Report 2019-112 Recommendation 7 Responses

Report 2019-112: California State Lottery: The Lottery Has Not Ensured That It Maximizes Funding for Education (Release Date: February 2020)

Recommendation #7 To: Lottery Commission, California State

To ensure that it receives value for the funding it spends on its fairs program, by January 2021, the Lottery should determine whether the program has increased its brand strength, customer loyalty, customer satisfaction, ticket sales, and profits. If the analysis determines that the Lottery has not achieved these benefits, it should terminate the program.

Annual Follow-Up Agency Response From October 2024

Due to the COVID-19 pandemic, the Lottery paused its Fairs & Festivals (F&F) program until FY23-24. The F&F program is an element of the Lottery's overall marketing plan and is designed to promote the Lottery brand and products and follows industry best practices. In June 2023, the Lottery began a pilot of its post-pandemic F&F program which consisted of 13 events during the year. As part of the pilot, the Lottery developed and fielded consumer research surveys to determine the impact that Lottery event activations have on fair and festival attendees. The research was designed to address the specific CSA audit findings that asked the Lottery to determine whether the program provides the value for the funding related to increasing brand strength, customer loyalty, and customer satisfaction.

In June 2024, the Lottery finalized its analysis of the pilot and the results showed significantly higher brand strength, customer satisfaction, and customer loyalty for adults who attended and engaged with the Lottery activation at a fair or festival during the pilot compared to those who did not attend or participate. Higher scores were seen across all player segments. The strength and consistency of the positive gap between booth attendees and non-booth attendees clearly indicates that the program is very powerful, influential and delivers benefits to the Lottery.

The pilot results demonstrate that the Lottery receives substantial value for the funding it spends on the F&F program and is a cost-effective and efficient way to increase awareness and build positive perceptions of the Lottery through fun, exciting, and memorable personal interactions. The in-person experience helps generate brand loyalty by motivating and converting consumers into new players, re-engaging past players, and building stronger loyalty with current players. Based on the positive results of the pilot program, the Lottery will continue the F&F program as a component of its marketing program.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From October 2023

In June 2023, the Lottery began a pilot of its post-pandemic Fairs & Festivals program. This program is an element of the Lottery's overall marketing plan and is designed to promote the Lottery brand and products and follows industry best practices. Following the final scheduled event of the season in November, the Lottery will conduct a holistic analysis of the pilot program that includes looking at CSA's recommendations to measure the intangible benefits for the Lottery in addition to consumer impressions, ticket sales, and profits. This analysis will be used to inform future participation in fairs & festivals.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Annual Follow-Up Agency Response From October 2022

As noted in previous responses, the COVID-19 pandemic significantly impacted the entire event industry. Almost all of the state's major fairs and festivals were cancelled in 2020 and 2021 and the Lottery redirected marketing resources during this period. While some events resumed in 2022, the Lottery has not yet restarted its fair and festival program. The Lottery has been evaluating the post-pandemic event landscape and is developing a plan to restart the program with the 2023 event season. This includes developing a methodology, per CSA's recommendation, to measure the intangible benefits for the Lottery in the form of brand strength, customer loyalty, and customer satisfaction at fairs and festivals in addition to ticket sales and profits, which will be used to help evaluate the efforts during the upcoming season.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Annual Follow-Up Agency Response From October 2021

While some events are beginning to return in generally smaller and reimagined formats to be COVID safe, the Lottery has not participated in any fairs and festivals to date. The Lottery continues to prioritize health and safety of its employees, retailers and vendor partners while looking at ways to evolve the program in the future.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

The COVID-19 pandemic has devastated the event industry. Due to the uncertainties surrounding the coronavirus pandemic and vaccination timelines, most fairs and festivals and other live events have either canceled their 2021 events or are considering offering significantly smaller, re-imagined versions that would be safer to implement. The Lottery continues to monitor industry trends and will re-evaluate the program as necessary to adapt to the changes in consumer behavior and event industry.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

Reason for not fully implemented:

All fairs and festivals, live events and major gatherings have been canceled and are not expected to fully resume at scale until sometime next year at the earliest. The Lottery will continue to monitor and evolve this program as necessary in the next 6-12 months.

California State Auditor's Assessment of 6-Month Status: Pending

We look forward to the Lottery's one-year response to see what actions it has taken to evaluate the effectiveness of its fairs and festivals program.

60-Day Agency Response

The Lottery is in process of developing its methodology to measure the intangible elements received at fairs and festivals, including awareness, engagement, brand strength, customer loyalty, and customer satisfaction in addition to ticket sales and profits. These metrics will be used to evaluate the efforts during the upcoming festival season. However, due to the impact of COVID-19, the program will most likely experience significant changes. All fairs and festivals have been canceled through June, and it is expected that more will be canceled during the summer months, including the largest fairs in the state. At this time, the Lottery is monitoring the current public heath guidance and prioritizing the health and safety of its staff, vendor and retail partners, and players before resuming fair and festival participation. Additionally, the impact of the crisis on consumer behavior and overall interest in attending events is also uncertain at this time. The Lottery will continue to monitor and evolve this program as necessary in the next 6-12 months.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2019-112

Agency responses received are posted verbatim.