The North Carolina Education Lottery can claim a singular feat in the American lottery industry: Achieving year-to-year sales growth in every year of operation, even after 20 years. That’s a remarkable performance, and reflects the strategic focus and dedication of the entire team.
“We’ve been very deliberate and I think quite measured in how we grew our portfolio of games over time,” says Executive Director and CEO Mark Michalko, who took the helm in April 2018. Based on extensive research, new products have been introduced that complement, rather than cannibalize, other products already in the market, with the goal of reaching the widest audience possible. “We have a very broad and deep portfolio right now, and over the last couple of years we have reached additional players with our digital platform.”
Ticket sales began with instant games on March 30, 2006, and Powerball was added on May 30. The rest, as they say, is history. Today, NCEL offers a portfolio of instant tickets (from $1 to $50), eight draw games (Pick 3, Pick 4, Cash 5, Powerball, Mega Millions, Cash Pop, Keno, Millionaire for Life) and Fast Play. Online sales of draw games began in June 2016; all games except Keno and Cash Pop are now on the platform. eInstants began in November 2023.
In its 20 years, NCEL has delivered more than $12 billion to its education beneficiaries – college scholarships plus programs for pre-K, non-instructional personnel, and school construction. “At the end of the day, we’re in the business for one reason, which is to raise revenue for education,” emphasizes Michalko. He marvels at the sheer volume of revenue raised over the years, which is easy to talk about but perhaps not so easy for people to understand. “Those dollars need to be in more concrete terms.”
To help make that happen, actual concrete increasingly figures into the Lottery’s conversations about its impact. “As we prepared a report for our 20th anniversary, it was interesting to see that over the years lottery funds have contributed to, or fully paid for in some cases, more than 100 new or renovated schools. That’s something that has more of an impact than an individual with a scholarship. It impacts generations of students, and I don’t think we spend enough time talking about that.”
Therefore, it has become a very visible component the Lottery’s “giving back” message. At a recent groundbreaking ceremony for a new school in Craven County, for example, NCEL officials were invited to participate alongside county leaders. They came back with video and a great story to tell. “We want to make sure that our players get to see these types of things, because they’re a big part of making it happen.”
While the sales success is undeniable, those revenues are captured with an eye on responsible gambling. Since 2017, NCEL has held Level 4 certification in the World Lottery Association’s Responsible Gaming Framework (the highest level possible), and maintains a parallel certification at the highest level in the NASPL RG program. A key to its success is the player-focused Play Smart program, launched in 2020. It centers on the education and empowerment of lottery players, providing a wealth of information that encourages players to make informed choices before they decide to play lottery games. “That was a game changer, and I think it’s been one of the most important elements of our overall portfolio,” says Michalko.
In 2023, NCEL was tasked with the regulation of newly-legalized sports betting. The Lottery created a new department to handle oversight and the collection of licensing fees on behalf of the state. While this activity is separate from lottery operations, there is knowledge to be gained in observing how the big sports betting operators work in the online space, from user experiences to RG tools and techniques.
Product Progression
Driving the Lottery’s annual growth has been a broad portfolio of products, and each new game or price point has been added only after considerable research. “We have been extremely deliberate and intentional with how we’ve grown the portfolio,” explains Chief Product Officer Randy Spielman.
Scratch tickets lead the way, generating close to $3 billion in sales annually over the past few years, peaking in FY23 but still holding their own as the industry as a whole has experienced challenges since the COVID-era spikes. Available price points run from $1 to $50, the latter first introduced in December 2023.
Of key importance is the price point balance. Spielman sees that players are shifting away from $1 and $2 games, with $5 games strengthening and higher price points gaining traction. “We are trying to rebalance the portfolio based on what player demand is telling us.”
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Part of that comes from the availability of new products in North Carolina. “Scratch-offs used to be the only show in town when it came to instant-win, higher-payout games. Now, digital instants fit in that space and there’s also sports betting.” The gaming landscape has changed, and that means looking at everything differently.
Total sales of draw games in FY25 were $1.15 billion, down from $1.3 billion the year before as the big jackpot games sagged. The national games are keeping everyone busy from a development standpoint, as any draw games take extra time and resources to implement. “We have to prioritize and be really strategic about in-state portfolio to make sure we’re not losing sight of that because of the national initiatives.”
A big factor is the payout. “I do think there’s a future for higher price points for draw games, but I don’t think it’s going to come at a 50% prize payout. Scratch games have made it clear that players are sophisticated and know that higher price points have better value propositions.”
Opportunities with Keno and Fast Play
Rounding out North Carolina’s draw portfolio are Cash 5, Keno and Fast Play. The latter two probably have the most potential for growth, for different reasons.
