Research Library

Worldwide Hospitality and Tourism Themes

Marketing professionals have long recognized the importance of fostering loyalty among past and current customers through database marketing. Retailers and supermarket chains have long embraced loyalty programs in order to reward loyal customers through targeted offers. Airline frequent flyer and hotel loyalty programs have become the foundation of marketing strategies for airline and lodging companies. Yet, no segment of the hospitality industry devotes more effort and allocates a greater position of their marketing dollars to customer loyalty programs than the gaming segment.

This paper examines customer reinvestment strategies in the gaming industry, the tactics that gaming operators employ to foster loyalty, the measurement tools they utilize to track the success of their programs and recent trends that track the ever-increasing amounts of marketing dollars that casinos are willing to reinvest in their customers.

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The Components of the Marketing Audit

With the economic downturn affecting casinos in jurisdictions throughout the U.S., casino managers are trying to reduce variable costs to better match business volume. The largest variable expense for a casino is labor, followed by marketing and advertising. While managers have begun to trim labor costs through layoffs and a reduction in hours for hourly workers, many managers are reluctant to reduce marketing expenses. In fact, many operators feel the need to increase marketing expenses in order to maintain revenues and market share.

While maintaining market share is critical, it is often done at great expense and can have a deleterious effect on cash flow. Large scale drawing drum promotions, free play offers and point multiplier days are typical programs that gaming markets see during economic downturns. What casinos should first do is determine how to best allocate their precious marketing dollars. This is done through a marketing audit.

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The Six Audiences of Casino Advertising

The economic downturn, coupled with higher gasoline prices has had a significant impact on many of this nation’s casinos. In response, casinos have stepped up their promotional efforts in order to maintain market share. In addition, many casinos have increased their advertising efforts, ostensibly to attract new gamers to their properties and some defectors who had altered their visitation patterns. The general opinion is that advertising is used to target these segments while direct mail is utilized to encourage repeat visitation from existing customers.

Casinos advertise, particularly during economic downturns. However, they often do so without first understanding the various audiences that these advertisements are supposed to target. Because of this, many advertising efforts fail to reach the right audiences or the wrong messages are delivered to the wrong group. There are six audiences of casino advertising and strategies to effectively communicate with each of them.

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Developing More Effective Promotions

The recent rise in fuel prices coupled with a decline in this nation’s economic growth has had a significant impact on casinos throughout the United States. Once thought immune to economic downturns, casino operators have come to realize that their industry is as vulnerable as others.

To maintain revenue streams and gain market share in this tough economic climate, casino operators have increased the level of promotional activities that they use to attract new gamers to their properties and maintain visitation levels among loyal customers. Often these activities include an increasing number of direct mail campaigns, special events that target premium players and traditional large-scale drawing drum promotions. It is the latter marketing program that this article addresses: the design, implementation and measurement of traditional drawings in which a large marketing net is cast across the gaming population by offering a drawing for a new car (more often these days, a hybrid vehicle), a series of large cash drawings or some combination of the two.

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The Complexity of Bonus Point Multiplier Promotions

Bonus point multipliers have long been used as a marketing tool in casinos. The practice dates back to the earliest days of player tracking systems. For many of the earliest systems, point multipliers were in fact, the only bonus module available. Today, all casino management systems offer some form of point multiplier promotion in addition to far more sophisticated bonusing modules, such as free play, electronic coupons, random free play jackpots as well as large progressives linked to every machine in the casino.

Despite the advent of these more sophisticated bonusing modules, casinos still embrace point multipliers as a marketing tool. They are perceived as a relatively low cost and easy promotion to implement. The recent downturn in the U.S. economy has forced casino marketers to find more ways to stimulate play and move customers from competitors’ casinos without giving the house away. As such, point multipliers are now being used with far greater frequency because of the need to market more aggressively. One need only scan the print ads from the recent President’s Day weekend to appreciate this. In Southern Nevada, one casino offered 5x bonus points over the holiday; another offered 7x points while a third heralded 2x points all day on President’s Day. This begs the question, if bonus point promotions were so salient to gamers, why would anyone go to a casino that offered 2x points when another one down the road offered 7x points?

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Happy Employees Make Happy Customers

Leaders of many Indian casinos have long recognized the importance of providing outstanding customer service to their guests. They recognized that casino gaming is comprised of a unique suite of products and services and those products and services make up what is referred to as gaming entertainment. Gaming entertainment incorporates slot machines, table games, quality food products and lodging delivered in a fun, energetic and entertaining atmosphere. The linchpin of those products and services are the employees who deliver them to guests. They are the ones who
provide the service that makes the gaming entertainment experience memorable. The ultimate measures of success are happy customers who come back on a regular basis.

