Incentive Program

FY 2019 RETAILER INCENTIVE PROGRAM 

GOALS AND OBJECTIVES                                 

To develop a program to exceed the State Sales Scratch Off Quota of $679 million for FY‘19. 

To provide financial incentives beyond standard fees for Retailers achieving outstanding sales performance. 

To provide a compensation program that is fair and equitable for all KLC Retailers. 

To provide an incentive for KLC Retailers to increase lottery presence and sales. 

To provide an incentive system that will motivate retailers to promote and sell lottery games throughout the fiscal year.  As such - this year’s incentive budget is more than double the incentive program for FY18. 


SALES GOAL FOR FY ‘19
 

  • $679 Million is the goal for Scratch-off games
  • FY ’19 time period = July 1, 2018 – June 30, 2019
  • Quarterly Scratch Off Goals for retailers will represent the same % increase as the Kentucky Lottery Quarterly Scratch Off goals

INCENTIVE TIME PERIODS                   

  • Quarter 1: July 1, 2018 – September 30, 2018
  • Quarter 2: October 1, 2018 – December 31, 2018
  • Quarter 3: January 1, 2019 – March 31, 2019
  • Quarter 4: April 1, 2019 – June 30, 2019


SCRATCH-OFF INCENTIVE

FY ‘19 ELIGIBILITY 

Retailers must have an active license status on the records of KLC at the beginning and end of the quarter they qualify for an incentive.  To qualify for a specific quarter’s incentive program, the retailer must have the capability to sell Scratch-off products all weeks of that specific quarter.  If not, they are ineligible for the incentive for that quarter. 

Retailers who have an “Inactive” license status (often due to A/R balance issues) according to the records of the KLC on either of these two dates (first/last day of quarter) are still eligible if they fully pay their account balances and are eligible to sell lottery products all assigned weeks of that specific quarter. 

Only retailers who have had at least 5 complete sales quarters will be eligible for additional incentive rates per this section of the plan.  For example – to earn a 1st Quarter Incentive in FY19 the retailer must have actively sold lottery in all 13 weeks of 1st Quarter FY’18.  

Only retailers who had no more than 1 NSF instance during the incentive period during which they are qualified for an incentive will be eligible to receive that incentive. Those retailers with 2 or more NSF instances during a specific incentive period are not eligible for the incentive for that period. 

At the sole discretion of the KLC, a retail location having joint ownership may retain its eligibility if one of the original owners sells their share of the business to the remaining partner(s) (which necessitates a Retailer Number change).  These will be handled on a case-by-case basis.  Sales from both retailer numbers will be combined for comparison to the weekly incentive rates if eligible. 

Retailers not meeting the above criteria may still be eligible, at the sole discretion of the KLC, with written authorization of the President of the KLC.  


SCRATCH-OFF INCENTIVE RATES
 

The Kentucky Lottery Scratch Off Sales Goal for retailers each quarter shall match the same sales growth percentage goal as the Kentucky Lottery that quarter.  For example – if the Kentucky Lottery goal 1st Quarter is to grow Scratch Off sales 10% as compared to 1st Quarter FY18, the retailer’s goal will be to grow Scratch Off sales 10%.  Retailers must exceed their total sales goal each quarter as compared to the same quarter the previous year.  Currently, KLC’s Scratch-off sales are only Scratch-off tickets.  These rates do not apply to or include draw game sales or iLottery sales. 

Weekly Average

Bonus Earned by Exceeding Quarterly Sales Goal

Sales below $1,500 per Week

Does not Qualify for

Incentive

$1,500 – 2,999

Flat $50

$3,000 – $4,499

0.25%

$4,500 - $6,499

0.40%

$6,500 – 8,999

0.50%

$9,000 – 11,999

0.60%

$12,000 or more

0.70%

Average Weekly Scratch-off sales will be used to determine which quarterly incentive percentage (%) rate for which a retailer qualifies. Average weekly sales refer to total Scratch-off sales during the quarter, divided by the number of days in that quarter, multiplied by seven (7). 

The incentive rate above will be applied to calculate the total earnings of each retailer. During the normal course of business, retailers receive a 5% commission rate for our Scratch-off games which is separate from this incentive program. 

If an incentive is earned, the retailer will receive it by an account credit with written notification by the Lottery.  The credit will be given as soon as administratively possible in the month following the end of the respective quarter.  At KLC’s discretion, checks may be written and delivered to retailers earning incentives above a certain amount (i.e., $500 or more).  Each incentive period stands alone and represents a sales quarter as defined above.          

