COVID-19 – A WAKE-UP CALL

I wrote a blog “Digitalization of Lottery Business” two months ago. I will now continue with the same theme and this blog will partly be the same than that previous one. I believe on principle “Repetition is the mother of learning”. I got the impulse for this one from the virtual SBC Digital Summit event where I participated in panel discussion last week. I discussed with Steen Madsen (A Game Above), Stuart Godfree (Mkodo) and Chris Armes (GiG) about mobile and digital opportunities for lotteries. I have thought that issues a lot during last few days and believe that we could help operators, lotteries and the other ones, who would like to develop their offering and service in that area.

It is already now obvious that Covid-19 has changed our lives. It has been amazing how fast that changed has happened. Unfortunately, it has not been good changes, but I would say that it hasn’t been totally bad either. Of course, I’m not talking about the number of dead or sick people, but how we have changed our habits to buy things and spend our free time. That “damn virus” has also showed to companies that there should be agile ways to change business strategies and plans very quickly. Those companies who have managed to do that, have better possibilities to stay alive during that crisis and after that.

Covid-19 has shown one big weakness from gambling business which is mainly problem for casinos and lotteries. That weakness is to big role of retail business and the lack of digital online business. It’s not good solution if you have “all your eggs in the same basket”. We have the best/worst examples of that in Las Vegas where casinos have been closed now some weeks and most of them have just minor online business going on or in many cases not at all online business. That has meant 95 – 100 % lost of sales and profits have changed to losses. Too many lotteries have faced similar problem. When places where you are used to sell your lottery tickets are not allowed to be open, you don’t have any places where you could get sales if you don’t have online/digital channel. There are examples where big lotteries have been forced to stop whole operations when they haven’t had online sales at all, or the share of that business has been too small.

The other example of “all eggs in the same basket” problem is sports betting. Those operators who have had just sports betting business without any other gambling verticals have faced extremely big problems. If you have offered only sports betting and there are no sports events going on, what else you could do than stop your operations? Those sports betting operators who have had for example virtual sports and/or online casino games in their product portfolio have had possibility to continue their businesses.

I said in panel discussion last week that hopefully Covid-19 is the wake-up for lotteries. Actually it should be wake-up call also for some other gambling operators too! It is not useful to say that lotteries should understand the need of change already many years ago. It is better to concentrate on the future and how they could make things better. As a skeptic guy, I‘m not sure how many of them are willing to change and how fast they are ready to do it. The time for action is NOW not sometimes in the future!

There are many things what gambling operators should have learnt from the crisis we have faces during last 2 -3 month. Companies should have adaptive strategy which means capability to react on big changes fast. They should also have capability to move changes in strategy to business plans and further to operational level as quickly as possible but in the way which their organization and customers will understand. The main problems in that area are slow processes, the fear of change and the lack of communication with employees and customers.

There are at least four areas where the most of lotteries should make improvements. Those area are digitalization, customer centric operations, products & services, and technology. All those areas would be worth of own blog, but I try to explain the main changes now shortly.

Although retail is really important part of lottery business, lotteries should have digital business too. Lotteries should understand that online sale is not against retail business but rather will support that. The next step for more developed lotteries will be omni-channel solution where retail and online will establish “one package” and work as a one sale channel. We have noticed that it is easier to offer services for customers in digital channels than in traditional retail network. But it would be possible to offer those supporting services and new kind of products also in retail network if companies could utilize digitalization in all channels, not only in online channel. Lotteries should start digitalization immediately if they haven’t done that yet.

Lotteries should have capability to serve their customers whenever and wherever they are willing to buy products. It is old fashioned way to think that good product would be enough to get customers and sales. Companies should understand and admit that customers are kings and queens and they will decide what, when and where they are going to buy. We should understand more about our customers and data is one important part of that. Lotteries should put more resources on data utilization and automatization. I’m sure that it would bring them more satisfied customers and better business.

