Research Library

Vegas is Not the Competition

A critical factor in determining the success of a casino operation is to correctly define the competition. By properly delineating one’s competition, a casino can design a facility that best meets the needs of its market, optimize the allocation of precious capital, forestall attempts by competitors to gain an advantage and more prudently spend marketing dollars. One of the single biggest mistakes an Indian casino can do is define Las Vegas as one of its competitors.

Casinos that make the assumption that Las Vegas is part of their competitive mix do so on the flawed hypothesis that, because some of their customers periodically visit Las Vegas, the casino can divert one or two of those visits to their property. While at first blush this reasoning appears sound, a closer examination of customer behavior reveals that this logic is flawed. These casino operators simply do not understand the basic reasons gamblers choose periodically vacation in Las Vegas and the reasons visit Indian casinos with such great frequency.

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Dispelling the Myths of Cash Back

The player rewards program or slot club is the cornerstone of any effective casino marketing plan. Too often these programs are created by mimicking what the competition is already doing or by examining what casinos in other markets do with their clubs. Often these programs use “cash back” as the primary incentive to get players to use their cards. Cash back in this scenario refers solely to the redemption of bonus points for cash. This article examines cash back as a marketing tool and some of the myths that surround it.

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Database Segmentation Analysis

Casino management systems give the gaming marketer a wealth of information to better understand individual player behavior. Each successive generation of management systems allows casino operators to understand their customers and develop programs that recognize and reward loyal play. All casino management systems give the marketer detailed player information showing trip history, actual win/loss, theoretical win/loss, point and comp redemption history, as well as information on personal player data.

While casino management systems can accumulate vast stores of data on individual behavior they tend to fall short in their ability to summarize the behavior of player segments. The report writing tools that come with many of these systems tend to summarize transactional data to better assist the slot and table game departments rad1er than provide the marketing department
with useful information to conduct and analyze marketing campaigns. Fortunately, it is not too difficult to extract the data from the master system and analyze it using a relational database program. This technique does require individuals within the marketing department with advanced skills using relational database programs. Alternatively, the casino can turn to a database marketing consultant to perform a periodic analysis.

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The Marketing Systems Manager

Marketing and operations executives always have a need for information from their casino management system. Fortunately, designers of these systems predicted many of those needs and designed a series of reports that can be run by the system. Of course accessing those reports requires training and skills senior executives often do not have the time to learn. In addition, executives often have a need for information these reports cannot answer. Who then does the executive turn to in order to extract the information he/she needs to make an informed decision?

Every casino marketing department has a group of professionals that know how to perform certain operations within the casino management system. The bus manager knows how to set up groups, assign tracking codes and monitor the performance of each bus. The promotions/special events manager knows how to set up an event and track expenses, forecast revenue and prepare proformas. The database manager knows how to pull mailing lists given a set of gaming criteria. Each member understands specific components of the casino management system. Few, if any, know how to operate all of the marketing modules within the player tracking system.

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I Want a New Club

A mid-sized casino in the southeast recently replaced its casino management system. Marketing had grown frustrated with the system’s inability to do all of the things that it needed in order to be competitive. The marketing staff could not conduct electronic drawings. They were unable to award non-negotiable slot credits to player accounts and pulling data for periodic analysis was cumbersome and difficult. After much lobbying, the marketing department was finally able to convince senior management that a new system was needed if the property was to remain competitive. The system that was replaced was only three years old.

The vendor who had provided the casino management system was not invited to participate in the RFP process. Rather than re-invest in a system that did not deliver on all that was promised, the casino chose to look at other providers. In addition to the sizable capital cost, the casino endured a week of disruption as reader boxes and other hardware were replaced and the staff was retrained on the new system. Customers were also frustrated as points and comps did not transfer over accurately into the new system .

