Catch Gus the Groundhog in his natural habitat -- a TV commercial -- and he comes off cute, fuzzy, scratch-happy, perhaps a bit annoying in that way an animatronic creature with attitude can be.

Pennsylvania Lottery Gus the Groundhog Click photo for larger image.

Amusing or bothersome, the year-old "spokes-hog'' for the Pennsylvania Lottery's instant games is having the kind of results that makes the marketing team that created him happy -- game sales are surging and groupies have been asking for Gus dolls and Gus appearances.

It's a welcome end to a situation that, only three years ago, had the fur flying around the state's highly prized $30 million lottery advertising account. The Ridge administration had awarded the contract to Marc USA of Station Square, ending a 25-year hold on the account by Philadelphia advertising agency Tierney Communications. Tierney, in turn, challenged the bidding process, and it was months before Marc got an all-clear to do the work.

Then, under the new Rendell administration, an executive from that very same Philadelphia agency, Edward Mahlman, was hired to run the lottery. The new guy's new boss, Gregory C. Fajt, secretary of the state Department of Revenue, remembers getting calls from nervous Marc staffers questioning the move and wondering about its implications for them and their agency's work.

"There were clearly some bad feelings between Tierney and Marc," said Fajt, who can laugh now with the hindsight of someone who knows the story will turn out OK. Indeed, in the years since the new team came together -- Fajt, Marc and Mahlman, the former Tierney guy who became executive director of the lottery -- the division has been putting up numbers that make everyone involved look smart.

The lottery posted record sales of $2.35 billion in the fiscal year that ended in June, up from the previous fiscal year's record of $2.1 billion. For the current year that runs through next month, the lottery is on target to do $2.6 billion, ranking the Pennsylvania Lottery second nationally in overall sales growth, Mahlman said, and No. 1 in the growth of instant game sales.

Instant games, of course, are the major thrust of Gus, who in ads implores lottery players to "Keep on scratchin'." But instant game sales, which accounted for 42 percent of total lottery sales in fiscal 2004, were headed up even before the groundhog made his debut in March of that year.

And it helps that in late 2002 Pennsylvania became part of the multistate group offering big jackpots in the Powerball game.

Other tinkering in recent years included dumping the Super Six game, which had odds of around 48-to-1, with the Match 6 game, promising odds of about 6-to-1.

But scratch-off games and Gus deserve a lot of credit for the lottery's growth.

The state, along with the lottery industry nationwide, had been working to tap the potential of the games for years. Compared with a few decades ago, when one or two different versions might have been offered annually, the state now brings out an average of three to six games monthly, ranging in price from $1 to $20 with a broad mix of prizes.

The seemingly endless supply, which helps keep the lottery fresh in players' minds, is developed by lottery officials and industry supplier Scientific Games Corp. But advertising each and every game individually would be cost prohibitive.

That's where Marc, and ultimately Gus, came in. Assigned to see how the often short-lived offerings could make a bigger splash, Marc analyzed sales numbers and ran focus groups. The agency found fans liked the steady flow of new games and anticipated the latest offerings.

To build on that, the agency suggested driving awareness of new games in sort of the way that toy maker Ty did with its Beanie Babies for years -- by coordinating marketing with the launch of games so players would know when to expect another round.

Marc, whose research showed the lottery's image was rather tired, also thought there should be some unifying brand to tie together scratch-off games as diverse as Lucky Shamrocks, Trick or Treat Tripler and Jumbo Bucks.

Enter Gus, a fun-loving guy who claims to be the second-most-famous groundhog in the state, orders pizza with pepperoni and anchovies, calls his Mom on Mother's Day and just happens to come out with a new radio or TV commercial tied to a new instant game every month. His spots are concentrated in the first 10 days of each month.

Industry publication Adweek, which has been critical of some past Marc creative work for the lottery, last month called Gus "fake-looking but cute."

"He is a unifying factor," said Mahlman. Gus also has the virtue of not promising to make players rich overnight or change their lives in big ways. He just thinks scratching is fun.

That carefully crafted message reflects the reality that lottery advertising can be a minefield. Critics watch to see if unrealistic promises are being made or if lower income audiences are being preyed upon.

Various states have laws about what lottery ads can say. Lady Luck, a longtime character in Virginia lottery ads, had a magic wand that did not work very well, so players got the idea that they couldn't expect to win all the time.

Massachusetts, which claims to have launched the first instant ticket games 30 years ago, cut off most lottery ad funds in the late 1990s. Only last year did the New England state launch a TV campaign again, using a $5 million budget to try to bring back casual players lost during the quiet years.

While the Keystone State has long marketed its lottery, Fajt believes that past administrations may have been wary of appearing to push too hard or stepping inadvertently into a scandal.

In Pennsylvania, lottery revenues support various programs for older citizens. Gov. Ed Rendell committed to expanding those programs early on, and gave Fajt the assignment of doing more with the program to help pay for those promises. Fajt passed on the directive to Mahlman.

Mahlman, who had worked on the lottery account in various roles since he'd started with Tierney in 1977, does not seem to have been aware that anyone was nervous he and the Marc staff might not play well together. To hear him tell it, his priority from the start was just to get moving on his assigned mission of increasing sales.

To that end, the lottery has edited its game offerings, worked to offer more prizes so players have a better shot at winning something and tied its informational boards into the state police's Amber Alert, a service that also works as a good public relations move.

Mahlman thinks other drivers behind improved overall lottery sales include the reversal of a 16-year slide in the number of retailers selling tickets, a change achieved in part by giving stores new technology to check ages on driver's licenses; the introduction of new machines that let players buy their own tickets; and an increase in such old-fashioned marketing tools as signs.

The once-skittish Marc staff now praises Mahlman as a fellow marketer, someone who understands the issues. For example, despite the pitfalls inherent in trying to create new characters, Mahlman saw the potential in putting an animatronic groundhog on the payroll.

Earlier this year, to test the power of Gus, the lottery ran an instant game called, "Keep on Scratchin," and featuring the furry guy's picture. Players who sent in 10 nonwinning tickets had a shot at appearing in a TV commercial with the groundhog.

Although Marc estimated, based on the odds of that particular game, the average applicant had to buy 40 tickets to find 10 duds, more than 22,000 people entered. A commercial featuring the three winners was shot recently and should appear this summer.

"It's [er, he's] developing this kind of cult mentality, which we just love," Fajt said of Gus.

The ad agency and the lottery are now exploring what lies in the future for the young groundhog.

Mahlman does not foresee producing Gus dolls, in part because he does not want to risk the appearance of trying to appeal to Pennsylvanians under 18 who are not allowed to play the lottery. The groundhog, Mahlman believes, needs to stay focused on his day job: selling instant tickets.