IGT | Are the bats & faangs biting yet?

Today’s so-called titan brands will have a major impact on the consumer landscape over the coming decade. Here we explore three strategies that lotteries can consider to address the challenges posed by Amazon, Facebook, Google, and their Asian counterparts.

The major players in today’s advanced and emerging markets are commonly known by two acronyms: “FAANGs” ─ Facebook, Amazon, Apple, Netflix and Google ─ and their Asian counterparts, “BATs” ─ Baidu, Alibaba and Tencent. Together, the BATs and FAANGs are poised to bite, causing organisations across all industries to respond as they exert a major influence on consumer preferences. Here, we outline three strategies that lotteries can consider to meet the challenges posed by titan brands. First though, it’s helpful to understand the consumer preferences facilitating this rise.

Functional First

In a 2018 U.K. study on the future of brand loyalty conducted by analytics and trendspotting agency Foresight Factory, researchers surveyed a representative sample of consumers on 20 factors influencing their brand choice and loyalty ─ from quality, convenience, and ease of use to whether a brand is eco-friendly, innovative, or treats its employees well. These wide-ranging factors were then grouped into seven macro drivers: Functional, Financial, Corporate Social Responsibility, Brand Charisma, Self-Fulfillment, Service, and Loyalty.

Across all the drivers, the functional factors ranked the highest by far in influencing brand choice and consumer loyalty. Whilst the more emotional drivers remain important in building customer engagement and loyalty, they do not carry as much weight.

Further, when researchers looked at the results across different sectors, such as Retail, Food and Drink, and Media Entertainment, the functional factors always ranked first, even though each sector had its own distinct hierarchy of loyalty drivers.

Crucially, it seems that the dominance of functional factors in driving loyalty is what’s facilitating the emergence of titan brands. In 2018, when the same consumers were asked to name their favourite brand, Amazon came out on top – significantly higher than all other brands mentioned by respondents.

So, it seems that we have entered a period where Functional First has been embedded as the main mantra for driving brand loyalty. And, if a brand is providing an incredible level of functional benefits, it can get emotional engagement for free – due to the basic benefits provided to consumers’ lives (time saving, money saving, etc).  This era of Functional First appears to be creating fertile ground for the rise of titan brands.

Where Amazon Leads

To understand why the challenges posed by titan brands will only grow over the coming decade, consider the example of Amazon. Amazon is not the largest company in the world by any key metric. By stock valuation it’s Microsoft, and by number of employees, it’s Walmart. But in terms of the potential to reshape the consumer world, Amazon is arguably unparalleled due to its continued expansion into more areas of the commercial world and, thereby, into consumers’ lives.

In the past few years, Amazon has moved into the fashion sector with its Prime Wardrobe business, and into bricks-and-mortar retail with its Amazon Go clerk-less stores as well as the acquisition of Wholefoods. The company also operates successful side-businesses, such as Amazon Web Services, which generate huge revenues facilitating further Amazon’s expansion into other new sectors such as healthcare, home services and insurance. This evolution of Amazon has led to the company holding a unique position. It’s simultaneously one of the biggest advertisers, spending an estimated $3.4 billion in the U.S. last year, and one of the largest advertising platforms, expected to generate $4 billion this year. And, this is also just a side business.

Amazon is also investing in innovation, research and development. The company has published more than 4,000 patents in the past decade, covering everything from a global network of blimps for its drone delivery systems, to augmented reality mirrors in support of the Prime Wardrobe business. Such investment provides the technological infrastructure for Amazon to move into new sectors and do so as a market leader – often with technological advantages.

And it seems that consumers are receptive to the continued expansion of Amazon. The more services used by Amazon customers today, the more open they are to purchasing future services, suggesting a “snowball effect” that will continue to drive expansion into new categories. In particular, current Amazon customers in the U.K. have expressed strong interest in using the platform to purchase tickets for an event that takes place in the future!

Brand Dominance

Today, Amazon is in the midst of a private-label push, presenting a further challenge to established brands. At the same time, consumer searches on Amazon are becoming less brand-specific. Foresight Factory data show low percentages of brand-name use in Amazon searches across different sectors.

And when consumers purchase products using voice command via Amazon’s Alexa smart home assistant, Amazon will suggest its own brands first, if available. Revenue from Amazon private brands is expected to grow from $7.5 billion in 2018 to $25 billion by 2022.

Rising to the Challenge ─ 3 Strategies for Success

Against the growing challenges posed by titan brands such as Amazon, businesses will have to consider various strategies to optimise their response.

Sharon Duncalf, Vice President, WLA International, Marketing Operations and Strategic Planning, IGT, discussing the challenges posed by titan brands at the EL/WLA Marketing Seminar in London on February 8.