At the sole discretion of the KLC, a retail location having joint ownership may retain its eligibility if one of the original owners sells their share of the business to the remaining partner(s) (which necessitates a Retailer Number change).  These will be handled on a case-by-case basis.  Sales from both retailer numbers will be combined for comparison to the weekly incentive rates if eligible. 

Retailers not meeting the above criteria may still be eligible, at the sole discretion of the KLC, with written authorization of the President of the KLC.  

ADDITIONAL QUARTERLY INCENTIVE OPPORTUNITY
Excellence in Execution Program 

Retailers can earn an Excellence in Execution incentive each quarter based on achieving or complying with significant success markers.  Retailers must be active all 13 weeks of the associated quarter to qualify for this section of the plan.  The first marker will be tracked by the Kentucky Lottery system. 

  • 100% activation of at least one pack of Scratch Off tickets from every new game within 3 days of launch day each quarter (EOB Wednesday). Packs must achieve at least 50% validation and cannot be returned for credit.

The Success Markers listed below will be measured and recorded by Lottery Sales Staff 3-6 times per quarter during store visits.  

  • Minimum of 24 facings at retail including at least 8 games at the counter
  • Average 10% or less Out of Stock based on site visit. Lottery employees can assist on occasion, but retailer must have primary loading responsibility for all lottery games.
  • 100% compliance with current exact game POG program
  • Placement of at least one of the following game specific POS items including but not necessarily limited to:
    • Pole Sleeve
    • Window Cling
    • Pump Topper
    • Gemini Topper
    • Dispenser Topper

Retailers must achieve 100% of the Activation Goal for all games launched each quarter AND all of the above Success Markers at least 3 times each quarter to qualify for an incentive based on their volume.  The categories are as follows: 

SCRATCH OFF SALES PERFORMANCE CATEGORY

BONUS EARNED

Sales below $1,500 per Week

Does not Qualify

$1,500 – 2,999

$50

$3,000 – $4,499

$150

$4,500 - $6,499

$300

$6,500 – 8,999

$750

$9,000 – 11,999

$1,000

$12,000 or more

$1,500

Best of the Best Program 

Retailers can qualify for an additional incentive each quarter above and beyond the Scratch Off Sales Incentive and Excellence in Execution Incentive by carrying a minimum of 24 games at the counter and a minimum 24 game Gemini machine.  Retailer must exceed $4,500 per week in Scratch Off sales to qualify.  Retailer must have sales and qualifying game facings all 13 weeks of the quarter to qualify for this program. 

SCRATCH OFF SALES PERFORMANCE CATEGORY

BONUS EARNED

Sales below $4,500 per Week

Does not Qualify

$4,500 - $6,499

$100

$6,500 – 8,999

$250

$9,000 – 11,999

$500

$12,000 or more

$1,000

PROGRAM POINTS 

  1. The cashing bonus for “authorized cashing agents” will remain at 2% for cashing winning tickets between $601 - $5,000.
  2. Incentives will only be awarded to those retailers meeting all eligibility requirements and who qualify by their sales.
  3. Each retailer will be considered as standing alone for purposes of this plan. (i.e., Each store in a chain account will be judged on the merit of its own sales, rather than the total of the chain account.) KLC will provide any incentive due to the retailers based on their current banking arrangements with KLC.
  4. It is anticipated that unusual situations may arise during FY ‘19 that might not have been considered by this plan. Such situations will be brought to the attention of the President & CEO, who will determine how such situations shall be treated in conformance with the intent of this Incentive Plan.

RETAILER INCENTIVE EXAMPLES – COMPARING FY19 PLAN TO FY18 

EXAMPLE – RETAILER “A” 

  • Averages $15,000 per week in Scratch Off Sales
  • Carries 40 at the counter plus a 24 game ITVM
  • Activates new games within 2 days of launch
  • Keeps facings full
  • Allows one game specific piece of Point of Sale
  • Achieves budgeted sales growth

FY18 Incentive Plan – Incentive based on 1.25% of $195,000 ($15k per week)
Maximum FY18 Quarterly Incentive - $2,437

FY19 Quarterly Incentive:

.7% of $195,000 = $1,365

Excellence in Execution = $1,500

Best of the Best = $1,000

FY19 Quarterly Incentive = $3,865

EXAMPLE – RETAILER “B”

  • Averages $8,000 per week in Scratch Off Sales
  • Carries 32 at the counter plus a 24 game ITVM
  • Activates new games within 2 days of launch
  • Keeps facings full
  • Allows one game specific piece of Point of Sale
  • Achieves budgeted sales growth

