Professor Roger Beahm weighs in on the effects of winning the N.C. Education Lottery ad contract

State lottery to re-bid ad contract for first time
Originally Posted on Friday, November 6, 2009 | by Steve Iveys
Reposted from The Business Journal of the Greater Triad Area

For the first time since it launched in 2006, the N.C. Education Lottery is seeking bids for its high-profile advertising contract.

Wray Ward Lassiter of Charlotte has held the ad contract for the lottery since it began. That contract would have automatically renewed Feb. 21 if the state was not seeking new bids.

Wray Ward Lassiter has charged the lottery commission anywhere from 10 percent to 12 percent of the lottery’s total advertising budget, while the remaining ad budget goes toward actually purchasing commercials, print ads, billboards and other costs of executing campaigns.

The lottery’s ad budget for fiscal 2008, the most recent audited report available, was $8.6 million. State law allows the lottery to spend up to 1 percent of its overall sales on advertising, which could have put a 2009 ad budget as high as $12.9 million.

Based on such an ad budget and Wray Ward Lassiter’s current terms, an ad contract could be worth between $1.29 million and $1.55 million per year for an agency.

But Quan Kirk, director of legal services for the lottery, said lottery commissioners decided to seek bids now hoping to get a better value, since more advertising agencies are battling for less work during the economic downturn.

“We were just curious whether we could find a better rate right now,” Kirk said. “And when we awarded that first contract, things were pretty hectic just getting the lottery off the ground. Now we know a little bit better what kind of services we need and what to expect.”

Kirk said the lottery is also asking potential bidders to submit ideas on alternative ways of billing other than a percentage of the total ad budget.

Kirk said the lottery has been looking at other contracts, seeking to save money or get a better value. For example, a Rhode Island company agreed to provide new vending machines for some lottery games if the lottery commission extended its existing contract at the same rate in hopes of keeping the business.

Ad agencies in the Triad contacted this week were hesitant to discuss specific interest in the lottery contract, citing restrictions on comments in the lottery’s request for bids. But local industry sources said it’s likely that at least a couple of Triad agencies will pursue the contract.

The deadline to apply is Nov. 16, with a contract awarded by Jan. 1.

Roger Beahm, a visiting professor of practice at the Wake Forest University Schools of Business and local industry veteran, said winning the contract would have multiple benefits for an agency beyond the large new source of revenue.

“First, it’s highly motivating for an agency’s employees,” Beahm said. “This contract will entail using all kinds of creative outlets for broadcast, print, outdoor, new media and point-of-sale.”

It also might allow an agency to hire other support services in areas like public relations and media buying that a firm could then offer to a broader range of other new clients.

“And it of course brings a lot of attention to an agency,” Beahm said. “Prospective clients love to go with winners. It’s true that success breeds success in this business.”