The POWERBALL multi-state lottery recently doubled the basic ticket price of its bi-weekly drawing, from $1 to $2. I have no idea – and not a lot interest – in just how that has affected their revenue or profits, but it’s an intriguing example of the interplay of marketing, bottom line accounting, and customer psychology. First, a sort of mea culpa —
I cheerfully admit that I’m an occasional lottery ticket buyer, and that I savor, for a day or two, the fantasy of instant, extravagent 8 or 9 figure wealth. My more literal minded friends – and my own right brain – point out that the financial ‘return on investment’ of my ticket purchase is about the same as flushing greenbacks down the toilet. No argument – this accounting analysis is absolutely right. The lottery ain’t a retirement plan!
Absolutely right – but totally irrelevant to most of us who buy lottery tickets anyway. The point has little to do with the financial investment value of the ticket, but the entertainment value that comes from fantasizing about what could happen if we did win. This entertainment is a perfectly valid reason to spend a couple of buck$. We, after all, don’t bat an eye about investing in the entertainment potential of a movie, book, or theater ticket, or paying to watch a ball game.
Now, back to the POWERBALL –I’ve read that their motivation for doubling ticket prices is to build up multi-hundred million dollar jackpots more quickly and more often, and the ticket buying frenzy that those huge jackpots seem to generate.
I don’t know whether raising ticket price will ultimately help or hurt their bottom line. I do know that, because they’ve doubled the price of my fantasy, I’ve stopped buying POWERBALL tickets. My temporary daydream is worth a $1 ticket, but it doesn’t quite stretch to cover the $2 POWERBALL investment.
Perhaps POWERBALL’s market research and customer segmentation analysis tells them that the loss of customers like me doesn’t really matter to their bottom line, that the extra revenue and more frequent ‘huge jackpot frenzy’ more than make up for the loss of my occasional Dollar.
BUT , there’s a bigger lesson out there for businesses large and small: Your customers’ decisions to buy from you are driven by a thicket of motivations – motivations that are at the same time rational and emotional, often hidden, and occasionally conflicting. Understanding what’s important to your customer – accounting-wise and in her deep psychology – gives you a better chance of winning the big jackpot in your marketplace.
Need help discovering just what motivates your customers and how to tap in? A consultant like Marketing Intelligence & Strategy Assoc can help you figure it out.