Research Library

Common Mistakes in Marketing Research

A locals’ oriented casino-hotel located in a resort community recently completed a major expansion to better serve tourists visiting the city. After extensive market research, the casino’s parent company had made the determination that the property was highly desired by tourists and that an expansion of its hotel and entertainment offerings was critical if it was to grow its revenue. After investing over $50 million, the new resort expansion opened. While locals were impressed with the new property and liked its richly appointed amenities, tourists did not show up in any great numbers. Revenues remained essentially flat and EBITDA plunged as operating expenses associated with these new amenities increased.

In the post-opening period a team of executives tried to understand what went wrong. They began a marketing forensics exercise in which they reviewed all the data that was used to bring the company to the decision to expand into the tourism segment. This is what they uncovered.

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Selecting the Appropriate Advertising Agency

There is a tendency among people who are recruited for leadership roles in gaming organizations to change things. The logic is that, by shaking things up, the organization’s business performance will improve. New marketing directors and property managers often target the casino’s advertising agency as one of those institutions that must be changed.

The motivations to change a casino’s advertising agency are varied. There is often a tendency to criticize current advertising as ineffective. There is also a desire by the new manager to bring in an agency that he/she had worked with in the past. Rather than first evaluate the capabilities of the existing agency and to provide new direction, the new marketing director or property manager will sometimes summarily dismiss the current agency as incompetent and bring in an agency that he/she knows can do the job .

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First, Get the Product Right

Marketing is a process. Marketing begins with “product marketing” – a process of conceptualizing, aligning, and delivering products that meet or exceed consumer needs, wants, and expectations at a price that creates a value. If there is unutilized capacity, then it is filled via “demand marketing” programs- a constant stream of motivators that are packaged and delivered to motivate first time visits among the uninitiated or additional repeat visits among experienced, existing players. Demand marketing is comprised of cash mailers, promotions, two for one meal coupons and other offers that attempt to increase traffic into a casino during midweek and daytime periods.

Casino marketers are often forced to turn to demand marketing prematurely when the package of gaming and entertainment amenities is insufficient to stimulate consumers to visit the property. In other words, the sum total of products that the casino has to offer is not, in and of themselves, sufficient to attract people. Before a casino turns to demand marketing, it must first make sure that its products are aligned with the market. It must first make sure that the products are right.

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Player Incentives: Don’t Give Away the House

Almost all segments of the leisure and hospitality industries utilize loyalty programs. Airlines, hotels, rental car companies and even restaurants employ methodologies to induce repeat visitation, foster loyalty and build long term relationships with their more frequent and most profitable customers. The airline industry first instituted these programs in the early 1980’s and was followed by hotel and rental car companies. Today, a wide variety of retail industries employ some form of reward programs. They have all come to understand the value of incentives rewarding frequent users of their products and services. While there are no hard and fast rules regarding the percentage of customer reinvestment, it is generally assumed that these industries return between 2% and 15% of the theoretical revenue derived from their loyal customers in the form of various incentives.

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Delivering Outstanding Customer Service

For years many Indian tribes have recognized the importance of customer service in their casino operations. Gaming is after all, an entertainment experience and, while winning money is an important part of that experience, the majority of customers walk away from a casino with less money than they had than when they entered. They are left with the memory of the experience, hopefully positive, that will prompt them to return. Great customer service adds value to that experience and acts as an inducement to return. Rude or indifferent service can easily sour these experiences and discourage patrons from returning.

To advance the concept of quality customer service, many tribes have invested in employee training programs that teach employees how to deliver outstanding customer service. These programs focus on teaching the importance of a good attitude, a smile, empathy towards player concerns and taking ownership in order to solve a customer’s problem. While smiling and caring employees are an important factor in the delivery of outstanding customer service, it is just one component of the service delivery process.

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Effective Billboard Design

Virtually all casinos rely on outdoor advertising tocommunicate with their existing and prospective customers. This mode of communication, in the form of traditional “bulletin” style and “30-sheet” rotator billboards, has been embraced by gaming operations for decades. Casinos in competitive markets seek the best locations and in turn, bid up the price of available boards. Billboards are often purchased deep inside secondary competitors’ markets and in markets that are far beyond logical market definitions. In fact, the hunt for available outdoor space often takes casino marketers outside of their traditional markets and into regions where they cannot hope to penetrate.

Outdoor advertising is also expensive, often comprising up to one third of a casino’s advertising placement budget. Yet despite these high costs, casinos continue to rent outdoor space in illogical locations, deliver messages that are not salient to drive-by traffic and create murals that are often illegible or unreadable. Much of the outdoor advertising that casinos employ is simply ineffective.

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Building Effective Promotions

Recent advances in game technology, improved access to capital markets and the continued growing popularity of Indian gaming is creating a climate that is stimulating an unprecedented expansion of Indian casinos. In the next few years, many tribes will expand their facilities or build new casinos to better serve their guests and to provide essential services for tribal members.

Promotions are a critical element of almost every casino’s marketing mix. In fact, in many casinos promotions are considered the primary endeavor of the casino marketing department. It is not unusual to find casinos devoting up to one third of their marketing budget towards promotions. Yet despite the prodigious amounts of money that casinos devote to promotions, few casino managers demand from their marketing team, clearly delineated objectives, a written promotions strategy, or any methodology to track the relative success or failure of their promotions.

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Marketing’s Role In the Design of the New Casino

Recent advances in game technology, improved access to capital markets and the continued growing popularity of Indian gaming is creating a climate that is stimulating an unprecedented expansion of Indian casinos. In the next few years, many tribes will expand their facilities or build new casinos to better serve their guests and to provide essential services for tribal members.

Opening a new property or introducing a greatly expanded facility puts tremendous strain on the property’s leadership and often thrusts managers in unique roles that differ dramatically from the day to day operations of the gaming enterprise. While architects, contractors and consultants manage the construction process, property managers are often enlisted to help with developing the new property while continuing to manage their own departments. The slot director and table games director play an integral role in designing the new casino floor as does the food and beverage director in designing the kitchen, dining room and menus. More often than not though, marketing is not invited to participate in the initial planning of the new property.

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But Did the Casino Make Any Money?

At a recent presentation of casino performance before the tribal council, the casino manager distributed handouts illustrating gaming activity. “Handle is up,” he proclaimed as the council members examined bar charts showing year over year handle growth. “Business is growing. The casino is experiencing consistent increases in handle from prior years. We’re driving revenue.”

The casino’s marketing director then walked the council through an analysis of recently completed direct mail campaigns, special events and promotions. For each of these campaigns the marketing director presented a profit and loss statement showing the profit made. “Our direct mail program has been very successful. Marketing has been able to drill down into the database and mine very profitable customers. Our theoretical win continues to improve and for each direct mail campaign, we have been able to generate on average, theoretical win in excess of 75% of expenses. Our marketing is working.”

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The Marketing Audit

Several years ago, the marketing director of a medium sized casino saw an opportunity to partner with a nearby hotel to achieve mutually beneficial goals. The casino, lacking a hotel, needed a lodging property to house its overnight customers. The casino’s marketing director also recognized the potential gaming value of transient lodging customers if they could be induced to cross the street and visit the casino. Thus, a promotion was created. The hotel agreed to set up a direct billing accow1t and the casino agreed to provide the hotel with a stock of coupon books containing a number of compelling offers to be given to guests upon check-in.

The coupons were designed, printed and numbered. As the books came into the receiving department, they were shipped to the secured document storage closet in the accounting office. The marketing director then requested several cases of coupon books from accounting, which he delivered to the hotel.

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