Jari Vähänen: Responsibility – a competitive edge?

Jari Vähänen of Finnish Gambling Consultants looks at the responsibilities of lotteries in protecting big winners from harm in his latest Lottery Daily Column
Image source: Jari Vähänen

In November 2020, I wrote a column stating that lotteries must be even more responsible operators. Since that writing, the role of responsible operations has grown even more. Authorities and, above all, customers have begun to demand real action from gambling companies. On top of all that, compliance with the requirements should be the minimum level, and only if they are exceeded will real progress be made.

The demands of responsibility do not only apply to gambling but a much greater societal change. I dare say that the demand for responsible action has already become a global megatrend that has a powerful impact, at least in Western Europe.

Gambling is a dangerous product for some consumers that can cause serious addiction, which is why gambling is regulated worldwide. Although there are big differences in the dangers of different types of gambling, all gambling is more restricted today. As I have said in my previous columns, the operation of lotteries is part of this same entity, even though the companies themselves consider their operations to be safe compared to betting and, above all, casino companies.

How should lotteries respond to demands for responsible behavior? Do they have to change their activities, and if so, is it a requirement or an opportunity? So is this social change causing extra harm to lotteries, or is it even a win for them?

Attitudes certainly vary from company to company and from individual to individual. Understandably, the tightening of the practice of responsibility is seen as a mandatory evil, but it must be implemented in a way that minimizes disruption to the business.

The requirements come from several sources. Political decision-makers are waking up because they are following public opinion. Decision-makers enact laws that gambling companies are required to comply with. Officials, in turn, are responsible for regulating and interpreting the law. Gambling regulators have tightened controls, as evidenced by the gambling limits introduced in many countries and the mandatory identification of customers.

However, the rise of responsible operations into a global megatrend comes from consumers’ demands. A successful company understands its customers and keeps them happy. By operating at a minimum level, the company can’t create a positive image of itself for its customers. At best, implementing a minimum can only avoid creating a negative attitude. So if a gambling company wants to improve its brand, it must exceed customer expectations. This is also possible in responsible gaming.

So, could responsibility be an opportunity to gain a competitive advantage over other gambling operators? While lotteries have had a bit of a bad habit of keeping themselves better than they may have been, they have traditionally been the most responsible operators in the industry anyway. The lottery brand has been associated with charity in many countries because the companies’ profits have benefited important things.

Games of lotteries have been softer than that of betting and casino companies. The gap has narrowed significantly today, but the lottery brand is still good. If lotteries now invested prominently in responsible operations, they could even gain a competitive edge over others.

Responsibility and financial performance are often mistakenly seen as alternatives to each other. Increasing responsibility measures is considered to reduce the gambling company’s earnings. In the short term, this will probably happen, but in the long run, could it be otherwise?

In many businesses, the 20-80 rule applies, meaning that 20% of customers bring in 80% of the company’s revenue. In the gambling business, the situation is unfortunately different. A tiny percentage, only a few percent, of customers bring half of the companies’ sales. Mandatory loss and play limits will have a huge impact on the gambling of these customers, but in the long run, it can even have a positive effect, at least in the lottery business.

The customer base of lotteries is large thanks to big lotto games. Lotteries should focus on serving a big audience in all gambling products. If lotteries are able to convince their customers that they are really doing their best that gambling is not a problem, then the companies’ brand can improve significantly. A truly responsible gambling company can gain a significant competitive edge in a situation where the overall reputation of the gambling industry is deteriorating. Such a development could even lead to an improvement in the lottery’s financial performance, despite increased restrictions. In any case, the “conscience” of companies will at least be better.

Lotteries are still owned mainly by states that, of course, want to profit from gambling. On the other hand, it should be easier for state-owned companies to reduce problem gambling, as the management and other costs of gambling problems are borne by society (states). Therefore, in any case, states can achieve two types of benefits from more responsible gambling. People are happier, gambling problems cause less harm, and on top of all that, states can save money.

Lotteries should, therefore, seriously consider how they will respond to the increasing demands for responsibility. At best, they can even be a means of gaining a competitive advantage over other gambling operators. “Lotteries – the most responsible gambling companies in the world” could be a global brand.

Jari Vähänen

Jari has enjoyed a long and successful career in the gambling sector, having cut his teeth in the horse racing and betting business. He has spent the biggest part of that time with Veikkaus, the Finnish national lottery and gambling operator, where he was responsible for horse and sports betting business. While there he started digital sale channels, introduced the first customer-based strategy and took care of international relationships and businesses. Having resigned from the lottery in spring 2020, he established The Finnish Gambling Consultants Ltd and is now helping lotteries and other gambling operators and suppliers to further develop their businesses.