-going basis. The following charts show changes in the incidence play of each game, among each segment as it is defined. Segment % Point Difference vs. Prior 6 Months Non Players-1% (n=95) Fun Seekers+2% (n=121) Conservative Players-2% (n=151) Very Prominent Players+2% (n=135) Budget Conscious-3% (n=137) Risk Takers+2% (n=73) Sample sizes are from 3Q16
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7 Segment Summary Target Group Segment Description Segment Pop. Size Past 6 Months Play Past Month Play Past Week Play % of Pop. played in Past Week Key Lottery Games Importance to Lottery Non- Players Non-players, but occasionally will jump on the Powerball bandwagon, highly conservative and socially conscious 13%37% 20%11%1% Powerball Mega Millions Scratch Low priority. Ensure this segment is aware of Powerball jackpots Fun Seekers Relaxation and Fun are key. Would gift tickets for friends and family as Lottery is good for Kentucky and a good cause. A big opportunity segment 17%76% 57%32%5% Powerball Instant Games Mega Millions Keno Big opportunity segment. Play for fun, love to gift Lottery tickets Conservative Players Conservatives, with no alliance to Lottery, either through strategy or believing in the Lottery. They are truly pessimists yet they do play! 20%74% 56%36%21% Powerball Instant Games A tough segment to change their behavior. Set in their lottery ways. Very Prominent Players Heavier Jackpot and Scratch Players than other segments, play for the fun of it, and LOVE that Lottery is part of Kentucky and change their spend regularly 20%96% 90%64%12% Powerball Mega Millions Instant Games 5 Card Cash Key segment for new game development Budget Conscious Budgeters, older males, who play the Lottery, but very quietly/discretely 20%82% 65%33%6% Powerball Mega Millions Instant Games Regular players, good opportunity for Fun Club expansion Risk Takers Young, heavy players of all games, especially Scratch Games and Secondary games. Winning is important, and risks warrant the rewards 10%92% 90%70%7% All KY Lottery Games Key segment for new game development and advances in technology Q11/12/13 Based on 3Q16
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8 Kentucky Lottery advertising awareness bounced back this quarter with a significant increase from the previous quarter, with more than two in three (70%) recalling KY Lottery ads. Aug–Sept “WT$G” start Feb “WT$G” 2 nd Wave vs. Q2 ‘16 Q3 2014 (JAN-MAR) (n=507) Q4 2014 (APR-JUN) (n=543) Q1 2015 (JUL-SEP) (n=526) Q2 2015 (OCT-DEC) (n=529) Q3 2015 (JAN-MAR) (n=551) Q4 2015 (APR-JUN) (n=552) Q1 2016 (JUL-SEP) (n=700) Q2 2016 (OCT-DEC) (n=702) Q3 2016 (JAN-MAR) (n=712) Note:Solid arrows indicate Q3 2016 significantly higher/lower than Q2 2016 at 95% confidence level Arrow outlines indicate Q3 2016 significantly higher/lower than Q2 2016 at 90% confidence level Q1 KY Lottery advertising awareness continues to strengthen among Kentuckians (75%), with a significant increase from the previous wave. Advertising awareness is back up to Q4 2014 and Q1 2015 levels. KLC Advertising Awareness “In the past month have you seen or heard any advertising for Kentucky Lottery games?”
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9 AD CHANNEL RECALL ACROSS ALL GAMES: Nearly three in five recall an ad for any Lottery game on TV (58%, up +3%), followed by In-Store POS displays (up +4%). Two of the lower channels, newspaper and direct mail, showed significant increases this quarter. Ad Channel Trended % Recall Across All Games Q3 2015 (JAN-MAR) (n=551) Q4 2015 (APR-JUN) (n=552) Q1 2016 (JULY-SEP) (n=700) Q2 2016 (OCT-DEC) (n=702) Q3 2016 (JAN-MAR) (n=712) TV 54%52%44%55%58% In-store (POS) 36%34%30%38%42% Billboards 27%24%21%28% Radio 25%20%18%25% Internet 15%13%11%19%22% LCD Monitor 13%5%12%16%14% Bus Signs 13%11%12%13% Newspaper 10%11%8%10%13% Direct Mail 5%4%5% 3% AD CHANNEL RECALL Across All Games Q3 2016 (JAN-MAR) (n=712) Note:Solid arrows indicate Q3 2016 significantly higher/lower than Q2 2016 at 95% confidence level Arrow outlines indicate Q3 2016 significantly higher/lower than Q2 2016 at 90% confidence level Q4
