THE STATE OF DIGITAL LOTTERY STRATEGY AND MARKETING

THE STATE OF DIGITAL
LOTTERY STRATEGY
AND MARKETING
IN EUROPE AND CANADA
The industry’s perspective in 2015
A White Paper from Lottovate
2
Foreword
Digital lottery seems to be the future of the
lottery industry. Indeed, digital seems to be the
future for the entertainment industry at large.
We now have to compete with so many other
forms of leisure activities that there’s no
denying that digital channels will increasingly
become the lottery platform of choice as
digitally-savvy generations reach maturity.
But that isn’t to say our target markets are
in their infancy when it comes to digital –
Lottovate’s previous research has shown
that our audience is already embracing digital
gaming, with a core of confident, professional
adults in the 25-45 age range heading online
for lottery experiences. It naturally follows that
if our players are already digital, the best way to
direct them towards our games is also through
digital channels.
Yvonne Schnyder
Former General Secretary of
the World Lottery Association
Digital marketing has the potential to
transform the way we as an industry interact
with our players. We can and should be
welcoming this opportunity with open arms.
This in-depth analysis of the way digital
marketing currently operates in the lottery
industry – and crucially where it can do better –
is a vital step in the right direction.
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Introduction
This study will describe the key trends and
strategies in digital marketing and digital lottery
channels for lotteries in the European and
Canadian markets.
It is a qualitative survey which aims to provide
a succinct look at the state of play in digital
marketing within the industry, highlighting
areas of strength and weakness so that all
lotteries can benefit from the experience
of others.
The research was designed, conducted and
analyzed by Angela C. Hoelzenbein, PhD, an
independent consultant analyst and former
researcher at The University of Freiburg.
She interviewed executives and digital
marketing experts from 14 state lotteries
and licensed operators in Europe and Canada
that currently have a digital sales channel
and provided the report that forms the basis
of this study.
Her conversations with these
experts covered:
• The internal organization of marketing
• Product management
• Player acquisition
• Player retention
• The main challenges
• Lessons learned
• Future developments and trends
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Angela C. Hoelzenbein, PhD
The European and Canadian markets were
selected because of their established digital
lottery presence. Almost 70% of European
states have a lottery provider with a digital
offering, whilst 80% of Canadian lotteries
have a digital channel. In contrast, only 8%
of the US states currently have any kind of
digital lottery at all.
It is our belief that conducting this research
through a scientific and academic approach,
whereby participants were granted full
anonymity, has led to a truly open and indepth study of the current and future state of
digital lottery marketing and will provide lottery
marketers with the insights they need to
develop their marketing strategies and boost
the strength of their digital channels.
The internal organization of marketing
Based on the conversations with marketing
stakeholders of participating lotteries, we
found a clear distinction between those
organizations who have had a digital sales
channel for over five years and those who
started more recently.
Lotteries with a well-established digital channel
have a much more defined and organized
structure for their digital marketing. Many of
these have separate teams or roles in areas
such as player acquisition, CRM, product
marketing, branding, customer service,
business intelligence or data warehousing.
Those who started their digital offering
recently or with a lower priority, however,
tend to have single managers responsible for
i-lottery and digital marketing – and this often
sits beside other activities and responsibilities.
In both groups we found activities and roles
outsourced to designers, media agencies, user
experience consultants, IT specialists, strategy
consultants and survey researchers. But this
is particularly more common for the second
group of lotteries, with lots of different people
managing different aspects of the marketing
strategy, and has often led to a lack of clear
oversight on the strategy as a whole.
Newer marketing teams would benefit
enormously from the realization that more
established divisions have had already – that in
the digital sphere in particular, a strong unified
approach with a greater sense of control and
insight is required. This means that actions to
improve marketing can be carried out quickly
and as a part of an overarching strategy, rather
than in disconnected bursts.
With a proper oversight of all the marketing
channels, lottery marketers can identify
areas of improvement and truly add value to
a lottery’s digital offering. This is why we at
Lottovate believe in our approach to work in
close partnership with a lottery, ideally in a colocation, covering product management, player
acquisition and retention.
