Strategy

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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Happy Employees Make Happy Customers

Leaders of many Indian casinos have long recognized the importance of providing outstanding customer service to their guests. They recognized that casino gaming is comprised of a unique suite of products and services and those products and services make up what is referred to as gaming entertainment. Gaming entertainment incorporates slot machines, table games, quality food products and lodging delivered in a fun, energetic and entertaining atmosphere. The linchpin of those products and services are the employees who deliver them to guests. They are the ones who
provide the service that makes the gaming entertainment experience memorable. The ultimate measures of success are happy customers who come back on a regular basis.

Making customers happy is not a simple procedure. It involves a complex process of getting the right products to satisfy their needs coupled with caring employees. This requires assembling the appropriate mix of gaming products, restaurants and other amenities and placing them in an attractive environment. Then it requires happy, upbeat employees to deliver great service. The hardest part of the equation is getting employees with the right disposition and keeping them happy so they in turn can make the casino’s customers happy. The ongoing question for all casino operators is how do you keep your employees happy?

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Integrating a Nightclub at Your Gaming Property

Casinos throughout the world have long looked to Las Vegas for product innovation and ideas to enhance their customers’ entertainment experiences. With the explosive growth of nightclubs at casinos along the Las Vegas Strip, operators in other jurisdictions have begun to add new forms of nightlife to their casinos, including big-box nightclubs and ultra-lounges that target new demographic segments. Successful night club operators, like Light Group, Pure Management Group and N9ne Group, have opened some of the most successful operations and companies like Titan
Nightlife Group are exporting the Las Vegas nightclub concepts to Indian casinos.

Unfortunately, the world of nightclubs is a decidedly different place than the world of casinos, comprised of different customers that are motivated by different wants and needs. While both groups of customers have high levels of disposable income and are willing to spend copious amounts of money for that entertainment, they come from different demographic groups and the activities that they enjoy can conflict with one another. Failing to manage how these two worlds interact can lead to conflict and prevent the casino from maximizing its overall profit potential. Often strategic decisions are made without thorough analyses, preventing casinos from fulfilling their revenue potential. It is useful to examine two instances in which the behaviors of nightlife customers and casino customers conflicted and how management made decisions without complete information.

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Planning for a New Buffet

As casinos expand from simple gaming centers with limited amenities to multi-faceted gaming entertainment destinations, gaming operators often increase the number and size of food and beverage operations as part of their expansion programs. Very often such expansions include a two-meal or three-meal buffet operation. There is a generally held belief that a casino should have a buffet in order to appeal to a broader base of gamers, feed large groups of people quickly (such as buses), give gamblers a quick meal option and to create an additional attraction to people who might gamble but have not yet demonstrated an interest in visiting the casino. Conversely, there is a belief that buffets, if designed and executed poorly, do little more than increase food costs, attract a marginal segment of the dining public that has little interest in gaming and place an undue burden on overall profitability. It is for these reasons that prior to starting construction of a new buffet the casino operator must first thoroughly research the market, develop a buffet business strategy, and then develop a predictive model that forecasts food revenues, expenses and incremental gaming revenues that would be derived from diners who gamble in the casino.

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Time is the Enemy of the Player

Not long ago the leadership team of an Indian casino near a major metropolitan area made a strategic decision to attract premium Asian-American table game play. With a clear mandate that the tribe wanted this initiative done correctly, the general manager instructed his marketing team to thoroughly research the value of this gaming segment, identify the amenities and marketing programs necessary to attract and retain this segment and to develop an implementation plan.

The marketing team did an admirable job. They first retained a consulting firm to estimate the size of the market’s premium table game market. They conducted focus groups in the primary feeder market. They flew to Las Vegas and met with colleagues who operated premium table game rooms at Strip hotels. They even sent a member of the team to Macau to see how premium table game operations were conducted in Asia.

