The True Cost of Marketing
When trying to understand how much a casino spends on marketing, most casino managers look at specific departmental expenses on the profit and loss statement including marketing expense, advertising expense, player rewards program expense and total comps (which often appear as line items on the P&L). The sum of these is considered the total amount a property spends on marketing. And while this methodology is valid, it leaves out several hidden expenses that must be considered when trying to understand the true amount that a casino spends to attract new customers to the property and foster loyalty among existing customers.
Two areas of a casino’s business operations that are not normally considered as part of the marketing equation are food and beverage and entertainment. They are normally considered stand-alone revenue-generating departments that, for the vast majority of casinos, produce negative results every month. They are allowed to operate at a loss because they serve a supporting role to casino operations. Yet, the operating losses that they produce each month are never considered a form of marketing expense. To better explain why they should in fact be considered as part of the marketing equation, two hypothetical scenarios are offered.
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