DIGITAL IS NOT JUST A NEW CHANNEL. IT IS AN
OPPORTUNITY TO ENHANCE THE CUSTOMER
EXPERIENCE, TO INTERACT WITH CUSTOMERS,
TO PERSONALIZE CONTENT
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Product management
Key findings:
• User experience is of paramount
importance in driving sales
• Standards set by e-commerce and
other sectors mean that players
have high expectations of what
their user experience should be
• Continuous testing and
optimization is key to
maintaining user experience
and site performance
• Testing should branch out from
just game products and also cover
website design and processes
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User experience drives sales
First impressions count. How a lottery
website looks and functions is of paramount
importance to players. The standards of
digital users are set high because of the
best practices they encounter regularly in
interaction with other e-commerce companies.
If a lottery site struggles to load properly or
looks dated, many players will move to one
that meets their expectations more closely, or
simply decide not to play. The website is the
shop window of your lottery; if it’s cluttered
and unattractive, customers won’t enter and
purchase your wares.
The lotteries we spoke to are well aware of
the importance of user experience in driving
sales, and report that the aesthetics and
usability of a digital product are just as, if not
more, important as the product itself. Many we
spoke to are currently focused on improving
responsive gaming to ensure an easy sign-up
process providing best user experience.
In whatever format or channel a game is
available on, it should look and behave in a similar
way – or as one lottery representative said: All
channels should “sing the same song”. This
provides a consistent user experience, which
users associate with a high-quality product.
Continuous testing and
optimization is key
Launch day is only the beginning – while most
lotteries take pains to ensure a fantastic user
experience is in place at launch, some even
going so far as to delay a launch to perfect it.
However, the user experience isn’t set in stone
at launch and so neither should your testing
program be. Usability testing and optimization
should be carried out throughout the life of a
game to identify where improvements can be
made to improve performance and, ultimately,
return on investment.
This doesn’t just apply to the game itself, either
– a process of continual optimization should
be applied to every aspect of a website from
player registration forms to site navigation.
Where lotteries put in a great deal of effort to
product management pre-launch, relatively few
continue optimization processes afterwards.
Continuous focus on testing and optimization
of all elements – website, processes and
games – is the core of Lottovate’s approach
and offering to lotteries.
THE USER EXPERIENCE ISN’T SET IN STONE
AT LAUNCH AND SO NEITHER SHOULD YOUR
TESTING PROGRAM BE
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Player acquisition
Key findings:
• Marketers believe digital sales do not cannibalize retail purchases
• Players use both digital and retail channels and play more as a result
• Search engine advertising and optimization are top acquisition channels being used
• Technical expertise in digital marketing may be falling behind other industries
• Jackpot marketing only pays off from a certain jackpot size
• Social media remains a point of contention for digital lottery marketers
Digital sales do not cannibalize
retail purchases
While many lottery insiders have felt in the
past that digital sales will cannibalize in-store
purchases, marketers do not believe this is the
case in practice. They have found that players
use both digital and terrestrial means to play the
lottery and are actually playing more as a result.
The marketers noted that the age gap between
online and retail players is not as big as may have
first been thought. Rather than digital lottery being
a channel primarily played by younger generations,
in fact the average player is in their 40’s, only a
decade behind the average retail lottery player.
Typical digital players
Male
40+
Better off financially
Typical retail players
Male
50+
Financially more diverse
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This is in line with Lottovate’s previous research
into the US market in 2014, and as such most
digital players are not always early adopters
of technologies. This demographic make-up
means that marketers often cross-promote:
print advertisement also leads to increased
digital sales, and customers who purchase
tickets in-store will often go online to check
the winning numbers. “Even if customers are
not purchasing in another channel, they are still
playing”, said one interviewee.
Search engine advertising and
optimization are the top
acquisition channels
Technical expertise in digital
marketing may be falling behind other
industries
Where acquiring customers is concerned,
there is no single marketing channel that holds
all the answers, according to our interviewees.
They agree that a successful campaign
requires a strategic, multi-channel approach
that will be seen by an increased number of
the target audience.
Settling upon the perfect mix of digital
channels requires a high amount of expertise
and the ability to perform continuous testing
and measurement of those channels.
