Hitting the Jackpot: Rebecca Hargrove's Winning Strategy

Meet Rebecca Hargrove who's made the lottery into a billion-dollar business.

March 26, 2009, 3:52 PM

NASHVILLE, Tenn., March 28, 2009 — -- You may not have heard of Rebecca Paul Hargrove, but in the lottery world, she's a celebrity.

The brash, hard-charging CEO of the Tennessee lottery has accomplished what nobody else has in the state-run gaming business. She ran the lottery in Illinois where sales topped $1.3 billion. Next, Hargrove moved to Florida, where she set a new record: $95 million in sales the first week.

In Florida, Hargrove's marketing strategy included appearing in ads and handing out checks. But some thought she was too flamboyant and she ultimately was fired.

She wasn't out of work long. Georgia tapped her to start its lottery and ticket sales increased 10 percent every year for the decade she was in charge.

Now the 60-year-old dynamo leads one of the nation's newest and most successful state-run gaming operations -- the Tennessee lottery.

Her critics say she's promoting a "fool's tax," taking advantage of people who are not financially sophisticated, and this at a time when most people don't have a lot of spare money.

Hargrove brushes off the notion that lotteries manipulate those who are low-income or uneducated.

"Well, you use the word 'tax' and I have never known taxes to be voluntary," she said. "If you don't pay your taxes, you are going to go to jail. If you don't buy your lotto ticket, you aren't going to jail."

"There are a handful of people who may buy more lottery tickets than they should and I wish that didn't happen," she said. "There are people who have addictions. I am addicted to Diet Coke. You can be addicted to anything. I'm not sure that makes shopping bad or Diet Cokes bad or lotteries bad."

As the economy has crumbled, more and more have turned to the dream of that ultimate windfall.

"Lotteries are huge business," Hargrove said. "Let me put it in perspective for you. Last year, the movie industry ... all the box office receipts across the country were about $9 billion. Music: $20 billion. Salty snacks, pretzels, chips, all that stuff ... about $40 billion. Fifty-five billion dollars of lottery tickets were sold -- $55 billion!"

Her winning strategy is fueled by innovative TV ads and new games. The latest is a $20 scratch ticket called Tennessee Millionaires Club.

"The introduction of this game alone, our sales went up $7 million a week," she said. "We've had three million-dollar winners [in a month]."

Hargrove said one of the women who won the $1 million called her husband but couldn't get the words out that she had won. She could hardly breathe but managed to say, "I hit the... I hit the...," which made him think she had been in a car accident. Finally, she found the right words and told him she had hit the lottery.

Whether it was coincidence or her latest savvy marketing move, a fourth million-dollar winner happened to show up the day "Nightline" visited: Brandy Bowling, an unemployed single mother of two.

She said she felt as though her head was "about to explode."

"I can't wait to get the check in my hand to, you know, believe it's really happening," Bowling said. "My family has always worked hard and struggled, and to have this happen to us is awesome. I think my family deserves this."

Of course, the lottery is a game of chance that some say exploits those who can least afford it. But Hargrove doesn't view it that way.

"I am very proud of what I have accomplished in four states," she said.

And those states have been more than willing to return the favor. As a state employee in Tennessee, she can make up to $750,000 a year, including bonuses. Last year, she says she made about half a million.

That's three times the governor's salary.

"I think there are a lot of things that go into a decision that people make when they hire you," she said. "I haven't applied for a job in years. I've been recruited."

"If you look at what happened in Tennessee in particular, we started three weeks earlier than any other lottery," she said. "The profits we made from those three weeks were $30 million, which would pay what I make for 50 years. I am comfortable that the citizens of Tennessee have benefited from my ability to do a startup quicker."

Despite her sky-high salary, Hargrove is quick to remind everyone she has working class roots.

"I'm a poor little girl from the wrong side of the tracks in Indianapolis who has been very, very successful and very, very fortunate," she said.

Almost as if to prove she hasn't forgotten where she came from, she has the same artery-clogging lunch from Krystal Burgers nearly every day of the week.

And she's a big fan of Diet Coke.

"Oh, I drink a lot. I would guess on a work day ... I probably go through 10 or 12 pretty easily," she said.

She moves at a pace that would exhaust someone half her age. And it's been like that for years.

Hargrove has always been competitive, making it as far as fourth runner-up in the 1973 Miss America pageant, where she performed a gymnastics routine as Miss Indiana.

She got her big break when she was broadcasting and producing ads at a tiny TV station in Springfield, Ill., the state capital. That led to her Illinois lottery gig.

But throughout her record-breaking lottery run, Hargrove has had her vocal critics, such as Tom Grey, spokesman for StopPredatoryGambling.org, who says she made her fortune by marketing a nearly impossible dream to people with low incomes.

"Rebecca has been pitching what I consider to be a scam on the American public," he said.

Grey said more tickets are sold in "our barrios, our ghettos" than anywhere else because there are more lottery outlets in those neighborhoods.

But Hargrove would tell her critics: "You can't make the numbers add up when you say only poor people play. ... That just isn't where the vast majority of our numbers come from. Now, are there people who maybe buy a lottery ticket who shouldn't? Absolutely. I wish that didn't occur, but it's not my job or anyone else's job to tell people how to spend their discretionary dollar."

"Say you don't have enough money to go to a movie, you can't go bowling tonight, I don't know if you should get that Diet Coke," she said. "You know people who make less money tend to balance their discretionary income better than people who make a lot of money."

She is adamant that she's never marketed specifically to poor people.

"Never have, never will," she said.

Funding Education: 'I Feel Very Good About It'

Hargrove and her supporters say the lottery is a viable, seemingly recession-proof way to raise money. In Tennessee, lottery funds are earmarked for college scholarships. An estimated 98 percent of in-state students at the University of Tennessee are on so-called "hope" lottery scholarships, something Hargrove is proud of.

"I remember giving a speech in a small town and when the speech was over, the service staff came up to me and said ... 'I just want to thank you,'" Hargrove said. "She started crying and said, 'My son was the first one in my family to go to college and if it had not been for the hope scholarship that would have never happened. I feel very, very good about it.'"

Forty-two states and the District of Columbia have lotteries: Some give all the revenue to education; others use the money for their general fund to build roads or to pay for health care.

Lotteries aren't going anywhere anytime soon. And neither is the woman known as the Michael Jordan of the lottery, who doesn't seem to have retirement in her vocabulary.

"You know, I love life. I love what I do. I am who I am," she said. "I mean, you've spent a day with me. ... There isn't a whole lot of pretense. It just is what it is. Is that over the top? I don't know."

"It energizes the people that I work with," she said. "Some people love it; some people hate it. ... But at the core, I am who I am. I'm comfortable with who I am and I think that's a good thing."

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