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Mass Mail Versus Smart Mail

As a gaming consultant, I often find myself traveling to casino properties located great distances from my home. During these trips I also find myself shopping competitors’ casinos. Like many others who visit their competition, I make it a point to dine in one of the casino’s restaurants, ask employees basic questions, inspect the public areas, join the competitor’s player rewards program and spend a few dollars in the casino.

My purpose for such visits is to gain an understanding of competitors’ service levels, identify their strengths and weaknesses, understand how competitors’ slot clubs work, what they return in visible rewards and how well the club staff explains reward benefits- I had long ago given up hope that competitors would acknowledge my modest gaming activity with any meaningful offer. Most casinos have long ago figured out that visitors whose mailing addresses are 2,000 miles away and whose daily theoretical is very low are not prime candidates for direct marketing. Nevertheless, some casinos still attempt to entice me to return.

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Choosing a Competitive Business Strategy

When it comes to identifying an appropriate competitive strategy, casinos are no different than any other business. All businesses compete using one of two basic strategies: they employ a pricing strategy or a differentiation strategy.

Businesses that compete on price strive to offer the lowest possible price. They do so by reducing the costs of production in order to deliver a product or service at a price that is lower
than the competition. This strategy works well for commodities in which the products sold are undifferentiated. Wheat and oil are commodities and producers compete solely on price. Products that are clearly differentiated, through features or other unique elements, can command a higher price.

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Bus Programs and the Abandonment of Common Sense

Few areas in the casino receive more scrutiny from senior managers for their business practices than the casino marketing and advertising department. Direct mail campaigns are carefully tracked by redemption rate, average daily spend and trip frequency. Print advertisements routinely contain coded coupons and each publication is evaluated based on d1eir effectiveness.
Player reward programs are evaluated using a variety of measures. Casino executives pride themselves on being able to measure the efficacy of every marketing program. That is, with the exception of bus programs.

Bus programs are an anomaly in casino marketing. They are expensive and, in many casinos, represent the second largest marketing expense behind player reward program costs. Yet despite their high costs they manage to defy measurmement. Bus programs satisfy casino management’s lust for bodies in the casino. They deliver customers in waves but few casinos are able to justify the expenses associated with acquiring those customers.

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Understanding the Marketing Mix

As competition among Native American gaming properties grows, there is increased pressure on casino marketing and operations managers to grow market share. This is normally achieved by either stealing share from other properties or identifying and attracting new market segments. Tales abound in the industry of half-hearted attempts to grow business. An aging casino, eager to attract high end play, hires a senior host from a newer property with the hopes of using his list of premium players. A local oriented casino, recognizing the importance of Asian garners, enters into an agreement with a junket rep who promises to deliver Asian players. Invariably such efforts fall short of their intended goals because these gaming operators fail to develop the proper marketing mix prior to servicing these new market segments.

While originally developed for the hospitality industry, the principles of the marketing mix are readily adaptable to business issues facing Native American gaming. First developed by Leo M. Renaghan of Cornell University’s School of Hotel Administration and later refined by Robert Lewis and Richard Chambers, the marketing mix is comprised of four distinct components: the product/service mix, the distribution

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Understanding Your Customers Through Market Research

When was the last time you withdrew $1,000 from your ATM with the sole purpose of visiting a nearby casino for an evening of gambling? Have you ever gambled in a casino six times in one month and lost $250 per visit? Have you ever drawn a marker for $5,000? If the answer is “no” then you are like most gaming executives. In fact most people in the general population do not gamble at these levels or frequencies yet the core customers that make up the most profitable segments of a typical casino most certainly do. There is no better example of the 80/20 rule than a basic segmentation analysis of an average casino. 80% of the gaming revenue comes from 20% of the database.

Many casino marketing executives devise promotions, design advertising campaigns and mail customer incentives without ever truly understanding what it is that motivates their core customers,
what the reasons are for their visiting a casino and what it is they seek in terms of rewards and recognition. Some executives will state that they “talk to their customers on the Boor” and through that process have an understanding of their customers’ desires.

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