The channels most commonly
used by the marketers
interviewed were:
However, this requires a level of commitment
from in-house marketers that has become
difficult to maintain, due to issues such as
capacity or budget. Based on the discussions
we had, we believe this may have led to the
general level of expertise lottery marketers
have with these new channels falling behind
marketing professionals in other industries.
• Search engine advertising
• Search engine optimization
• Affiliate marketing
• Display advertising
The difficulty comes in finding the right mix of
channels for your proposition. And it doesn’t
stop once these have been identified: in the
words of one interviewee, “Channel mix is
important, and then requires tweaking that
mix for your company and situation”.
For instance, a high proportion of interviewees
realized the value of search engine
optimization and search engine advertising but
often these two very different disciplines were
discussed in the same breath. Usually this was
because they were activities that interviewees
oversaw, rather than took an active part in,
instead handing the reigns over to other
internal departments such IT, or outsourcing
to external companies.
On the whole though, the lotteries that had
implemented a strategy that ensured they
are able to test, measure and refine their
marketing channels enjoy a greater return
on investment.
A SUCCESSFUL CAMPAIGN REQUIRES A
STRATEGIC, MULTI-CHANNEL APPROACH THAT
WILL BE SEEN BY AN INCREASED NUMBER OF
THE TARGET AUDIENCE
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Jackpot marketing only pays off from
a certain jackpot size
IF THE JACKPOT
IS NOT HIGH
ENOUGH, NO
MATTER WHAT
YOU DO OR HOW
GOOD YOUR
STRATEGY IS, IT
MIGHT NOT WORK
– SAVE YOUR TIME
AND MONEY FOR
ANOTHER DAY
Player registrations
The size of the jackpot on offer has a huge
impact on the success of marketing, with larger
jackpots getting more attention. For instance,
in some European markets, a jackpot of at least
€20 million pushes increased levels of sign-up
and play. Lower jackpots are not as effective
as an acquisition tool, with one interviewee
stating: “if the jackpot is not high enough, no
matter what you do or how good your strategy
is, it might not work – save your time and
money for another day”.
5m
10 m
15 m
20 m
25 m
30 m
Jackpot Size
Social media remains a
point of contention for
digital lottery marketers
There is a general feeling amongst lottery
marketers that they should be doing more
in this area, but it is not currently a priority.
Many feel that as their target demographic
(the older generations) isn’t as active on social
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media, they have no need to push it as a sales
channel. They believe it is more useful for
branding and customer service, and maintain
presences on Facebook and Twitter because
players expect them to be there. Some are
interested in the potential of social media paid
advertising platforms, but they are not yet able
to monetize these activities.
Furthermore, in recent years there have been
mixed messages on restrictions coming from
the social networks themselves, with lotteries
initially having ads approved and then rejected
later. Facebook, for instance, has updated
its guidelines to provide more clarity, but has
different rules for advertising online and retail
gambling products.
All of this combined with the lack of a
guaranteed return on investment (both
financially and in time spent) means that
social media advertising is unlikely to become
a priority player acquisition channel any time
soon. In fact, only one lottery that participated
in this research had a live Facebook ad
campaign running at the time of interview.
As well as the usual age restrictions, advertising
retail State lotteries is permitted as long as “ads
are targeted in accordance with applicable law in
the jurisdiction in which the ads will be served and
only target users in the jurisdiction in which the
lottery is available”1. The latter point has also seen
some lotteries have had to ensure their websites
can only be reached by devices with IP addresses
within their jurisdiction in order to comply.
The question remains, however: is digital
lottery the answer to reaching the social media
generation? It’s a self-perpetuating circle; once
lotteries can engage with younger players then
they can tap into the virility of social media and
put in place marketing efforts that will drive
further player acquisition.
1
. https://www.facebook.com/policies/ads/#prohibited_content
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Player retention
• Having a clear strategy from
the outset is essential
Successful lotteries go beyond just
collecting data and use insights gained
from thorough analysis to inform
their strategy
• Successful lotteries go beyond
just collecting data and use
insights gained from thorough
analysis to inform their strategy
Digital marketing enables marketers to collect
more data on their customers and their playing
behavior than ever before.
