California Racing Update

The 14% takeout pick five came about as a result of the Players Boycott, which in turn was a reaction to SB 1072 and its ensuing takeout hike. (Real credit for the Pick5 belongs to Roger Way, R.I.P.) I know this because I was in the room when the decision was finally made to implement the pick five. Brian Boudreau, Vice Chairman of the TOC, told me “We are going to give one of your ideas a try. We are meeting with track management in about an hour and we are going to tell them we are in favor of implementing a 14% takeout pick five as a new bet.” He and I stood up, looked each other in the eye, and shook hands.

The rest, as they say, is history.

Last summer, I wrote about the 14% takeout pick five and a new handle trend at Del Mar. Here’s a cut and paste from that write up:

“Q. What single wager type is up the most?

A. That’s easy. It’s the 14% Takeout Pick 5 and it’s up 51.8% this year vs. last year.

Q. Is it possible that instead of cannibalizing handle, customer awareness about the 14% Takeout Pick 5 bet is generating overflow handle into the other pools and races for the races involving the pick 5 sequence?

A. Overall handle for races 1-5, the races in the 14% Takeout Pick 5 sequence is up an encouraging 10.2% this year vs. last year.

Overall handle on the races outside of the 14% Takeout Pick 5 sequence is up just 1.6%  (compared to a 10.2% overall handle increase for the races inside of the 14% Takeout Pick 5 sequence.)”

Link here:

http://blog.horseplayersassociation.org/2012/08/california-s-14-takeout-pick-5-del-mar.html

The 14% takeout pick five is now in its second year. I’m happy to report that the growth trend first seen last summer at Del Mar is continuing this year at Santa Anita.

For the calendar quarter just ended March 31, 2013 - the year over year handle numbers at Santa Anita tell the story.

Not only are Santa Anita's year over year handle numbers for the 14% takeout pick five up $5.35 million and 46.9 percent respectively - but, apparently, the low takeout bet is sparking handle growth in the pools of the other wagers on the wagering menu for the races in the pick five sequence.

With 1 fewer race day this year vs. last year – and looking strictly at the races in the Pick5 sequence - or races 1-5 only:

Dollar Change in Total Handle Q1 2013 vs. Q1 2012: …….. UP $16.45 million

Percentage Change in Total Handle Q1 2013 vs. Q1 2012:.. UP 10.14 percent

However, looking only at the races outside the Pick5 sequence:

Dollar Change in Total Handle Q1 2013 vs. Q1 2012: …….. UP $2.13 million

Percentage Change in Total Handle Q1 2013 vs. Q1 2012:.. UP 0.94 percent

This trend is remarkable because it runs counter to a big picture handle trend spanning the past 75 years or so. Historically, the later races on the card have always garnered more attention from bettors and out-handled the early races on the card because: 1.) Field size is bigger. 2.) The quality of stock is better. 3.) Attendance is higher – both on track and online. (Hey, some of us are procrastinators.)

The handle numbers for the races in the 14% takeout pick five sequence buck that big picture trend.

Here’s what I think is happening:

When I was in college I worked as a Liquor Department Manager for Walgreens. For those of you who may not be aware, Walgreens is a successful retailer. The first Walgreens store was opened in 1901. According to Wikipedia: Walgreens had 8,061 drugstores as of December 31, 2012.  Link: http://en.wikipedia.org/wiki/Walgreens

At the time that I worked there, the newspaper ad for all 26 Walgreens stores in our district came out every other Wednesday. Considerable planning was involved. As a department manager it was up to me to review the upcoming ads, order large enough quantities of the items scheduled to be on sale, and see to it that the merchandise did in fact arrive and was on hand in store in advance of each sale. The objective was to order enough of each item to see us through the sale without running out of stock – but not so much that we would be stuck with large quantities of inventory after the sale was over.

Walgreens had another objective: Customer goodwill. Not only was each store to have ample ad merchandise on hand – but ad merchandise was to be displayed in a manner so that the customer could easily find it.

Each department in the store had one primary sale item designated as that department’s feature item in the ad. As department manager, it was my job to make sure that my department’s feature item was prominently displayed on an end stand. Further, the end stand for the feature item was positioned so as to be immediately visible to the customer the moment he or she approached my department.

Come back with me to 1977. It’s a Wednesday in late March and our new ad just came out today.

The first thing you see when you walk into my department is a giant end stand where about 300 cases of Budweiser twelve packs are stacked like a pyramid. In front of the end stand is a sign. Taped to the sign is the actual headline clipped from the newspaper ad. It reads: $2.79 Budweiser Twelve Pack 12 oz. cans. If you look closely, at the bottom of the sign is smaller lettering that reads: Regular price $3.69. (No limit.)

Every day for the next two weeks I watch as literally every beer drinker within a 10 mile radius of the store walks into my department and does exactly the same thing. They walk in, hundreds of them, maybe thousands, one after another… They see the end stand, stop, read the sign, grab a shopping cart, and load it up with Budweiser twelve packs. Then, literally every one of them wanders the department and fills up the cart with other items that aren’t on sale… margarita mix, bottles of wine, a bag of ice, pretzels, chips, salsa, beef jerky, a jar of peanuts, a bottle of whiskey or vodka or gin or brandy for the more dedicated drinkers among them. Literally nobody – and I do mean no one – comes up to the register with a shopping cart that only has Budweiser twelve packs in it. As long as I have enough Budweiser twelve packs on hand so that we don’t run out of stock – every customer leaves the store happy. And when the next new ad comes out and something else goes on sale – most if not all of those same customers will come back – and leave the store happy all over again.

The company is happy because the customer is happy. Three words come to mind: Pure marketing genius.

Sadly, I see very little in the way of pure marketing genius going on behind the scenes these days when it comes to the decision making for California Racing.

However, the 14% takeout pick five does appear to have California Racing cashing in on the same psychological theme Walgreens has been cashing in on since 1901.

The numbers suggest that bettors are looking at races one through five and walking into the store because of the sale item. Some are even arriving at the register with more than just the sale item in their carts.

Jeff Platt

President, HANA