FY18 Incentive Plan – Incentive based on 1% of $104,000 ($8k per week)
FY18 Quarterly Incentive - $1,040

FY19 Quarterly Incentive:

.5% of $104,000 = $520

Excellence in Execution = $750

Best of the Best = $250

Total FY19 Quarterly Incentive = $1,520

 

FY 2019 KENO RETAILER INCENTIVE PROGRAM 

GOALS AND OBJECTIVES                                        

  • A program designed to achieve Keno Sales at retail of $87,360,000 for FY’19.
  • Provide financial incentives beyond standard fees for Retailers achieving outstanding sales performance.
  • Provide a compensation program that is fair and equitable for all Keno Retailers.
  • Provide an incentive system that will motivate Retailers to promote and sell Keno consistently throughout the fiscal year.

SALES GOAL FOR FY ‘19

$87.36 Million is annual goal for Keno retailer sales

FY ’19 time period = 12 months: July 1, 2018 – June 30, 2019

Annual Keno Sales Goals for retailers will represent the same % increase as the Kentucky Lottery’s annual sales goal for Keno sales at retail

 

INCENTIVE POOL 

An incentive pool equal to approximately 0.3% of total eligible Keno sales will be created.  This incentive pool will not exceed $260,000.  Sales of ineligible retailers (e.g. cancelled, etc.) will not be included in the total Keno sales.  Only retailer-based Keno sales are included. 

INCENTIVE RATES 

Retailers must exceed their annual sales goal for Keno to be considered for eligibility on the incentive program.  The retailer’s Keno sales goal shall represent the same percentage increase as the Kentucky Lottery’s overall percentage increase goal at retail. For example – if the Kentucky Lottery’s goal is to grow the sale of Keno at retail by 7%, the retailer’s annual goal will be a 7% increase over their FY18 sales.  An incentive will be awarded only to retailers if their Keno (draw game) sales exceed a weekly average of $1,000.  These rates do not apply to or include other traditional draw game, scratch game or iLottery game sales. 

The total incentive pool will be based on total Keno sales of eligible retailers; however, each retailer's proportion of the incentive will be based only on the total sales of retailers sharing in the incentive pool. 

For example, if $75 million in Keno is sold among possible eligible retailers there would be an incentive pool of $225,000 to distribute.  But only retailers selling above $1,000 weekly and meets the other eligibility requirements will receive an incentive.  Those retailers (who will share the incentive) might have a combine total of $65 million in Keno sales resulting in an incentive pool of $195,000. Each retailer who receives money does so based on their market percentage of this $65 million. 

Total average weekly sales refer to total Keno ticket sales in FY’19 divided by 52. 

If an incentive is earned, the retailer will receive it via an account credit or check with written notification by the Lottery.  The credit/check will be given as soon as administratively possible in the month following the end of the Fiscal Year 2019 after all necessary checks and balances are performed.  At KLC’s discretion checks may be written and delivered to retailers earning incentives above a certain amount (e.g., $500 or more). 

FY ‘19 ELIGIBILITY 

In order to be eligible for the Keno incentive, a retailer must meet the following criteria:

  • Have an active license status on the records of KLC at the end of FY’19
  • Have sold during each of the weeks that they were eligible to sell for all of FY’18 and FY’19
  • No more than 2 instances of Non-Sufficient-Funds (NSFs) during FY’19
  • Have exceeded their annual sales goal for Keno

At the sole discretion of the KLC, a retail location having joint ownership may retain its eligibility if one of the original owners sells their share of the business to the remaining partner(s) (which necessitates a Retailer Number change).  These will be handled on a case-by-case basis.  Sales from both retailer numbers will be combined for comparison to the weekly incentive rates if eligible. 

Retailers not meeting the above criteria may still be eligible, at the sole discretion of the KLC, with written authorization of the President of the KLC. 

PROGRAM POINTS 

  1. The cashing bonus for “authorized cashing agents” will remain at 2% for cashing winning tickets between $601 - $5,000.
  2. Incentives will only be awarded to those retailers meeting all eligibility requirements and who qualify by their sales.
  3. Each retailer will be considered as standing alone for purposes of this plan. (i.e., Each store in a chain account will be judged on the merit of its own sales, rather than the total of the chain account.) KLC will provide any incentive due to the retailers based on their current banking arrangements with KLC.
  4. Keno draw game sales at retail will only be considered for this program.

It is anticipated that unusual situations may arise during FY ‘19 that might not have been considered by this plan.  Such situations will be brought to the attention of the President & CEO, who will determine how such situations shall be treated in conformance with the intent of this Incentive Plan.