When casinos look at their revenue streams, one the first questions they have to ask themselves is “How much of this is from our loyal customers?” A widely accepted axiom in any business is that it is cheaper to keep a customer than it is to attract a new one. In these times, where we are expected to do more with less, it only makes sense that casino marketers and operators should be looking at their loyalty efforts with even more scrutiny than ever before.
Any time we are asked to improve a business condition, we must begin by measuring the existing circumstances. While there are a variety of measures of loyalty, I would suggest we work from three of the most important and telling. If a casino can measure and fully analyze its retention rate, the revenue coming from customers who have been active both this year and last year, and its revenue by length of relationship, it will have a good idea regarding the loyalty of its customers.
When we analyze these measures, we need to be able to segment them by factors such as geography, game type and worth. Each of these dimensions will be important as we develop tactics within our direct mail, special events, player’s club and player development programs. By focusing each of our programs directly on specific subsets of the database, we can move toward optimizing our marketing spend.
The most efficient and effective tool for segmenting the database is a well-thought-out business intelligence tool. The tool should be configured to provide reports that can be analyzed from all of the important dimensions. It should present the information in tabular, graphical and geo-mapping formats. It should provide information quickly and intuitively to users up and down the organizational chart. The more people who have access to the information, the better the chances that someone will discover a nugget of information that will allow for improved results.
In addition to understanding what the loyalty situation is, we also need to understand why the loyalty situation is what it is. Customer satisfaction studies are the tool of choice for knowing why some customers are loyal and why others defect or spread their play around to a variety of competitors. What motivates a customer to choose one casino over another? What do customers think you do well? What do they think your competitor does poorly? These are all questions that need to be addressed in your market research.
When you break down why people choose the casino they gamble at, the answers usually fall into three categories: product, pricing and relationship. These are broad categories that have subsets within them. Food quality, loose machines and marketing offers are examples of reasons that fall into the product group. Examples of pricing factors include rooms, food, entertainment and other amenities. While it is clear that not all gamblers are bargain seekers, many expect value and no one wants to feel taken advantage of.
The nature and strength of the relationship is oftentimes a tremendous driver of loyalty. Player’s club programs, hosts, and well-crafted direct mail messaging and image selection are all effective in strengthening the relationship between the customer and the casino. The more valuable a customer is to a casino, the more the casino should design its programs around that customer. For example, if your casino is primarily a locals market slot house, the more your programs should be focused on that type of customer. Conversely, if you are a high-end casino on the Las Vegas Strip, your programs are going to be focused on out-of-town guests and be more balanced between table and slot customers.
Loyalty is everyone’s job. Marketers, operators and administrative all have a role in the loyalty process. In the hyper-competitive casino business today, a slipup in any area can cost the operation customers. That is why it is so important that everyone has access to the market research and the business intelligence system. Not only will it allow everyone to keep a closer eye on their specific responsibilities, but it will also allow everyone to have a basis, grounded in facts, to add to the process of creating and maintaining loyalty.
Everyone should know the company’s revenue generation strategy. That strategy includes the primary and secondary targeted customer, the strengths upon which we are going to compete, and the primary motivators of our customer base. While everyone can and should have access to the information, as well as provide suggestions, department heads are still responsible for their areas and senior management is still responsible for making sure everything is coordinated and everyone is centered around the same priorities.
In conclusion, customer loyalty will ultimately make or break a casino’s financial results. You have to have sources in place that tell you both the what and the why of the loyalty situation. You have to have processes in place that analyze the information and people across the organization who are using those analyses to create and maintain the loyalty of targeted customers. The cost of new customers is far too high to be relying on a constant flow of new blood. Even recovery marketing efforts are expensive relative to loyalty marketing.
Competition, the economy and owner demands require casino marketers and operators to focus on targeted customers and provide them with high-quality products at fair and competitive prices. We must ensure that we dedicate the resources necessary to be constantly strengthening our relationships with targeted customers. The casinos that do the best job of creating loyalty will survive these difficult times. Remember, customers are like teeth—ignore them, and they will go away.
George Haldeman is a 24-year veteran of the casino industry. As a founding principal of Strategic Gaming Advisors, he provides his clients with powerful analytics and proven techniques for optimizing revenue in competitive markets while maintaining a financially disciplined approach to program development. He can be reached at haldemang[at]sganv.com.
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