Research Library

Now is the Time to Prepare the Annual Marketing Plan

The period between the end of the Thanksgiving weekend and the start of the New Year’s holiday is traditionally one of the slowest periods in the casino industry. As such it is the ideal time for leadership to focus on the preparation of the property’s annual marketing plan. What better time to focus on the plan’s preparation than during a naturally slow period that precedes the New Year?

The importance of preparing the annual marketing plan must be underscored. First, the total sum of marketing and advertising activities can easily consume in excess of 20% of the property’s revenue. As such, there must be a plan in place that details how the casino will be marketed, which markets it will target and a forecast of the expected returns from those activities. The plan details realistic objectives and strategies that the casino will employ to achieve them and how much it will spend to reach those objectives..

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Improving the RFP Process

The Request for Proposal or RFP process, the method in which governments issue requests for proposals to a number of vendors, evaluate competing bids and select the vendor that can provide the best product/service at the best price, is an important process that can ensure governments and its citizens are not overpaying for goods and services. The process is used by municipal, state, federal and tribal governments. While the RFP process has proven effective in a wide range of purchasing decisions, the adaptation of the RFP process to the selection of vendors for casino companies has proven itself to be somewhat problematic.

RFPs can be used in a wide variety of purchasing decisions, from meat vendors and accounting firms to the selection of a new advertising agency.

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Don’t Shoot the Messenger

The recession of 2008-2009 has touched nearly every facet of American business. Indian gaming has not been immune from the sudden drop in consumer spending, which followed a rapid rise in fuel prices last summer. Nearly every US gaming market and the vast majority of casino enterprises operating in those markets saw declines in gross gaming revenue and net income, coupled with lower operating margins. Tribal governments in turn saw precipitous drops in revenue derived from their gaming operations and have been forced to reduce spending on essential services such as health care, education and elder care.

The sudden drop in the gaming revenue stream caught many tribal governments by surprise. Since budgeting often takes place in two to three year horizons, it quickly became difficult for many governments to meet their ongoing commitments. Unable to fully fund essential services, governments turned to their business enterprise boards who in turn looked to their casino management teams for solutions to very large and ultimately global business problems.

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Swapping Out Debt: Solving the riddle of debt-asset swaps and triangular deal structures

The riddle of “debt-asset swaps” is currently befuddling CFOs, public debt analysts, casino buyers and hedge funds.

All look to profit from discounted gaming company debt and the sale of distressed assets. Right now, there is a disconnect between a gaming company and its debt. On the one hand, the gaming company’s debt—whether $5 billion of publicly traded bonds or $50 million in privately held notes—is trading at prices that may be 10 cents to 70 cents on the dollar. On the other hand, the gaming company may be willing to retire that debt at face value, as part of its de-leveraging process.

The theory of a debt-asset swap is to take advantage of that disconnect. If one could purchase the gaming company debt at today’s steeply discounted price, and then present it to the gaming company for retirement at face value, then one should be able to profit greatly.

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Examining the Value of Free Play

The use of free play to stimulate demand and foster loyalty has increased dramatically over the past three years. Fueled by advances in technology, newer slot machines, more robust casino management systems and customer acceptance, free play has emerged as a formidable marketing tool for most casinos.

Free play is an umbrella term to describe non-negotiable slot credits that can be used by players for wagers on slot machines. While free play cannot normally be redeemed for cash, any winnings generated by those wagers can be redeemed or wagered again. Free play has essentially replaced cash in all but the largest prizes awarded to customers including bonus point redemptions, direct mail redemptions and a myriad of other demand stimulation programs such as bounce back offers, celebration jackpots and hot player awards. Some casinos even offer free play as a replacement for large scale cash premiums. Customer acceptance also appears high as even the least technologically adept players have figured out the procedure to convert bonus points or direct mail coupons into free play.

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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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