Sudhir Kale writes about the ‘bait-and-switch’ strategies and ethics in casino marketing
One of the advantages of being a casual blackjack player as well as an avid student of gaming is the opportunity to see various casinos’ marketing strategies in action. A couple of months ago, I happened to be at the receiving end of extremely poor player reinvestment in operation at my local casino on the Gold Coast in Australia.
As most IAG readers know, player reinvestment is a strategy to reward loyal customers through targeted offers. The intent is to show appreciation to regular customers with the hope of retaining them and enhancing their lifetime value. With only one in five adults visiting a casino in any given year in the US, and only a fraction of them returning, player reinvestment plays a crucial role in preserving the relatively few customers who happen to be regular gamblers.
Back to my experience with the casino in question. The management succeeded in creating just the opposite impact on yours truly in a matter of 24 hours. Let me explain. I played blackjack for 10 hours, betting around A$75 a hand on two boxes. The net result was a loss of A$4,450 over the ten hour period. The next day, I requested a comp voucher for a meal from the Casino Rewards Desk. To my utter surprise, I was told that my play translated into comps worth $36. To justify his point, the desk attendant informed me that someone else had dropped $15,000 in slots just a day ago and got $35 in comps.
I know better than to expect 25% or even 20% of my losses in comps. Using the house advantage of 0.55% for Blackjack, the theoretical win for the casino in this case would be around $500. Andrew Klebanow, a casino consultant and friend, has conducted surveys of several casino markets in the US to estimate the level of player reinvestment. His conclusion was that in 2009, player reinvestment rates were between 25-43% of the casino’s theoretical win. By any objective assessment, the comp offered to me by the casino was way below standard rates. I approached a pit boss in the private gaming area (we’ll call him Paul) to ask him about the petite comp. He said he was busy and directed me to another person (we’ll call her Jackie). Jackie looked at the computer again, verified the time and average bets with me, and concluded that the comp calculation was right. ‘I am sorry, they just don’t give back what they used to,’ was her one sentence explanation. For one, she wasn’t really sorry, and second, if that’s the casino’s new comp policy, then ‘they’ certainly do not deserve my business.
On reaching home, I found a whole bunch of coupons from this casino waiting for my response. One of them offered a ‘free MP3 player valued at $49’ for me to pick up if I came in on the next Sunday between 10 a.m. and 6 p.m. Not that I was crazy about this MP3 player (which can be bought on e-bay for $20), but since it was raining, the family wanted to go out somewhere covered for dinner. So off we went to the casino. As instructed, I went to the VIP Reception desk to pick up my MP3 player. This time, I was told that they had run out of the product. I was asked to sign a form and was told that ‘they’ will call me when new supplies arrive so that that I can come to the casino to pick it up.
Now I am as yet uncertain about the specific laws in Australia when it comes to casino promotions. To me, an educated layman, this was a classic case of ‘bait and switch,’ a ploy meant to make hundreds if not thousands of customers come to the casino twice instead of one time, under the pretext of collecting their ‘free’ MP3 player. This outcome of inadequate quantities of MP3 players at hand, intended or not, was most definitely unethical if not illegal. That night I called the casino manager to inquire about this ‘bait and switch’ like strategy. He was interstate, and pleaded no knowledge of the promotion whatsoever. The next day, I got an e-mail from the casino’s marketing manager. By way of explanation, she wrote, “Please be assured that at the time of implementing this promotion we considered that we had ordered sufficient quantities to meet demand. This belief was based on data recorded from previous similar offers.” Just imagine, thousands of customers being sent home empty handed, with probably a lighter wallet, having to come back again to claim the ‘free’ MP3 player and go home again with probably an even lighter wallet. A deliberate ploy on the part of the casino? Probably. An unethical result? Most certainly. Like the countless unpleasant episodes occurring on a daily basis in almost every casino, this one has an underlying lesson.
The low-hanging fruit notwithstanding, casino executives should never lose sight of the essence of player reinvestment. Sure, every casino wants additional visits from the better players when planning and implementing promotions. Most certainly, managers want to ensure that they are not just buying profitability but also revenues when conducting promotions. But in all fairness to players, every casino needs to ensure that its promotions are always way above board in intent as well as outcome, and they result in happy and satisfied customers. When player reinvestment strategies have the opposite impact, as it did with me in relation to my local casino, the operator only alienates the very customers whom it should retain and nurture.
By way of epilogue, I did insist that the casino send me my MP3 player by registered post. And for my constructive complaints and protests, the casino dropped my name from its list of VIP players. I don’t get any offers anymore, but my wallet certainly looks healthy.
With casinos in markets such as Macau experiencing poor re-visitation rates from a majority of their customers, many marketing executives would want to look at effective player reinvestment strategies. The best strategy is one where the retention expenses are at or below what it would cost to acquire a new customer. While loyal satisfied customers never figure on the balance sheet, they are the only asset that matters. Every casino, regardless of locale, needs to pledge unswerving ethical conduct toward this nonrenewable asset. As for my friends in the local casino, I hope ‘they’ are reading this.
Sudhir Kale, Ph.D. is Professor of Marketing at Bond University on the Gold Coast in Australia. He is also the Founder of GamePlan Consultants, a company that advises casino companies on ethical ways with which to develop customer relationships and maximize customer lifetime value. You can write to Sudhir at firstname.lastname@example.org, or visit his website: http://www.gameplanconsultants.com.