Key findings:
• Segmenting lottery
audiences increases the
chances of conversion
• Many lotteries are also missing
out on opportunities to crossand up-sell their products
Having a clear strategy from the
outset is essential
Simply put, there is little point in dedicating
time and resources to acquiring players if there
isn’t a strategy in place for player retention.
In fact it’s a waste of your hard work and
acquisition effort entirely if your customers
aren’t sticking around! Successful player
retention requires a clear strategy and a
proactive, not a reactive approach. And here it
seems personalization is the key.
But data collection is only the first part of the
process – as one marketer noted, “There is
a tremendous amount of data that can be
captured in the digital space, but the question
is what to do with it. For digital to be effective,
you must be able to distil it, make sense of it
from a business perspective, and adjust your
programs accordingly”. With web analytics and
CRM systems they are then able to perform
advanced analysis, testing and targeting
functions, to use this data for segmentation
and personalization in an efficient way. Those
lotteries who already use such tools to inform
a digital strategy report far better results from
and confidence in digital marketing practices
for player retention. Those companies that
are unable to gain true insight into the data
they collect from digital play (either through
collecting too little data, or not analyzing it
effectively – or both) miss out on the chance to
improve the effectiveness of their marketing.
THERE IS A TREMENDOUS AMOUNT OF DATA
THAT CAN BE CAPTURED IN THE DIGITAL SPACE,
BUT THE QUESTION IS WHAT TO DO WITH IT
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Segmenting lottery audiences
increases the chances of conversion
Lotteries without behavior-based player
segmentation are more likely to be afraid of
annoying players with too many emails – and
their fear is often justified. But in contrast,
those who do employ segmentation tactics
to personalize emails report great success in
reaching customers, and often view email as
a form of one-to-one communication, rather
than one-to-all.
Those lotteries seeing better results reported
differentiating around 20 customer segments
and targeting them with different marketing
efforts. Dimensions such as frequency of play,
product preference and transaction volume
were used to group customers together and
assign values on how likely they were to engage
with a new product, for example.
Many lotteries are also missing out on
opportunities to cross- and up-sell
their products
Transactional emails with the ticket receipt, as
well as confirmation pages, are lost chances
to communicate with the customer at a
moment when they are highly likely to read
your message. After all, if the player has shown
enough interest to purchase one game from
you, it is likely they will also look at a second
or third – if you point them towards it. This
should form a key part of any lottery’s
digital marketing strategy, but it is currently
overlooked by many marketers.
Examples of dimensions a lottery
can segment its players by:
• Gender
• Age
• Location
• Frequency of play
• Average spend
• Favorite game type
• Favorite lottery game
• Day/time of most activity
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The main challenges
Lottery marketers currently face
the following main challenges:
• Deciphering and understanding
their data
• Reducing barriers to digital play
• Restrictions in app stores and on
social media
Deciphering and understanding
their data
Data collection is easy, but collecting the
right data and using it to inform marketing
activity is much harder. Our interviewees
told us that finding a best practice for data
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handling is a constant challenge for them,
because deciphering it to uncover important
points about player behavior and marketing
effectiveness is time-consuming. This isn’t to
say that marketers therefore want to put data
to one side – in fact most are eager to explore
analytics further to learn those best practices
and implement them.
So what’s stopping them from doing this?
Many reported feeling overwhelmed by
the amount of data, and said it was easy to
become distracted by it. Greater expertise in
data handling and more capacity for analytics
work would enable these marketers to engage
in effective data analysis and put learnings into
practice. Learning from the experiences of
those who have spent years deciphering data
would help even further.
Reducing the barriers to digital play
and pay
Restrictions in app stores and on
social media
In this highly-regulated industry player signup requires confirmation of age, among other
things, that often results in impatient players
dropping out of the process. Lotteries want
to make player registration easier, but must
balance the verification processes carefully.
Some lotteries feel frustrated that processes
as used by other industries for verification (e.g.
one-cent transfers to a bank account as used
by PayPal and other payment provider) can
result in less patient players dropping off. But
sometimes even small decisions like the order
of fields to be filled in during sign-up can have a
positive effect on a form’s conversion rate – as
Lottovate’s sister company in Spain realized in
a series of A/B tests. These tests resulted in
significant increases to their player acquisition
figures for what appears, at first glance, to be a
relatively insignificant adjustment to the form.
