Sales increased by 50%, why is the lottery so popular?
Author: Wu Zhanguo, Editor: He Yueyang
Since the beginning of this year, in addition to AI, there is also a lottery that has maintained its popularity for a long time.
Recently, the Ministry of Finance released a data: from January to May this year, the national lottery sales increased by 75.088 billion yuan compared with the same period last year, reaching 225.171 billion yuan, a year-on-year increase of up to 50%. This growth rate is jaw-dropping, and it has also led to discussion about why lottery tickets are selling hotly.
The Ministry of Finance pointed out three key factors for the surge in lottery sales data: the low sales base of lottery tickets in the same period last year, the promotion of mainstream events and the marketing of instant lottery tickets.
The broader view is that the surge in lottery sales data is a product of the recession. They believe that when people are looking for expected returns in the midst of economic hardship, the lottery, a low-threshold investment method, has become their first choice.
Similar to this view is the lipstick effect. The lipstick effect is that in the recession stage, because of the expected income reduction, people are unwilling to make large purchases such as buying houses and cars, but at this time there are more "idle funds", and people will use their spare money to consume those expensive substitutes - "cheap non-essential things", that is, lipstick.
In fact, this is a forest that is not visible to the trees.
So, what is the real reason for the surge in lottery sales numbers? What is its relevance to the economic cycle? What are the interesting economic principles behind the lottery? This article will answer the above questions.
1. Economic cycle and lottery sales
The economic cycle determines most economic behavior, and the lottery is no exception.
A complete economic cycle includes economic growth, recession, recovery, and boom, and cyclical changes can affect all walks of life.
Lottery sales figures are the opposite of what some explain, with a positive correlation between lottery sales and economic cycles.
First, lottery sales and GDP rise and fall at the same time.
On July 27, 1987, the first batch of welfare lottery tickets in China began to be sold, and it has been 36 years since then. In the past 36 years, when the growth rate of lottery sales has declined or slowed down, most of the time the corresponding GDP growth rate will also slow.
For example, in 1997, lottery sales fell by 33% compared with the previous year, corresponding to the decline in GDP growth from 17.1% in the previous year to 11%; In 2020, lottery sales fell by 21% from the previous year, corresponding to a decline in GDP growth of 2.7% from 7.3% in 2019.
China's lottery sales grew from 647 million in 1990 to 424.652 billion in 2022, and GDP also increased from 1.9 trillion to 121 trillion during the same period.
Lottery sales not only in China, but also in the United States and Japan are pro-cyclical.
According to a research report by Guolian Securities, US lottery sales increased from US$169 million in 1982 to US$2.69 billion in 2020, and GDP increased from US$3.34 trillion to US$21.06 trillion during the same period.
Japanese lottery sales grew from 4.3 billion yen in 1960 to 633.2 billion yen in 1990, while Japan's GDP grew from $0.04 trillion to $3.13 trillion in 1990.
Lottery sales not only rise and fall with GDP, but lottery sales tend to grow at an average rate higher than GDP when the economy is better.
In the 36 years that China has had a lottery, the average annual growth rate of lottery sales is 22%, and the average annual growth rate of GDP is 13%.
The same goes for the United States and Japan.
From 1982 to 2020, the average annual growth rate of lottery sales and GDP in the United States was 7.6% and 5%, respectively; From 1960 to 1990, Japan's average annual growth rate of lottery sales was 18.11%, while the average annual growth rate of GDP during the same period was only 15.25%.
Second, lottery sales are opposite to the unemployment rate, but occasionally resonate at the same frequency.
Data from the United States in the past 40 years shows that the unemployment rate has fallen and lottery sales have grown rapidly; On the contrary, the economic downturn, unemployment climbs, and the growth rate of lottery sales will decline simultaneously.
Japan in 1960-1990, Japan's rapid economic development unemployment rate is low, lottery sales year-on-year growth rate also maintained a high growth rate, in the 90s of last century, after the bursting of the Japanese economic bubble, the unemployment rate climbed, lottery sales growth rate compared with previous years also declined.
The economic upturn and the decline in the unemployment rate are generally consistent, which is also the general logic of lottery sales growth.
Of course, there are some small logics, such as the 90s, when the Japanese economy entered the early stage of recession, the unemployment rate rose rapidly, and when the IT bubble burst in 2001, Japan's unemployment rate was at a high level, when lottery sales were growing.
The reason for the high growth rate of lottery sales and the positive growth in times of economic downturn may be affected by the lipstick effect behind policies, markets, and unemployment rates, in addition to the economic cycle, which is behavioral economics.
Second, the behavioral economics behind the lottery
Whether in China or abroad, lotteries seem to have a magical power, and once launched, they can quickly become popular.
The modern lottery originated in Renaissance Italy, where a Genoese borrowed the 5-for-90 electoral model of parliamentarians and invented the "5-for-90" lottery, which spread to other parts of Italy and then to the rest of Europe and the rest of the world.
In the 60s of the 19th century, the lottery "Luzon ticket" invented by the Spanish was introduced to China, and the annual sales reached nearly one million taels of silver at its peak.
Traditional economic theory holds that investors' pursuit of maximizing returns and avoiding risks are two important assumptions. In the lottery, however, this theory has almost completely failed.
Daniel Kahneman, winner of the 2002 Nobel Prize in Economics, introduced the cutting-edge research results of psychology into the study of economics, creating a new research direction of behavioral economics. Behavioral economics combines behavioral analysis theory with economic operation laws, psychology and economic science, and is a supplement to traditional economics.
When we use behavioral economics to explain the lottery phenomenon, we come to a completely different conclusion than traditional economics.
