Casino Marketing

Excerpts from Chapter Three

Predictive Analytics for the Gaming Industry

“However beautiful the strategy, you should occasionally look at the results.”

~Winston Churchill

Casino Marketing

Often referred to as the heartbeat of a casino's operations, marketing affects almost every single function at a modern casino property yet it is often taken for granted. Casino marketing involves not only providing the right offer to the right patron at the right time, but also includes retaining existing patrons, as well as acquiring new ones. To perform these marketing tasks, the casino marketer needs to not only fully understand the patrons in its database but also figure out how to get new patrons onto its property and into its databases as well.

To both allocate resources properly and attract and retain the most profitable customer segments, the casino marketing department needs to understand which segments “pay the bills.” Some of the questions they must ask are:

-- Who are the casino's current customers?

-- Which customer segments contribute the most or the least to the property’s revenue?

-- Does it make more sense to design promotions that attract player segments with low theoretical win levels but high frequency of visitation, or should the casino allocate promotional dollars to player segments with higher theoretical win rates but less frequent visitations?

-- Where do the casino’s customers live?

-- What is the overall contribution of each zip code, country or province?

In their article How a professional casino consultant can

help ‘optimize’ your casino’s marketing, Steve Karoul and

Dean Macomber advise casino marketers to think of their

potential market as a series of interconnecting circles of

differing categories within which there is an endless

variety of options. They state that the segments can

include, but are not limited to, the following:

• Geographic

• Demographic

• Psychological

• Cultural

• Age

• Activities

Market Segmentation

When broken down this way, one person would obviously

be included in many different categories and each

segment could be broken down into smaller segments.

For geography, there would be three segments; Nearby or

“convenience” gaming customers, to whom distance

matters a lot; Middle distances or “excursion” gaming

customers, to whom distance is somewhat of an issue;

and Large distances or the “destination” gaming

customers, to whom distance matters little (Karoul and

Macomber).

When creating their marketing strategies, casino

operators must think in terms of the Market Cycle of

Demand Creation, which contains the following three

phases:

• Awareness,

• Trial offer, and

• Repeated visitation.

For starters, consumers must know that the product – the

casino – exists. Once patrons arrive, they must be turned

into loyal customers who will repeatedly return so

attempts must be made to have then enroll into a player

club. Once enrolled, the casino marketers can track the

patron's spend very accurately. Armed with this important

information, a casino marketer can determine the patron's

likes and dislikes and then target market to them

specifically. At this point, casino marketers should develop

a range of programs and offers that will generate

repeated visitations (Karoul and Macomber).

Marketing campaigns are where the rubber meets

the road. Whether the campaigns are monthly direct

mails campaigns, birthday or other promotions, a

marketing automation tool can provide a user-

friendly mechanism for assigning the data-specific

requirements to identify customer segments.

Once the marketing campaign criteria are established, all

future campaigns can be assured of having the same

criteria. Scheduling campaigns will allow the marketing

team to set-up recurring campaigns weeks in advance

versus setting up individual campaigns one at a time. The

goal is to automate routine processes into regularly

scheduled jobs. The main advantage of an automation

tool is that every campaign, communication and response

can be attributed to a specific event.

Customer-focused marketing campaigns

By taking advantage of the more powerful, statistically based segmentation methods, customers can be segmented not only by dollar value, but also on all known information, which can include behavioral information gleaned from a customer’s resort activities, as well as his or her simple patron demographic information. This more detailed segmentation allows for more targeted and customer-focused marketing campaigns.

Predictive Analytics can help to:

– Identify the casino's most valuable patrons.

– Predict a patron's future worth and/or his or her future behavior.

– Plan the timing and placement of advertising campaigns.

– Create personalized advertisements.

– Define which market segments are growing most rapidly.

– Segment patrons into groups based on their behaviors and then create marketing campaigns to exploit those behaviors.

Predictive Analytics can help to:

– Determine a patron's level of gambling skill.

– Identify patrons who come together.

– Identify the likelihood a patron will respond to an offer.

– Identify the offer(s) to which patrons are most likely to respond to.

– Predict when a patron is likely to return.

Predictive Analytics

In their article “Knowing What to Sell, When, and to Whom,” authors V. Kumar, R. Venkatesan, and W. Reinartz (2006) showed how, by simply understanding and tweaking behavioral patterns, they could increase the hit rate for offers and promotions to consumers, which then had an immediate – and substantial – impact on revenues.

By applying statistical models based on the work of Nobel prize-winning economist Daniel McFadden, researchers accurately predicted not only a specific person’s purchasing habits, but also the specific time of the purchase to an accuracy of 80% (Venkatesan and Reinartz, 2006).

Predictive Analytics

The potential to market to an individual when he or she is primed to accept the advertising is advantageous for both parties involved; marketers don’t waste time advertising to consumers when they aren’t primed to accept the advertisements, but do market to consumers when and where they might want to use the advertisements.

Manipulating Customer Behavior

Successful marketing is about reaching a consumer with an interesting offer when he or she is primed to accept it.

Knowing what might interest a patron is half the battle to making a sale and this is where customer intelligence and predictive analytics comes in.

Customer analytics has evolved from simply reporting customer behavior to segmenting customers based on their profitability to predicting that profitability, to improving those predictions, to actually manipulating customer behavior with target-specific promotional offers and marketing campaigns.

Campaign Effectiveness: Capturing Response Data

To truly understand the success or failure of a marketing campaign, casino and hotel operators must have an effective response tracking system. Costs and revenues can be combined with promotional contact and response information, which will provide a complete picture of response rates and ROI. Because this information is stored at the individual customer level, various levels of modeling, segmentation and analysis can be performed for strategic targeting of a campaign.

Predictive Analytics – Regression Analysis:

Regression analysis is the process of predicting the continuous dependent variable from a number of independent variables. It attempts to find a function which models the data with the least error. Regression analysis can be used on data which is either continuous or dichotomous, but cannot be used to determine a causal relationship. Regression analysis focuses on establishing a mathematical equation as a model to represent the interactions between the different variables under consideration. Regression models are particularly effective to find patron worth because the model can be used to score historical data to predict an unknown outcome.

Example of a campaign illustrating desired capabilities

Predictive Analytics in the Casino

and Gaming Industry

Book is available at

Amazon.com

Other chapters include:

• Customer Relationship Management

• Predictive Analytics

• Mobile-izing your Marketing

• Social Media

• Table Games Revenue Management

• The Asian Gambler

• Compliance

• A Winning Solution

Predictive Analytics in the Casino

and Gaming Industry

References:

Karoul, Steve & Macomber, Dean. How a Professional Casino Consultant Can Help

‘Optimize’ Your Casino Marketing Plan. http://euroasiacasino.com.

Kumar, V., Raj Venkatesan and Werner Reinartz (2006). “Knowing what to sell when

and to whom,” Harvard Business Review, 84 (3), 131.