The final challenge our interviewees mentioned
was again related to industry regulations: many
lotteries are banned from appearing in app
stores or advertising on social media channels
because of strict regulations related to money
gambling of companies like Apple, Google and
Facebook. As mentioned earlier, while some
are waiting for these restrictions to be relaxed
or clarified and are still keen to use these
channels in their digital strategy, many now
focus their efforts elsewhere.
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The lessons learned
“Digital activity has to align to business objectives, whether it's to acquire new players, grow
awareness of new products... Digital success is solely dependent on a company’s ability to
translate it out of an objective.”
Key findings:
• Undertaking digital activity for the sake of appearing on digital formats is not
an effective use of the medium
• Testing, analyzing and optimizing should be continuous and based on high
quality data
• Lotteries should look to other industries for inspiration
Undertaking digital activity for the
sake of appearing on digital formats is
not an effective use of the medium
Testing, analyzing and optimizing
should be continuous and based on
high quality data
Our interviewees reported that having a clear
strategy from the outset that aligns with the
wider business objectives, is essential to the
success of digital lottery. It was stressed that
it is far more important to position oneself
strategically and develop a USP as fast as
possible than rushing a product to market.
Continuous testing and optimization needs
to run alongside the core marketing strategy
– the beauty of digital marketing is that it
provides test results and necessary data
almost immediately. As new learnings from
players’ behavioral data come in, changes can
be made to the website to accommodate
them at speed. This relies heavily on the
quality of said data, however. The insights to
be gained from data are only useful if that data
is properly handled and analyzed. This serves
to emphasize the importance of expertise and
experience where analytics is concerned.
From their experience, proper planning
and strategizing needs to be done first;
jumping into untested waters will lead to
poorly implemented campaigns. This
matches Lottovate’s experience of lottery
marketing, which places planning at the
heart of any campaign.
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Lotteries should look to other
industries for inspiration
But lotteries shouldn’t just be looking at best
practices within the lottery industry. We think
there are lessons to be learned from other
industries too such as e-commerce. UPS is a
great example of a transformation from a bricks
and mortar business requiring phone, fax and
in-store ordering to a digital offering where
customers can interact, and order totally online
at their convenience. Likewise Starbucks has
mastered using data gathered from its customer
loyalty schemes to optimize the customer
experience in store, keeping those customers
coming back for more with targeted rewards.
What can lotteries take from these examples?
Just like UPS, lotteries can achieve excellent
results through well-harnessed data to
gain solid facts about various aspects their
company, products and customers. Data
can be collected on player behavior or the
performance of your sales and marketing
channels, for example, and from this you can
test and optimize your games and operations
and understand more about their performance
than you would from sales figures alone.
And if lotteries, in much the same way as
Starbucks, gather deeper insight into their
customer behavior by linking retail and digital
play, they can track individual player habits and
target their marketing based on that behavior.
Potential lapsed players can be re-engaged
with special, enticing deals, and because
they’ve been personally targeted they stand a
better chance of success.
UPS infographic highlighting its use of data analysis
Source: http://www.pressroom.ups.com/pressroom/staticfiles/pdf/fact_sheets/UPS-big-data-infographic-900x2708.pdf
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Future developments and trends
The marketers we spoke to were optimistic
about the rise of digital lottery, and shared some
predictions for the future of digital channels.
The key trends they
identified were:
• The rise of mobile gaming
• Licensing and the gamification of
instant win
• Rising advertising prices
• Access to games from new devices
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The rise of mobile gaming
Our interviewees believe that mobile gaming
will be the biggest trend in the next few years,
and so the majority are investing in responsive
website design and games optimized for use
on mobile. Many think mobile use for lottery
gaming will reach 50% of all games played
online within five years and that it would be
important to have a good strategy for mobile
advertising. We also believe that mobile
lottery gaming will increase rapidly in the near
future, and work to ensure the best customer
experience across all kinds of devices.
Licensing and the gamification of
instant win
Lotteries around the world have reported
successes promoting their instant win games
through licensing with well-known game brands
from other sectors such as Monopoly, Tetris and
Bejeweled. In the coming years the lotteries we
spoke to expect these successful partnerships
to continue and the continued gamification of
online and mobile instant win games as they
develop to resemble the games of these and
other top brands even more closely.