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Adherence to Leadership Principals

Many gaming organizations have come to understand the importance of operating with consistent principles of leadership. The notion is simple: all managers need to adhere to standards of leadership so that all employees know what is expected of them and what the consequences may be if they choose not to meet those expectations. To this end, managers are taught how to communicate expectations, follow up when expectations are not being met, counsel employees and, if necessary, discipline them. Gaming organizations often go to great lengths to teach managers how to lead in a consistent manner, employing outside consultants or developing leadership training programs in house.

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How to Calculate the Player Reinvestment Rate

The terms “player reinvestment” and “player reinvestment rate” are often used to describe the costs associated with the suite of benefits that casinos bestow on their players. However, despite the frequency with which these terms are used, there is no industry-wide definition that describes the specific components that make up player reinvestment. To better understand how the industry defines player reinvestment, a survey was conducted among casino operators in a number of jurisdictions including Indian casinos, riverboat/barge casinos and Nevada casinos.

A key finding of the research was that in the evolution of most casinos, understanding what a property’s player reinvestment rate is does not become an important issue until two seminal events occur: 1) the casino institutes a host program and 2) it begins to mail out cash and free play offers to various segments of its database. Then, as discretionary comp costs and mail redemption costs rise, casino leadership begins to ask, “So what is our player reinvestment rate?”

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“New and Better” works

The rapid growth of Indian gaming has created an unusual dilemma for the leaders of many tribes. In the years following the passage of the Indian Gaming Regulatory Act, many tribes attempted to develop casinos. Unfortunately, it was unclear how successful these gaming properties would ultimately be, particularly for those tribes whose reservations were far removed from major population centers. Access to traditional capital markets was difficult. Amidst this uncertainty many casinos were developed using low-cost construction techniques or existing commercial structures were converted to gaming space.

As the industry matured and as properties were able to demonstrate their viability to the investment community, the cost of capital dropped and many tribes were able to replace their temporary structures with more attractive, full-service gaming/entertainment properties. Conversely, other tribes chose to keep their original properties and gradually expand them, all the while continuing to employ low cost construction techniques. Many of these casinos generated outsized revenues relative to their invested capital. The logic for many in tribal leadership was, why
incur additional debt by replacing low-cost structures when revenue streams were growing? The emerging dilemma was, why spend the money if one did not have to?

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Designing a Tiered Player Rewards Program

As a casino matures and its database of active players grows, it is the natural tendency of casino leadership to consider the implementation of a tiered player rewards program (TPRP). This marketing initiative is driven by a number of factors, not the least of which is the realization that a small portion of the casino’s database is contributing an inordinately large share of gaming revenue. Thus a TPRP is implemented to offer the casino’s best customers higher levels of service and recognition. However, creating a tiered rewards program involves far more than the design, manufacture and distribution of various colored membership cards, distributing the appropriately colored cards to the right segments of the database and the planning of a few premium player parties. A TPRP, like any marketing initiative, requires clearly defining attainable objectives, a strategy that will allow the casino to achieve those objectives and tactical plans that carry out that strategy.

The first question that must be answered is “what are the objectives of a TPRP program?” While fostering loyalty, providing higher levels of recognition and taking care of the casino’s best customers are all reasonable objectives, they are immeasurable and cannot be quantified. Rather, a casino must delineate measurable goals. These goals may include: increasing the number of “A” level club members, grow the “A” and “B” segments by 10% and 5% respectively or increase the median number

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White Paper: An Analysis of Harrah’s Total Rewards Player Rewards Program

Harrah’s Entertainment’s Total Rewards Customer Loyalty Program’s (“Total Rewards”) basic structure is a tiered program. Unlike the vast majority of casino reward programs, players do not earn bonus points. Rather, they earn a combination of Tier Credits and Reward Credits. Tier Credits are used to determine one’s ranking while Reward Credits are used for comps and other purchases.

When a player inserts their card into an electronic gaming device, the LED display shows the customer’s name, the number of Tier Credits accrued over the course of the calendar year and then the number of Reward Credits that are available for redemption.

Total Rewards offers four tiers, the highest level being 7-Star. The following table details the number of Tier Credits, earned on coin handle that must be earned within a calendar year in
order to advance to each tier.

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