Keno does check the boxes of providing more play options and a higher payout than traditional draw games, but it can be a complicated product for those not familiar with it. There’s also a “Keno culture” element that doesn’t necessarily exist in North Carolina like it does in other parts of the country. That said, there’s a new effort to reach more social environments with Keno – there are some 9,000 pubs in the state, but only 300 of them are current lottery retailers.
Chief Sales Officer Terri Avery isworking to change that. There are now two full-time recruiters for social environments, and so far in the current fiscal year they have brought in 26 new licensees. “They are fantastic locations!” In addition to recruiting, these dedicated employees also continue to educate retailers about Keno and conduct nighttime Keno promotions.
Aside from bringing new social locations on board, there are other opportunities for Keno growth. “We’re looking at different ways to potentially present Keno,” says Spielman. That could mean a different format or the addition of a digital channel.
Fast Play’s potential comes primarily from the way games are introduced. Lotteries with thriving Fast Play games typically introduce new games and themes on a regular basis, much like they do with their instant games. With so much going on in North Carolina, development has been prioritized for other products. As a result, Fast Play may be ripe for expansion when the schedule permits. After all, it has a unique position in North Carolina, offering a progressive jackpot and instant wins in a retail game.
Even as NCEL has embraced online sales, retail remains essential, and there are a number of current modernization initiatives designed to give retailers the tools that will continue to help them grow their lottery business. Michalko is fairly confident that NCEL is investing more at retail than any other American lottery right now. “We want to maintain balance between the new product (digital instants) and our core retail business. We’re trying to give retailers all the tools that will help them continue to grow lottery sales.”
Another exciting project is the placement of 1,500 digital menu boards in retail locations around the state. They are expensive, but a close examination of their potential estimated that they would generate 3% sales growth, or a $60 million sales increase across the 1,500 stores. At that rate, “they would more than pay for themselves.”
Imagine everyone’s surprise when some of the initial results include up to 17% sales growth in the participating locations. Chief Brand Officer Terri Rose is among those studying these results. One key learning to date is that the temptation to use the boards to showcase all of a lottery’s games isn’t the best way to go.
“What’s really resonating with players is focusing on just one of two scratch tickets and being direct about it,” says Rose. “After we started doing that, the testing numbers are off the charts, with sales increases of more than 20%. It is really starting to pay dividends for us, and we’re just at the beginning of testing.”
The big menu boards have other advantages besides just showing games or beneficiary messages. Unlike traditional player-facing screens, the menu boards are more animated and content can be changed in about two minutes. For example, a big jackpot win announcement can be messaged on the board at the selling store almost immediately. “It’s very exciting and liberating to be able to change the images and messages whenever we want,” emphasizes Rose. “These are opportunities we haven't had before.”
Expanding Reach Through Marketing
In-store marketing is just one aspect of a larger marketing program that includes extensive advertising and Lucke-Rewards, the Lottery’s loyalty program. An engaged, loyal player base participates in Lucke-Rewards, and there are continuous enhancements to keep them excited. A current effort is to lean into promotions that cross platforms – if someone enters a scratch ticket for points, they might get an iLottery offer. And if someone is enjoying an iLottery game, there might be an offer to play at retail. “We’re trying to make sure that we’re really good stewards of the whole cycle, making sure we are always keeping both retail and digital top-of-mind,” explains Rose.
Advertising has certainly helped in acquiring new iLottery players. As other lotteries have experienced, there were early struggles to grow the online player base, but over the past six months that base has grown by about 30%. “We’ve been very lucky with some smart media strategies and a lot of testing. All of our advertising for these acquisition campaigns has featured a clear offer for players that they can activate immediately on their device.”
The recent launch of Millionaire for Life was well supported across all channels. “We think this game has tremendous opportunity for us,” says Rose. “Our early numbers look good and are well beyond our expectations.” An innovative advertising campaign may have helped with that. “One million dollars a year is a very different prize, and we had to make sure people understand that it is every year, not just $1 million once when you win.” The TV spot tells the story of what you can do with $1 million the first year, $1 million the next year, and so on. “It tells the story of what the prize really means, because it’s pretty life-changing. And our sales are terrific.
For all advertising, Rose has been testing a wide variety of streaming services, with Hulu and Amazon Prime bringing in the strongest results and Peacock also a strong performer. As she continues to evaluate various platforms, the one thing she won’t drop is live sports on broadcast television. “We’re still heavily featured, because our players like it. And we’re in NASCAR country, partnering with NASCAR and the Charlotte Motor Speedway. It’s a natural fit for us.”
Onward and Upward
All of these initiatives and strategies work together as NCEL strives to produce products that appeal to the largest possible segment of the adult population. Combined with industry-wide developments, such as the upcoming launch of Powerball Xs and Os, there are opportunities for growth.
This article was originally published on nasplinsights.com.
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