I already wrote about “all eggs in the same basket” dilemma. Gambling companies should have wider product portfolio than the most of them have at the moment. That is big problem for lotteries mainly. There are still plenty of lotteries who are offering just basic lottery products like Lotto and scratch cards. There might be legal reasons for that, but I would say that in many cases those legal and regulative problems are just too easy explanations. I don’t believe that it would be impossible to add for example horse and sport betting to product portfolio. From business risk management point of view it is better to have wider product portfolio than limited one.

I have always seen technology as a tool for business. I must admit that it is extremely important tool which allows you to develop your business. Gambling operators should have as modern and agile technology solutions as possible. Companies should have as fast time to market time as possible and technology is the most important element there. I think that one big challenge in that area for lotteries is unwillingness to make changes to technology which they are used to use. The most of lotteries are used to buy everything from same technology supplier and that would block the possibility for change and opportunity to use the best solutions in different areas.

Lotteries should be more ready to take more risks, controlled ones of course. I’m extremely keen on helping lotteries, and other gambling operators, if they would like to start to change their business now. The game is not over, but Covid-19 has showed that time for change is now!

And the winner is… – CUSTOMER!

Gambling companies have had very product centric strategies. The main business elements have traditionally been products and product related services. The basic idea has been that players will select us if our products are the best ones. This business model worked quite well about 10 – 20 years ago when gambling business was mainly based on retail shops and physical casinos and when internet and mobile gambling was not so big.

Consumption habits have changes and gambling business can’t be out that development. Gambling in retail network is going down and business has moved to internet and especially to mobile channel. When in old model there were just few retail shops in their own neighborhood now there are tens of alternatives in everybody’s pocket when mobile has become the main channel of gambling. Active customer could easily select his gambling operator among hundreds or even thousands of gambling companies. It’s not possible to operate with same business models anymore in this new world.

Successful company should understand the needs of their customers. It’s not enough anymore that product is good. It’s the fact that you can’t get permanent advantage with products in gambling business because we are living in “copy – paste” world. In practice it’s impossible to get patent for your new products and due to that the other operators could copy them in few months or even weeks. We have almost the same challenge with product related services which are also easy to copy if they seem to work in other companies. So with the traditional key elements you could get in the best case few months advantages compared to your competitors. One good example of that is bonuses. I don’t remember which company started that but it’s sure that it didn’t get very good benefit from that because all the others did the same very soon. Nowadays almost all companies have different kinds of bonuses and they are “new normal” which means that the only winner has been the customer who now gets a little bit higher payout percent.

The good gambling operator has to have high quality products and services and also trustable and flexible technology but you won’t win the game with those elements – you will just lose without them. I believe that those companies who understand more about the needs of their customers and could develop their service models based on those needs will win the competition. That’s why the importance of data will be extremely high. It’s not enough if you just collect data but don’t know how to use it. You should understand what the most important features are in that data. It’ll complicated task because those features will vary real much among different customer groups and could be even personal ones. More personalized service you could offer the better possibility you have to succeed. It’s not worth of doing personalization manually but machine learning and automatization will be useful tools for that. The goal is to give your customer feeling that he/she is important to you and you are offering him/her interesting products and services with “only for you” principle. The satisfied customer is for sure more loyal than unhappy customer and will probably be ready to spend even more money.

There are lots of talk about data and personalized customer experience. As an active gambling customer I would say that I have never get “wow” feeling from any gambling company. It’s of course possible that I’m too critical customer but the more likely alternative is that gambling companies haven’t yet understood what they should do. It’s sure that in long term the customer will be the winner because he/she is the king/queen which the companies will serve better than they have done earlier. Those companies who just optimize the profit of next quarterly will lose – hopefully! The companies who will invest in long term customer experience development will finally win the competition because that’s the only important area where you really could differentiate yourself from your competitors. You should try to find out the most important features by “test & learn”-method and utilize automatization and machine learning as much as you can. We are already doing that and there are tens or even hundreds of changes in our offering every day. We are all the time analyzing the results of those changes to the customer experience and have got excellent results from that. But there is still long way to go in that area…