ENGAGE: One strategy is for brands to engage directly with Amazon or another appropriate online marketplace. Such engagement could mean moving from a B2C model to a B2B or reseller model, where the titan brand is the main customer or channel to the consumer world. Lotteries can consider whether they want to be a single distribution source for products or whether they are willing to partner with third parties for this purpose. Recalling the list of potential new Amazon services, should Lotto be the tickets sold on Amazon for the “event that takes place in the future?” Could an instant ticket be available as a top-up item – the type of small-value items, usually under €5, needed to qualify for free delivery?

PARTNER: A second strategy will be to partner with other brands to provide a broader suite of services and a wider commercial offer to match the expansion of titans such as Amazon. For lotteries, this could involve working with new partners, brands or retailers that could expand the lottery’s audience, improve its functionality, or are aligned with the good causes supported by the lottery brand. Just as Uber has partnered with many food companies as a delivery service (UberEats), why not UberLottery? It may sound extreme today, but it highlights how we need to think differently for the future. It also gets back to the core issue of functionality of the brand. How do you evolve to be highly functional from a consumer point of view in the future and partner to associate your brand with new consumer groups?

COUNTER:

The final strategy for larger brands that are able to, will be to counter unilaterally the challenge posed by titan brands. The first step will be to ensure your product or service-offer has a strong unique selling point (USP), that ensures consumers seek your brand rather than using platforms like Amazon, where consumers are more brand-agnostic. Lotteries need to consider if their direct-to-consumer strategies reflect changing consumer habits and hangouts. Essentially, back to the 4Ps of Marketing:

Place – Can players buy a ticket without leaving the comfort of their favorite messaging service ─ for example, by using WhatsApp ─ or do they need to go to a standalone dedicated ap?

Product/Price – Many prestigious brands are diversifying their product portfolios to reach different consumer markets based on price. Lotteries might consider developing multiple brands to be sold to different consumer groups. The look and feel of the product, the price point, the exclusivity factor and the brand itself may need to change in order to acquire new consumer segments that don’t believe current lottery games are for them.

Promotion – Lotteries may use the opportunity to show that they contribute to good causes and sustainable practices.

To more information, please contact: Sharon Duncalf, Vice President, WLA International, Marketing Operations and Strategic Planning, IGT

Sharon.Duncalf@IGT.com

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Synopsis

Français

Les marques dites géantes d’aujourd’hui auront un impact majeur sur le paysage de la consommation au cours de la prochaine décennie. Nous explorons ici trois stratégies que les loteries peuvent envisager pour faire face aux défis posés par le soi-disant « FAANG » (Facebook, Amazon, Apple, Netflix et Google) et leurs homologues asiatiques, « BAT » (Baidu, Alibaba et Tencent). Premièrement, il est utile de comprendre ce qui facilite leur ascension. Les recherches actuelles montrent que les facteurs fonctionnels sont devenus fondamentaux pour fidéliser les consommateurs à une marque. Et si une marque offre un niveau incroyable d’avantages fonctionnels (à l’instar des marques géantes), elle peut susciter gratuitement l’engagement émotionnel des consommateurs, en raison des avantages fondamentaux apportés à la vie des consommateurs (gain de temps, économie d’argent, etc.). Comment la loterie peut-elle relever ce défi ? L’une des stratégies consiste pour les marques à dialoguer directement avec Amazon ou un autre marché en ligne approprié. Les loteries peuvent déterminer si elles souhaitent constituer une source unique de distribution de produits ou si elles souhaitent collaborer avec des tiers à cette fin. Une deuxième stratégie consistera à nouer des partenariats avec d’autres marques afin d’élargir la gamme de services et de proposer une offre commerciale plus large afin de correspondre à l’expansion des marques géantes. Pour les loteries, cela pourrait impliquer de travailler avec de nouveaux partenaires, marques ou détaillants qui pourraient élargir l’audience de la loterie, améliorer ses fonctionnalités ou s’aligner sur les bonnes causes soutenues par la marque de loterie. Une troisième stratégie consiste à contrer directement les marques géantes avec des stratégies qui permettront à la loterie d’attirer une plus grande part du paysage de la consommation, au-delà du profil client traditionnel des jeux. Pour les loteries, cela implique de prendre en compte des aspects spécifiques du mix marketing : Point de vente, Produit, Prix et Promotion. Alors que le secteur continue de générer des millions d’euros pour des bonnes causes, même ces marques géantes ne peuvent pas se différencier en faisant la promotion des avantages pour le sport, l’éducation, etc. dans la communauté locale, à l’instar des loteries. Les loteries ont l’opportunité d’exploiter cette situation contre certains des perturbateurs de l’industrie, des opérateurs commerciaux et des marques géantes actuels.