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10 KY Lottery player incidence is up significantly across all time periods in the latest wave. All three numbers are at historically high levels. This is the second quarter in a row with each playership incidence increasing significantly! Note: Solid arrows indicate Q3 2016 significantly higher/lower than Q2 2016 at 95% confidence level Lottery Player Incidence – 6 Months/1 Month/1 week “How often, in the past year, did you play the Kentucky Lottery?” Q11/12/13 (n=712)(n=551) (n=507) (n=526) (n=532) (n=509)
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11 Past 6-month lottery play has increased significantly from the previous wave among both 18-34 and 35-54 age groups. *NOTE: IN FY16Q1 Tracking Study respondent base was increased (n=700) but also balanced for income and ethnicity which may have impacted the strength of the results. Going forward, this should be more reflective of the true market environment N=171 N=186 N=172 N=166 N=196 N=131 N=146 N=188 N=162 N=220 N=137 N=170 N=211 N=128 Past 6 Month Lottery Player Incidence – by Age “In the past 6 months, which of those lottery games have you played?” N=203 N=266 N=233 Note:Solid arrows indicate Q3 2016 significantly higher/lower than Q2 2016 at 95% confidence level Arrow outlines indicate Q3 2016 significantly higher/lower than Q2 2016 at 90% confidence level N=206 N=272 N=234 Q11
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12 Powerball playership increased significantly this wave, most likely due to the historic jackpot earlier in the year. Instant ticket play may have received a ‘halo’ effect from Powerball and the ‘Holiday’ season, and now stands at a 5 year high of 39%. Q11 Past 6-Month Game Play “In the past 6 months, which of these Kentucky Lottery games have you played?” Note:Solid arrows indicate Q3 2016 significantly higher/lower than Q2 2016 at 95% confidence level Arrow outlines indicate Q3 2016 significantly higher/lower than Q2 2016 at 90% confidence level (n=712)(n=551) (n=507) (n=526) (n=532) (n=509)
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13 For the most part, lesser prominent games reported a directional decline or remained stable. Cash Ball did report a significant drop from last wave. Q11 Past 6 Month Game Play “In the past 6 months, which of these Kentucky Lottery games have you played?” Note:Solid arrows indicate Q3 2016 significantly higher/lower than Q2 2016 at 95% confidence level Arrow outlines indicate Q3 2016 significantly higher/lower than Q2 2016 at 90% confidence level (n=712)(n=551) (n=507) (n=526) (n=532) (n=509)
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Response to Q 38
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SALES BY BUSINESS CATEGORY: Q2’15 VS. Q2’16 Q2 2016TOTALDRAWINSTANT Grocery$28,555,360 $10,754,942 $17,800,418 C-Store (Gas)$173,856,200 $59,170,698 $114,685,502 C-Store (No Gas)$9,847,089 $5,173,498 $4,673,591 Liquor$9,345,275 $4,614,413 $4,730,862 Service Station$849,163 $303,451 $545,712 Drug Store$484,907 $173,686 $311,221 Restaurant/Lounge$2,662,341 $2,383,181 $279,160 Bar/Tavern$2,973,391 $2,933,011 $40,380 General Merchandise$862,294 $233,385 $628,909 Other$10,053,446 $4,128,288 $5,925,158 Q2 2015TOTALDRAWINSTANT Grocery$26,021,459 $10,227,613 $15,793,846 C-Store (Gas)$159,948,962 $55,164,930 $104,784,032 C-Store (No Gas)$9,032,372 $4,621,552 $4,410,820 Liquor$8,894,191 $4,383,082 $4,511,109 Service Station$864,842 $290,324 $574,518 Drug Store$458,096 $166,532 $291,564 Restaurant/Lounge$2,566,955 $2,288,103 $278,852 Bar/Tavern$2,630,554 $0.00 General Merchandise$814,775 $238,046 $576,729 Other$9,407,470$3,991,046$5,416,424 Total Sales % change 9.7% 8.7% 9.0% 5.1% -1.8% 5.9% 3.7% 13.0% 5.8% 6.9% 13 Weeks 9/27/15 - 12/26/15 At the end of FY16Q2, Internet Sales had not yet commenced. After selling for 6 weeks, cumulative sales are $138,333.