Kahneman did an experiment in which he offered two lotteries: A, a 20% chance of getting 4,000 yuan, and an 80% chance of getting nothing; B. 25% chance can get 3,000 yuan, 75% chance can get nothing. It turned out that more than 60% of people chose A.
Therefore, it is concluded that lottery buyers are not concerned with the sum of the accumulated wins each time they buy a lottery ticket, but rather regard each lottery ticket as an opportunity to achieve overnight riches, and this expenditure often ignores the risk paid.
Behavioral economists give three reasons for the boom in lottery sales.
First, lotteries are classified as separate psychological accounts, with the dual characteristics of "risk-taking" and "value-added".
When a person loses a movie ticket worth 50 yuan on the way to see a movie, he will most likely not buy another one, and if he loses 50 yuan before buying a ticket, this person will most likely buy a ticket to watch the movie.
The same value of 50 yuan is put into different psychological accounts, and people's behavior will change.
People subconsciously put assets into different psychological accounts, some assets can be used to gamble occasionally, part of the assets to be used for retirement, part of the assets to improve themselves, part of the assets to consume vacations and so on.
Lotteries have the nature of risk-taking, so people have a very strong risk tolerance when buying lottery tickets, and even actively seek risks. This psychological behavior makes lottery sales more attractive than ordinary goods.
Second, people tend to overestimate their judgment in the process of buying lottery tickets.
In the lottery market, when the media hype reports that a local lottery player has won a jackpot of hundreds of millions of yuan, investors will pay too much attention to these winning information, and ignore some basic facts, such as the winners are only a minority, and the actual total prize money is far from the bet amount.
A research paper shows that more than 70% of the publicity about the lottery is about winning the lottery, which leads people to tend to be overly optimistic and think that they have a higher probability of winning the jackpot than others.
Third, lotteries are fun.
Lottery as a betting activity, dating back to ancient Rome, when royalty and business people used lottery to draw lotteries, which can bring people surprises and excitement, help people relieve stress and relax.
Digital lottery tickets cost low, 2 yuan can buy a chance to fight for half a lifetime and the joy of fantasy winning before the lottery.
As people's understanding of the probability of winning the lottery becomes more rational, and there are fewer players who believe that they will get rich overnight, the sales of digital lottery tickets are declining year by year. On the contrary, instant lotteries and guessing lotteries that are only for "Tuyi Le" are more popular.
Of course, this is not only because young people prefer new things, but also because behavioral economics is used for marketing.
Third, the marketing behavior behind the lottery
China has a much larger group than shareholders, 300 million players. In 2021, 200 million shareholders contributed 247.8 billion yuan of stamp duty to the country, with a per capita contribution of 1,239 yuan, and players raised a total of 104.7 billion yuan in community chest, with a per capita contribution of 349 yuan.
Lottery types can be divided into lotto type, guess type, instant type, Keno type and video type, among which lotto type, guess type, instant type is the main force of lottery sales.
From the player's point of view, the advantages of lotto-type lotteries are a strong sense of participation, high prizes, and there is room for choice, and overall more fun; From the perspective of merchants, lotto-type lottery tickets have a large sales scale and higher profits, so lotto-type lottery tickets have always been the mainstream of lottery sales.
The origin of the guessing lottery is due to the development of sports events, especially the development of the world's largest sports football events, from 1934 Sweden issued the first guessing lottery, to now nearly a hundred years, has become an important lottery type in the world, with the increase of China's sports events, China's guessing sports lottery from 2014 to become the second largest type of lottery in sales.
Instant lotteries usually have relatively simple rules and are characterized by quick purchases and quick draws. The marketing of merchants has given instant lottery new attributes and greater interest, stimulating the demand of young people.
First, the number of channels has increased.
"Sports lottery shops open into commercial complexes" and "self-service lottery machines in shopping malls" are increasing, and lottery channels have also moved from small shops on street corners to modern shopping malls. For example, pop-up shops based on instant lottery tickets such as scratch music and top scratch are favored by young people because of their on-the-spot prize redemption and simple process.
As a non-rigid need, convenience is an important reason for creating incremental consumption.
In 2018, China's lottery sales exceeded 500 billion. In 2019, lottery sales declined by 17.5% due to the rectification of the lottery industry and the suspension of Internet lottery sales.
Just as the cutting of internet channels has reduced sales of digital lottery tickets, being within reach of malls has increased lottery sales.
Self-service lottery machines also add a sales link, and some users of self-service lottery machines may be people who will never walk into a street lottery shop.
In addition, shopping malls can usually carry out joint promotional activities of various brands, and lottery tickets can be marketed with other brands, such as purchasing certain goods for a certain amount and getting a certain amount of lottery tickets, and buying lottery tickets that reach a certain amount and getting other goods.
Second, the change in the marketing method of instant lottery has increased the interest and gift attribute.
The new way to play lottery marketing, the variety show "Mao Xuewang" gives a new marketing paradigm, such as Li Xueqin gave a box of lottery tickets as a gift to Mao Buyi, who was celebrating his birthday. Therefore, the commodity attributes of the lottery have another meaning, and many people use the lottery as a wedding game, a choice of follow-up and a return gift.
Under the influence of various factors, the sales of instant lottery in 2019 were 28.522 billion yuan, a year-on-year increase of 26.6%. In 2020, even in the face of the pandemic, sales still increased by 3.1%, and from 2019 to 2022, the average annual growth rate of instant lottery was as high as 27.5%.
Compared to investment or speculation, non-addictive consumer goods may be the best positioning of the lottery.