Español

Las marcas más grandes tendrán un gran impacto en los consumidores a lo largo de la próxima década. Aquí exploramos tres estrategias que las loterías pueden considerar para afrontar los desafíos impuestos por las llamadas “FAANG” (Facebook, Amazon, Apple, Netflix y Google) y sus competidores asiáticos, las “BAT” (Baidu, Alibaba y Tencent). En primer lugar, es importante comprender qué está motivando su auge. Las investigaciones actuales muestran que los factores funcionales han cobrado mucha importancia a la hora de ganarse la lealtad de los consumidores hacia la marca. Y si una marca ofrece un nivel increíble de beneficios funcionales —como hacen estos gigantes— puede conseguir crear una conexión emocional con los consumidores de forma gratuita gracias a que les ofrece beneficios básicos para sus vidas (ahorrándoles dinero, tiempo, etc.). ¿Cómo puede afrontar la lotería este desafío? Una estrategia para las marcas es involucrarse directamente con Amazon u otro mercado en línea adecuado. Las loterías pueden considerar si quieren ser una fuente de distribución única para productos o si están dispuestas a asociarse con terceros para este propósito. Una segunda estrategia sería asociarse con otras marcas para ofrecer una variedad de servicios más amplia, así como una mayor oferta comercial, para poder igualar la expansión de las marcas más grandes. Para las loterías, esto podría significar trabajar con nuevos socios, marcas o vendedores que pudiesen ampliar su audiencia o mejorar su funcionalidad o cuyos valores encajasen con las causas apoyadas por las marcas de loterías. Una tercera estrategia sería combatir directamente a las marcas más grandes con estrategias que permitan a las loterías atraer a más consumidores además de los tradicionales. Para las loterías, esto significa considerar aspectos específicos de las 4 P del marketing: place (lugar), product (producto)/price (precio) y promotion (promoción). Mientras la industria continúe generando millones de euros para buenas causas, incluso estos gigantes no podrán diferenciarse promocionando los beneficios del deporte, la educación, etc., en las comunidades locales porque no podrán igualar el nivel de las loterías. Las loterías tienen una oportunidad de usar esto en su favor contra algunas de las marcas más innovadoras, operadores comerciales y gigantes que actualmente hay en el mercado.

Deutsch

Die so genannten Titan-Marken von heute werden sich im kommenden Jahrzehnt ganz wesentlich auf die Kundenlandschaft auswirken. Hier untersuchen wir drei Strategien, die von den Lotterien in Betracht gezogen werden können, um die durch die so genannten „FAANGs“ (Facebook, Amazon, Apple, Netflix und Google) und deren asiatischen Pendants „BATs“ (Baidu, Alibaba und Tencent) gestellten Herausforderungen angehen zu können. Zunächst gilt es, zu verstehen, was deren Aufstieg möglich gemacht hat. Jüngste Forschungen haben gezeigt, dass funktionelle Faktoren bei der Förderung der Markentreue von Verbrauchern eine ganz wesentliche Rolle spielen. Und wenn eine Marke ein unglaubliches Niveau an funktionellen Vorteilen bietet – wie dies bei den Titan-Marken der Fall ist –, so kann sie dessen emotionales Engagement aufgrund der grundsätzlichen Vorteile, die diese für das Leben von Verbrauchern bietet (Zeitersparnis, Geldersparnis usw.), kostenlos dazu erhalten. Wie kann die Lotterie mit dieser Herausforderung umgehen? Eine Strategie für Marken ist es, sich direkt mit Amazon oder einem anderen entsprechenden Online-Marktplatz einzulassen. Die Lotterien können abwägen, ob sie ein einziger Vertriebskanal für Produkte sein oder sich mit dritten Parteien zu diesem Zweck zusammentun möchten. Eine zweite Strategie bestünde darin, eine Partnerschaft mit anderen Marken einzugehen, um eine umfassendere Dienstleistungspalette und ein breiter gefächertes Handelsangebot anzubieten und somit die Expansion der Titan-Marken zu ergänzen. Für Lotterien könnte dies die Kooperation mit neuen Partnern, Marken oder Einzelhändlern beinhalten, welche die Zielgruppe für Lotterien erweitern oder deren Funktion verbessern würden oder die mit dem von der Lotteriemarke verfolgten guten Zweck übereinstimmen. Eine dritte Strategie wäre es, den Titan-Marken unmittelbar mit Strategien entgegenzutreten, die es der Lotteriebranche erlauben, neben dem traditionellen Kundenprofil für Spiele einen größeren Anteil an der Verbraucherlandschaft zu erobern. Für die Lotterien würde dies bedeuten, die spezifischen Aspekte der vier P-s des Marketings zu berücksichtigen: Place, Product/Price und Promotion (Ort, Produkt/Preis und Werbung). Da die Branche weiterhin Millionen von Euro für gute Zwecke erwirtschaftet, können sich sogar diese Titan-Marken durch die Förderung der Vorteile für Sport, Bildung etc. in der lokalen Community nicht differenzieren, wie dies bei den Lotterien der Fall ist. Lotterien haben nämlich die Möglichkeit, dies gegenüber den derzeitigen Branchen-Disruptoren, wirtschaftlichen Operateuren und Titan-Marken zu ihrem Vorteil zu nutzen.

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