Making customers happy is not a simple procedure. It involves a complex process of getting the right products to satisfy their needs coupled with caring employees. This requires assembling the appropriate mix of gaming products, restaurants and other amenities and placing them in an attractive environment. Then it requires happy, upbeat employees to deliver great service. The hardest part of the equation is getting employees with the right disposition and keeping them happy so they in turn can make the casino’s customers happy. The ongoing question for all casino operators is how do you keep your employees happy?

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A General Managers Eye View of the Casino

Few people in the gaming organization can appreciate the view that the property general manager has of the casino. Unlike departmental managers, whose primary concerns center on the effectiveness of their departments and how their staff interacts with others, the GM sees how all of the departments interact.

While departmental managers may believe that their department should receive precious capital dollars over others, it is the general manager who truly understands how to prioritize the allocation of capital in order to best meet the needs of the organization. The slot director may sincerely believe that new gaming devices are the most important purchase that the casino should make, the security director may need additional surveillance equipment in order to preserve the safety of gaming patrons, and the information systems director may need new hardware to allow for fault tolerant data processing. Each of these managers believes their needs are most important.

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Integrating a Nightclub at Your Gaming Property

Casinos throughout the world have long looked to Las Vegas for product innovation and ideas to enhance their customers’ entertainment experiences. With the explosive growth of nightclubs at casinos along the Las Vegas Strip, operators in other jurisdictions have begun to add new forms of nightlife to their casinos, including big-box nightclubs and ultra-lounges that target new demographic segments. Successful night club operators, like Light Group, Pure Management Group and N9ne Group, have opened some of the most successful operations and companies like Titan
Nightlife Group are exporting the Las Vegas nightclub concepts to Indian casinos.

Unfortunately, the world of nightclubs is a decidedly different place than the world of casinos, comprised of different customers that are motivated by different wants and needs. While both groups of customers have high levels of disposable income and are willing to spend copious amounts of money for that entertainment, they come from different demographic groups and the activities that they enjoy can conflict with one another. Failing to manage how these two worlds interact can lead to conflict and prevent the casino from maximizing its overall profit potential. Often strategic decisions are made without thorough analyses, preventing casinos from fulfilling their revenue potential. It is useful to examine two instances in which the behaviors of nightlife customers and casino customers conflicted and how management made decisions without complete information.

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Measuring Slot Handle Performance

One of the most often used measures of casino business volume is Slot Handle. Often examined on a daily basis, “Slot Handle” or “Coin In” is the amount of money played through all of the electronic gaming devices on the casino floor. The general assumption is that slot handle, multiplied by the casino floor’s aggregate hold percentage, will yield a fairly accurate measure of daily slot performance. Unfortunately, not all slot handle is the same. In fact, in most casinos there is both good slot handle and bad slot handle and failing to fully appreciate how they differ can have a significant effect on a casino’s overall profitability.

Good handle is slot handle that is generated by people wagering on traditional reel slot machines, multi-line video slot machines as well as video poker machines with conservative pay tables. They appeal to players that seek gaming entertainment and are not under any allusion that they can make a living gambling in a casino. The hold percentage of these games is high enough to allow the casino to offer cash back allowances, complimentary dining privileges, mail offers and other perks in order to reward loyalty. Bad handle is generated by gamers wagering on video poker machines that have very generous pay tables and therefore inordinately low hold percentages. Individually, these machines are characterized by high wagering volume (slot handle) and at the end of the day have favorable win per unit per day (WPUPD) averages. However, despite their acceptable WPUPD averages, they often generate bad handle. For this discussion, bad handle is coin handle generated by players who are consistently not profitable to the casino. The total amount of money won from these players, if any, is eclipsed by the perks provided to those players.

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Planning for a New Buffet

As casinos expand from simple gaming centers with limited amenities to multi-faceted gaming entertainment destinations, gaming operators often increase the number and size of food and beverage operations as part of their expansion programs. Very often such expansions include a two-meal or three-meal buffet operation. There is a generally held belief that a casino should have a buffet in order to appeal to a broader base of gamers, feed large groups of people quickly (such as buses), give gamblers a quick meal option and to create an additional attraction to people who might gamble but have not yet demonstrated an interest in visiting the casino. Conversely, there is a belief that buffets, if designed and executed poorly, do little more than increase food costs, attract a marginal segment of the dining public that has little interest in gaming and place an undue burden on overall profitability. It is for these reasons that prior to starting construction of a new buffet the casino operator must first thoroughly research the market, develop a buffet business strategy, and then develop a predictive model that forecasts food revenues, expenses and incremental gaming revenues that would be derived from diners who gamble in the casino.

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