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viting the player to choose the game that

appeals to him or her is the best way to lift

all the games.

How does portfolio management differ from

keeping the games that sell best and dropping

the games that sell poorly?

G. Gurney:

Portfolio management is

definitely a best business practice on the

Instants side. We always have a pipeline

of good games to come in behind games

that are running out of steam

or stock in the market place.

We work constantly with

our vendors to consider price

points, proven game features,

play styles and new ideas.

Each combination of factors

results in varied products to

fulfill different needs in the

market place. A game may

have lower sales but pulling

in a new demographic. An-

other game may have higher

sales but is overlapping with other games

and so not contributing as much to the

overall results.

We have a limited amount of counter

space so it’s important that we are offer-

ing the right product mix. Other CPG

brands actually pay for premium space. So

it is vital that our product offering is opti-

mized for the benefit of the retailer as well

as our own sales objectives. And so we are

constantly going in and out of games on

the Instants side to make sure that every

product is serving its purpose.

The draw games require a longer term

strategy—they can’t be switched as fluidly

as the Instants. And all the games have

to be managed as a category to optimize

overall results. The draw game product

mix and presentation has to complement

the Instant side, and vice-versa. One key

metric, of course, is the impact of product

mix on net funds to good causes. Since we

are tasked with hitting a number in the

net funds column, and since margins vary,

we need to track changes in product mix

as well as sales. The shift to higher price

points in the Instants, and the challenge

of meeting consumer and media expecta-

tions in the big jackpot games, is putting

pressure on margins which means we pro-

mote, market and freshen the higher mar-

gin draw based games to hold their strong

position in the product mix.

So that is a good reason for launching the

Cash4Life regional draw-game.

G. Gurney:

We think of Cash4Life as

a much needed addition to the portfolio

of draw games. Powerball and Mega Mil-

lions will continue to be fabulous prod-

ucts with huge demand. But we need to

smooth out the sales volatility that occurs

when those jackpots slump. The impact

of a sales slump of the jackpot games on

profitability is heightened by the fact of

the high margins that those games drive.

In addition to Cash4Life, we are focus-

ing on our daily numbers games. Those

games have a dedicated player base, and

consumer awareness of the games is very

significant. The players all know that the

drawings are twice a day, so they can jump

into the game with their favorite num-

bers and quickly see if they won. A few

years ago our daily three and daily four

sales were flat to negative so we put some

promotional emphasis on them and sales

increased 2%. This past year, we ran game

specific and general draw based game ad-

vertising in support of the product line,

and the consumer response was exactly

what we were hoping for. We went from

2% growth to 4% on Numbers, and 7%

on our Win4 draw game.

The portfolio of draw-games can never be

quite as diverse as it is in Instants. Do you

feel good about the number of draw-games

you have or are you constantly searching for

a new draw-game concept like Cash4Life?

G. Gurney:

I don’t see Cash4Life as

being a 20-30 year game like Mega and

Powerball. We are seeing some degrada-

tion in Cash4Life year-over-year, so we

need to be thinking about how to evolve

the category. We are researching this now

to develop a new marketing campaign for

the fall. Maybe it needs a change in the

messaging or product positioning or how

we are representing the game to the play-

ers. We think there needs to be

a change, maybe just change

the day or time of the drawing,

include an add-on feature or

some other tweak to invigorate

consumer interest. We’re not

afraid to swap out games here

in New York just like we did

when Cash4Life replaced an-

other draw game. But ultimate-

ly the decision to make changes

or not is based on consumer de-

mand and how we can address

their perceived needs. We might always

have a “For Life” draw based product but

refresh it periodically.

I would have thought that it takes a longer

time for draw-games to gain traction, take

a longer time to recoup the cost of launch-

ing and building the player base for draw-

games, and therefore uneconomic to switch

them out.

G. Gurney:

That’s true. The eco-

nomics of launching and switching out

Instants are certainly much lower than

draw games.

Most of our discussions about products

involve the entire product line. Decisions

about how to evolve the portfolio of prod-

ucts rarely focus on the performance of

a single product, or even a single group

of products. In fact, the discussions typi-

cally involve a diverse range of opinions

because they almost always involve an el-

ement of strategic planning. That colors

the economic assessment because the suc-

cess of a single game is never as important

as the overall business plan. We are always

willing to change, but we are keenly aware



Continued on page 57

We saw very substantial

increases in web-based

purchases on the day of launch

of the e-newsletter, and for the

days following the launch.