United States

Be The Best Locals Casino You Can Be

As casino markets mature, there is a propensity among gaming operators and, in particular, Indian tribes, to diversify their businesses away from simple casinos. For some, the logical next step in the development process is to build full scale resorts, complete with golf courses, spas, elegant hotel rooms, ultra lounges and other amenities that appeal to new and different
customer segments. The basic assumption is that the local gaming markets are reasonably served and, in order for revenue to grow, a tribe must bring in new, different and far wealthier tourist segments.

The fundamental problem is that resort hotels are expensive to build and difficult to operate. They require a highly trained staff and an experienced sales team. A resort hotel stands a better chance of being successful if it is located within a resort community but that often means they must compete with branded hotel chains with international reservation centers. In addition, a resort hotel may alienate the very customers that made the casino successful as it often holds little appeal to local gamers.

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E-Marketing to Casino Customers

Email and the Internet have quickly become an integral part of the lives of most Americans. Most readers of this publication rely on the Internet and e-mail for daily communication with both friends and business associates. This behavior is no different for the general population.

Currently, it is estimated that 61.2% of adults use tl1e Internet regularly. While it is generally assumed that younger age groups comprise the bulk of Internet users, usage among older demographic groups has increased significantly. Today, the 47% percent of the US population over the age of 50 uses the Internet regularly and their usage rate is increasing faster than younger demographic segments. In 2000,45.8% of people aged 55-64 used the Internet. In 2003 that number jumped to 56.7%.

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Creating the Right Player Reinvestment Strategy

As ga1ming markets mature, and revenue growth slows, casinos struggle to find ways to remain competitive, grow market share and gaming revenue. Inevitably, casino operators are forced to increase the amount of marketing dollars that they spend in various forms of player reinvestment. As spending increases, marketing leadership is faced with answering such questions as “what is the casino’s player reinvestment rate” and “how much is the casino spending to reward and retain gaming customers?”

Unfortunately, these are not easy questions to answer. First, player reinvestment is an ill-defined term. Not all casinos define player reinvestment in the same way. Some use it as a catchall phrase to describe all marketing expenditures while others use the term only to describe comps issued through the property’s casino management system, bonus points redeemed for cash and redeemed mail offers. Others attempt to better define the term to describe all of those expenses that are expended to foster loyalty and encourage repeat visitation.

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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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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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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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A Behavior Based Approach to Market Segmentation

Market segmentation has long been recognized as a fundamental tool of casino marketing. Casinos throughout the United States segment their customers based on a variety of criteria. Casinos in Las Vegas use criteria such as convention, tour and travel, retail and invited guests. Atlantic City casinos h ave additional criteria defined by mode of transportation and distance traveled such as bus line run, bus charter, inner market and outer market.

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It’s Labor Day Again?

Recently, a casino manager of a large local-oriented gaming property had an epiphany. He realized that Labor Day was only six weeks away and he wanted to do something for his regular players. He assembled his marketing team and together, created a plan to give each customer a gift on the holiday if they earned a certain number of slot club points. The general manager defined some caveats: the gift had to have the casino’s logo on it, it had to be something patriotic and it could not cost more than two dollars. The purchasing director and marketing director then ran off to contact their vendors and see what they could find.

Unfortunately, the items that were available in sizable quantities were limited. None of the samples impressed the general manager. Further, some of the available items could not accommodate
the casino’s logo. Worse, all of the items presented cost well in excess of two dollars. Meanwhile, the ad agency was contacted and asked to start work on an ad. However, until the item was selected, the agency could not produce anything more than thumbnail sketches.

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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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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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