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FY16Q2 BUSINESS CATEGORY SHARE OF SALES BASED ON Q2FY16 SALES OF $239.63 MILLION 13 Weeks 9/27/15 - 12/26/15
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Response to Q9 Through continuous consumer tracking, representative of the state’s population (18+), core gamers
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18 KY Lottery player incidence is up significantly across all time periods in the latest wave. All three numbers are at historically high levels. This is the second quarter in a row with each playership incidence increasing significantly! Note: Solid arrows indicate Q3 2016 significantly higher/lower than Q2 2016 at 95% confidence level Lottery Player Incidence – 6 Months/1 Month/1 week “How often, in the past year, did you play the Kentucky Lottery?” Q11/12/13 (n=712)(n=551) (n=507) (n=526) (n=532) (n=509)
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Draw Game Play Frequency – Among Past 6 Month Game Players “How often do you play [Game]? Would you say you play…..” Cash Ball, 5 Card Cash, Pick 3 and Pick 4 have the most daily and weekly play compared to the KLC portfolio – these four games have the most loyal multiple purchases per week base. N=2405 N=1589N=443N=332 N=150N=120N=242 Past 6 Month Players of each Draw Game – 2yrs rolling. Note: Lucky For Life Base too small to report N=1586 19 Q24/Q37/Q49/Q53/Q57/Q65/Q95/Q102
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20 Kentucky Lottery 6 Segments Solution – 6 Month Roll-Up (Q2/Q3 2016) In 2013, the KLC conducted a separate segmentation study, also fielded by Leger. Definitions of the segments were placed into the tracking study to understand whether the Lottery was “moving the needle” among the segments on an on-going basis. The following charts show changes in the incidence play of each game, among each segment as it is defined. Segment % Point Difference vs. Prior 6 Months Non Players-1% (n=95) Fun Seekers+2% (n=121) Conservative Players-2% (n=151) Very Prominent Players+2% (n=135) Budget Conscious-3% (n=137) Risk Takers+2% (n=73) Sample sizes are from 3Q16
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21 Segment Summary Target Group Segment Description Segment Pop. Size Past 6 Months Play Past Month Play Past Week Play % of Pop. played in Past Week Key Lottery Games Importance to Lottery Non- Players Non-players, but occasionally will jump on the Powerball bandwagon, highly conservative and socially conscious 13%37% 20%11%1% Powerball Mega Millions Scratch Low priority. Ensure this segment is aware of Powerball jackpots Fun Seekers Relaxation and Fun are key. Would gift tickets for friends and family as Lottery is good for Kentucky and a good cause. A big opportunity segment 17%76% 57%32%5% Powerball Instant Games Mega Millions Keno Big opportunity segment. Play for fun, love to gift Lottery tickets Conservative Players Conservatives, with no alliance to Lottery, either through strategy or believing in the Lottery. They are truly pessimists yet they do play! 20%74% 56%36%21% Powerball Instant Games A tough segment to change their behavior. Set in their lottery ways. Very Prominent Players Heavier Jackpot and Scratch Players than other segments, play for the fun of it, and LOVE that Lottery is part of Kentucky and change their spend regularly 20%96% 90%64%12% Powerball Mega Millions Instant Games 5 Card Cash Key segment for new game development Budget Conscious Budgeters, older males, who play the Lottery, but very quietly/discretely 20%82% 65%33%6% Powerball Mega Millions Instant Games Regular players, good opportunity for Fun Club expansion Risk Takers Young, heavy players of all games, especially Scratch Games and Secondary games. Winning is important, and risks warrant the rewards 10%92% 90%70%7% All KY Lottery Games Key segment for new game development and advances in technology Q11/12/13 Based on 3Q16
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Response to Q16
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23 Kentucky Lottery advertising awareness bounced back this quarter with a significant increase from the previous quarter, with more than two in three (70%) recalling KY Lottery ads. Aug–Sept “WT$G” start Feb “WT$G” 2 nd Wave vs. Q2 ‘16 Q3 2014 (JAN-MAR) (n=507) Q4 2014 (APR-JUN) (n=543) Q1 2015 (JUL-SEP) (n=526) Q2 2015 (OCT-DEC) (n=529) Q3 2015 (JAN-MAR) (n=551) Q4 2015 (APR-JUN) (n=552) Q1 2016 (JUL-SEP) (n=700) Q2 2016 (OCT-DEC) (n=702) Q3 2016 (JAN-MAR) (n=712) Note:Solid arrows indicate Q3 2016 significantly higher/lower than Q2 2016 at 95% confidence level Arrow outlines indicate Q3 2016 significantly higher/lower than Q2 2016 at 90% confidence level Q1 KY Lottery advertising awareness continues to strengthen among Kentuckians (75%), with a significant increase from the previous wave. Advertising awareness is back up to Q4 2014 and Q1 2015 levels. KLC Advertising Awareness “In the past month have you seen or heard any advertising for Kentucky Lottery games?”
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24 AD CHANNEL RECALL ACROSS ALL GAMES: Nearly three in five recall an ad for any Lottery game on TV (58%, up +3%), followed by In-Store POS displays (up +4%). Ad Channel Trended % Recall Across All Games Q3 2015 (JAN-MAR) (n=551) Q4 2015 (APR-JUN) (n=552) Q1 2016 (JULY-SEP) (n=700) Q2 2016 (OCT-DEC) (n=702) Q3 2016 (JAN-MAR) (n=712) TV 54%52%44%55%58% In-store (POS) 36%34%30%38%42% Billboards 27%24%21%28% Radio 25%20%18%25% Internet 15%13%11%19%22% LCD Monitor 13%5%12%16%14% Bus Signs 13%11%12%13% Newspaper 10%11%8%10%13% Direct Mail 5%4%5% 3% AD CHANNEL RECALL Across All Games Q3 2016 (JAN-MAR) (n=712) Note:Solid arrows indicate Q3 2016 significantly higher/lower than Q2 2016 at 95% confidence level Arrow outlines indicate Q3 2016 significantly higher/lower than Q2 2016 at 90% confidence level Q4
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