Rising advertising prices
Lotteries are concerned that digital
advertising prices are rising with the increase
in competition in the market, with more and
more companies crowding the space. This
makes it more essential than ever that lottery
websites and paid advertising are continuously
optimized to ensure they are working to the
best of their abilities, and converting paid visits
into retained players.
Access to games from new devices
One future trend that is being watched closely
by lottery marketers is how consumer behavior
may develop from the use of smartphones and
tablets to other forms of integrated devices
such as smart TVs. The potential to combine
digital advertising with an area that has been
a heartland of traditional lotteries, with draws
announced on television and TV advertising
historically taking up a large part of advertising
budgets, is an exciting prospect. Many we
interviewed feel this could be a prosperous new
channel for the industry, and one that should
be exploited as smart TV adoption increases
among the general public.
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Conclusion
Digital marketing has opened up a range of
opportunities for lottery marketers in 2015. We
now have unprecedented access to data about
how our players interact with our games, and
the opportunity to quickly refine and optimize
our work without having to rely on guesswork.
It should be noted that due to the sample size
and because not all sales figures were available
these tendencies cannot yet be said to be
indicative of the lottery industry at large.
The tendencies we found when
comparing our interviewees’
strategies with their digital sales
showed that lotteries with a bigger
digital share of sales had:
• a more profound product
development process, using
surveys, tester groups or even
different stages of tester groups
• a stronger belief that truly
successful customer acquisition
required perfecting the right mix
and balance of marketing channels
• more advanced strategies for
collecting and analyzing data,
using it for prognosis of future
sales and opportunities for
up- and cross-selling.
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However, they are indicative of Lottovate’s
belief that for digital to succeed it requires
a fully comprehensive and well-designed
strategy, and should not be viewed as just an
addition to your regular marketing. The companies that appear to be the most
behind digital are reaping the rewards, and
thereby have more justification for their
actions. If we couple this with the consumer
demand for digital we uncovered in our
previous research, there’s an extremely strong
case that good marketing drives gameplay
rather than high amounts of gameplay give
companies the drive to invest in marketing.
The marketers we spoke to have a variety of
experience levels with the digital space, ranging
from the well-established and organized
to a lone marketer charged with finding
opportunities to spread the word about games
in an unfamiliar digital world. These varying
levels of experience provide an opportunity for
us all to learn – the experienced can share their
findings; the novice can provide insight with a
fresh pair of eyes.
But where all levels of experience fall down
is with analytics and continuous testing. The
tools available make data collection easy
work, but gaining real insight from quality data
remains a hurdle. Many are unsure where to
turn with their findings, and don’t have effective
channels in place for post-launch marketing,
website and game optimization based on their
data. Lottery marketers require expertise from
those with years of experience in this area to
truly make the most of analytics.
About Lottovate
Lottery marketers are open to the change that
digital brings. All that remains is to ensure that
change is implemented effectively to drive
digital adoption among players.
We at Lottovate are happy to assist lotteries
with our expertise and best practices from 16
years in digital lottery in Europe to enable them
to achieve this.
Lottovate is passionate about digital lottery
and the potential it offers to the regulated
lottery market, both in increasing revenues and
attracting new players, responsibly.
Indeed, digital
is all we do.
We focus on managing player experiences
that will deliver results, based on leading
ecommerce practices and principles.
Most traditional suppliers to the lottery
industry focus on the supply of technology,
leaving lotteries to operate and build
their businesses. Lottovate works in true
partnership with lotteries to build a successful
digital channel together on a shared basis, with
Lottovate, not only supplying the multi-channel
experience, but also managing the digital
lottery channel and the day to day operations
of attracting and retaining players.
Our services are available in two ways - as a full,
end to end, multi-channel operation which we
call “The Digital Retailer”; or for those lotteries
who already have an interactive proposition,
we can manage the player-facing marketing
activity to optimize performance as “The
Marketing Partner”.
We can also offer our insight and experience on
a consultancy basis.
info@lottovate.com
www.lottovate.com
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www.lottovate.com
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